TRIPOLI, (Reuters) – Libya will begin building in January a $5 billion economic zone for energy firms operating in the North African country, officials said on Monday.

The planned “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.

Gulf Finance, which invests according to Islamic principles, is arranging financing for the project, to be built 70 kilometres (43 miles) west of the Libyan capital Tripoli on the Mediterranean Sea.

“The preparatory works for the project are completed and the project will be launched in earnest in January, 2009 and the total costs of the project are $5 billion,” Fund Chief Executive Officer Hamed al Houtheiri told the signing ceremony.

“Between three and five years are needed to complete the whole project and the first stage to build the basic infrastructure would take 18 months,” added Finance House’s Chairman Esam Janahi.

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

“Our project meets the needs of most oil and gas companies. Our study showed they were interested in doing more business in Libya and want to expand their operations,” said Janahi.

Abderrhmane Gammoudi, head of Libya’s state Investment Promotion Company said: “We are expecting the project to create thousands of direct jobs alongside several thousands of indirect jobs”.

Libya plans to nearly double crude oil production by 2012 with an investment of $30-$40 billion.

The country 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 2.7 bcfd now.

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