A project to link the power grids of Saudi Arabia, Kuwait, Bahrain, Qatar and the UAE will cost $1.6 billion, a senior official from the body overseeing interconnection said on Monday.

The full construction of the grid is expected to be completed by 2012, said Yousif Janahi, chairman of the Gulf Cooperation Council Interconnection Authority (GCCIA).

Gulf Arab countries hope the power connection project will help them meet rapidly rising power demand and avoid power outages.

The UAE will hook up to the grid in 2011, the Gulf Cooperation Council Interconnection Authority (GCCIA) said in July.

Representatives of five of the six countries signed a power trading agreement on Tuesday in Saudi Arabia. Oman has yet to sign but will do so later.

The Gulf countries have little excess capacity to sell for now. They all have similar patterns of consumption, which sees demand peak in the summer as air conditioners work on full throttle to counter soaring desert temperatures.

The economies of the world's top oil producing region have boomed on record oil revenues but have struggled to supply the power needed for expansion. – Reuters