Saudi Arabia has approved plans to build a freight and passenger railway connecting its western port of Jeddah with the eastern ports of Dammam and Jubail, said a top government official.

The 950 km railway project, which is estimated to cost $10 billion and will pass through Riyadh, was shelved after the financial crisis.

'This project will transport containers to the local and neighbouring gulf markets as a main activity which will lower the cost for transporting goods,' said Saudi Railway Organisation (SRO) president Abdul Aziz Al Hokail, adding that it will also transport passengers.

The rail line will connect the Red Sea port city of Jeddah to the capital Riyadh, where it will connect to an existing network between Riyadh and Dammam.

The Saudi cabinet approved the funding from the state-run Public Investment Fund and will solicit bids to build out infrastructure, according to a statement on the state news agency.

The land-bridge project was originally offered as a Build Operate Transfer tender in 2007 but it was shelved for further study.

Kuwaiti logistics firm Agility entered a consortium in 2007 with US firm KBR and General Electric to bid for the project, which was then estimated to be cost around $6 billion.

Other firms that tendered bids in 2007 include Japan's Mitsui & Company and Germany's Siemens as well as Korea's Samsung Engineering and Construction.

The rail project is one of three main projects Saudi Arabia is planning to upgrade its transportation infrastructure.

A high-speed (Haramain) railway linking Islam's holiest cites in Mecca and Medina to  Jeddah is currently under construction.

SRO is studying bids for the second and final phase of the Haramain railway which includes construction of the railway tracks, installation of signal systems and telecommunications as well as procurement of rolling stock equipment.

The third rail project is the 2,400km north-south railway, which would be the kingdom's longest railway project, also financed by PIF.-Reuters