Bangladesh on Wednesday signed an agreement for Russia to build the first nuclear power plant in the energy-starved South Asian nation, an official told AFP.

The plant -- which will have two 1,000 megawatt reactors that are set to cost up to $2 billion each to construct -- is expected to generate power by 2018 and help ease chronic power shortages that have hit industry hard.

"The Russian Federation will fund construction of the plant, supply fuel for the plant for its lifetime, take back spent fuel, and provide training," said Shawkat Akbar, director of the Bangladesh Atomic Energy Commission.

The deal was signed in Dhaka by Yeafesh Osman, the minister for science and technology, and Sergei Kiriyenko, head of Russia's state-owned nuclear energy giant Rosatom, after a framework agreement secured in Moscow last May.

It specifies that safety studies on the site near the northwestern Bangladeshi town of Rooppur must be carried out before construction is started.

Kiriyenko said the plant would be designed to avoid the kind of accidents that took place at Japan's Fukushima nuclear plant following an earthquake and tsunami earlier this year.

"The agreement provides for the construction of a modern nuclear power plant that meets all the modern safety requirements," Kiriyenko told reporters after the ceremony, which was attended by Bangladesh Prime Minister Sheikh Hasina.

Bangladesh has long suffered severe power outages as demand for electricity soars on the back of a booming economy that has grown at around six percent a year since 2004.

The power crisis has worsened in recent years as the gap between demand and supply shot up to 2,000 megawatts per day or 40 percent of daily production due to years of under-investment.

In 2007, Bangladesh received approval from the International Atomic Energy Agency, the industry's global watchdog, to set up a nuclear power plant.

Officials said the country needed to build the plants because reserves of the country's main source of energy -- natural gas -- were fast depleting and could run out in a decade.