MEXICO CITY Thu Mar 19, 2015 11:16pm GMT

Pemex is set to launch its first-ever sales of gasoline mixed with cleaner-burning ethanol to reduce greenhouse gas emissions, the Mexican state-run oil company said on Thursday.

Pemex has awarded contracts to be supplied with as much as 123 million liters of ethanol per year, which will be derived from locally-produced sugar cane and sorghum.

Over the course of the 10-year contracts, the value of the ethanol purchased would range between $524 and $750 million, Pemex said in a statement.

The 5.8 percent ethanol will be mixed with Pemex's top selling Magna gasoline brand and lower emissions by 35 percent.

Four contracts were awarded to Mexican companies on Tuesday, but tenders for two others were declared void.

A company spokesman said several more contracts will be bid out, but did not provide further details on the timeline.

The new gasoline sales will begin in the states of Tamaulipas, San Luis Potosi and Veracruz before expanding further, although the precise timing was unclear.

Pemex will invest about $58 million to build necessary infrastructure for the project at its Ciudad Madero and Minatitlan refineries.

Citing the need to cut costs due to slumping oil prices, Pemex first delayed, then canceled a planned $2.8 billion investment to boost ultra-low sulfur diesel production announced in September also designed to reduce pollution.

A sweeping energy reform finalized last year and championed by President Enrique Pena Nieto gradually ends the retail monopoly enjoyed by Pemex's nearly 11,000 franchise gas stations scattered across the country.

Beginning in 2017, companies that operate startup non-Pemex stations will be able to import outside gasoline, and then in 2018, gasoline and diesel prices will no longer be set by the government.