UPDATE 3-Gulf states say linked power grid to start July

* Saudi Arabia, Kuwait, Qatar, Bahrain linked this month

* United Arab Emirates to hook up in 2011

* Countries sign power trading agreement, Oman yet to sign

(Adds details on how grid to work, comments, NCC deal)

KHOBAR, Saudi Arabia, July 7 - The power grids of Saudi Arabia, Kuwait, Qatar and Bahrain will be linked later this month, the body overseeing interconnection said on Tuesday.

Gulf Arab countries hope the $1.4 billion power connection project will help them meet rapidly rising power demand and avoid power outages.

(For a graphic on the grid, click: http://graphics.thomsonreuters.com/RNGS/JUL/GRID.jpg)

The United Arab Emirates will hook up to the grid in 2011, the Gulf Cooperation Council Interconnection Authority (GCCIA) said in a statement. That was a year later than previously expected. Oman also plans to join the project.

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, Yousif Janahi, chairman of the GCCIA said.

"The agreement is between transmission system operators, power procurement companies and the GCCIA for the sole purpose of exchanging and trading electrical power," Janahi told Reuters after the agreement was signed.

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, leaving them struggling to supply the power needed for expansion.

Kuwait has been in talks for months to buy power from Qatar through the grid. But Qatar has told Kuwait that it has no available electricity to sell, al-Watan newspaper reported on Tuesday [ID:nL7623250].

The priority for the GCCIA would be to meet power supply emergencies, Adnan al-Mohaisen, the body's chief executive, told Reuters. There would be no transmission fees in the case of a power transfer to meet an emergency, he said.

For bilateral power agreements, the GGCIA will act as system operator and charge transmission services, Hassan al-Assaad, a GCCIA development specialist said. Any excess capacity would be allocated through an auction, Assaad added.

The GCCIA will set up a regulatory committee to set tariffs, al-Mohaisen said.

Subsidised power across the region has encouraged rapid demand growth. Kuwait has one of the highest per capita power consumption rates in the world.

Top oil exporter Saudi Arabia is experiencing outages of up to five hours a day in the industrial zone of Jeddah, the kingdom's commercial hub.

The GCCIA awarded a $44 million contract to Saudi-based National Contracting Co (NCC) on Tuesday to build transmission lines between Salwa substation in Saudi Arabia and Silaa in the United Arab Emirates.

The Gulf Cooperation Council (GCC) is a loose political and economic alliance between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.