TRIPOLI, Feb 10 - Bahraini Islamic investment bank Gulf Finance House has signed a memorandum of understanding with Libya on Sunday to build an economic zone for energy firms operating in the country, officials in Tripoli said.

Gulf Finance, which invests according to Islamic principles, envisages a $3.8 billion investment in the zone, to be built 70 kilometres west of Libyan capital Tripoli on the Mediterranean Sea.

"The end-value of the development is estimated to be around $3.8 billion once it is completed," Gulf Finance House's Chairman Esam Janahi told the signing ceremony.

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

"The project ... will help encourage more foreign investment, especially from the Gulf region," said Hammed Hadhari, head of Tripoli's government development arm, Economic and Social Development Fund.

Libya plans to nearly double crude oil production by 2012 with an investment outlay 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 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.