Libya on Sunday started construction of a $5 billion economic zone for energy firms operating in the country.

Smart Energy City is a joint project between Libya's state Fund for Economic and Social Development and Bahraini Islamic investment bank Gulf Finance House GFHB.BH, the officials said.

Gulf Finance arranged the financing for the project, which is being built 70 km (43 miles) west of the capital city of Tripoli on the Mediterranean Sea, they said.

Gulf Finance is involved in similar plans to build energy cities in India and Qatar.

"Today we advanced by a significant step as we signed the deal to own the land for the project and start implementing it, after getting the money needed to fund and complete this strategic project," said Abderrhmane Gammoudi, head of Libya's state Investment Promotion Authority.

It will take between three and five years to complete the project, with the first stage of building the infrastructure to take 18 months, the officials said.

The energy city will provide business infrastructure for oil and gas producers, refiners, and companies involved in shipping, energy trading and support services.

Libya plans to nearly double its crude oil production by 2012 with an investment of between $30 billion and $40 billion. It also wants to become a major gas producer and aims to increase production to 3 billion cubic feet per day (bcfd) by 2010, with a potential for 3.8 bcfd by 2015, compared with the current 2.7 bcfd. (Reuters)