RPT-Law, not grain price, hits biofuel output -Abengoa

(Repeating with no changes to text)

By Martin Roberts

SEVILLE, May 13 (Reuters) - Legislation and low wholesale prices for ethanol are squeezing biofuel production margins rather than high grain prices, Spain's leading bioethanol producer Abengoa (ABG.MC) said on Tuesday.

Javier Salgado, chief executive of Abengoa's renewables unit, said Spain had failed to introduce legislation to mandate minimum levels of bioethanol use in petrol, in line with a target of 5.75 percent by 2010 recommended by the European Union.

"All we are asking the government to do is abide by the directive and to legislate," Salgado said at the opening of a biofuels convention in southern Spanish city of Seville.

The second problem was that energy companies were paying lower wholesale prices for ethanol than for petrol, but selling them at the same retail price to the consumer.

"That is the monstrosity, and the main driver for why margins in the bioethanol industry are suffering," Salgado added.

Abengoa halted production last September at its 158,000-tonne a year bioethanol plant -- the country's largest -- in the central province of Salamanca.

Asked how long the Salamanca plant could remain closed in the absence of suitable legislation, Salgado answered, "Frankly, forever."

Biofuel producers in Spain have often complained at the dominant role played by major refining companies in distributing petrol and diesel in Spain.

Salgado said he did not rule out Abengoa opening service stations, but said this had yet to budgeted for.

Salgado said the plant had been built to supply the domestic market, but lack of demand meant production could only be exported, which was not profitable from a remote location.

Salamanca is located in Spain's main grain-producing area, Castilla-Leon, where barley and wheat are mainly grown. The plant is a joint venture with food company Ebro Puleva (EVA.MC), in which both firms hold 50 percent.

Grain prices have eased a little in Spain recently in line with other European markets ahead of an expected strong wheat harvest, but are still much higher than 12 months ago.

Barley in central Spain is now trading at about 192 euros ($296.8) a tonne GRAES01, down from 260 last September, when the Salanca plant was halted.

Abengoa does plan, however, to open a 5-million-litre (about 4,000 tonnes) a year plant in Salamanca using cereal biomass as its raw material.