NICOSIA, Aug 20 (Reuters) - A water pipeline is being planned to link Turkey with drought-hit northern Cyprus in a bid to ease a critical water shortage on the Mediterranean island, an official said on Thursday.

The Turkish Cypriot administration in the north of the island believes a 60 km (37 mile) pipeline running between southern Turkey and northern Cyprus could carry up to 75 million cubic metres of water annually.

"The planning phase of the project will be completed by the end of this year," said Durali Elal, a Turkish Cypriot environment official.

"Bids for the project will start in 2009 and construction could be launched in the same year," Elal told Reuters.

The pipeline, to be laid some 250 metres below sea level, suspended above the extremely deep seabed, will cost an estimated $400 to $450 million which Turkey will pay, he said.

Cyprus, ethnically divided between its Greek and Turkish Cypriot communities, is experiencing one of its worst droughts in decades.

The southern Greek Cypriot side of the island has already started emergency imports of water by tanker from Greece and plans to import a total of 8.0 million cubic metres in the July-November period.

Four years of inadequate rainfall have left reservoirs on the island virtually empty, and underground water deposits have been depleted by over-extraction. Some accounts say annual rainfall has shrunk by more than 10 percent in the past three decades.

The pipeline is the latest of several attempts to overcome the island's chronic water shortage. Turkish Cypriots have in the past imported water in giant floating balloons towed from Turkey, but with mixed results.

Elal said the pipeline could easily meet Turkish Cypriot water needs. "If there is the demand, we could provide water for our neighbours as well, including south Cyprus," he said. (Reporting by Anil Isik, editing by Tim Pearce

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