Laos has begun work on a controversial multi-billion dollar dam, an official confirmed Thursday, defying objections from environmentalists in its bid to become a regional energy hub.

Construction on the main part of the $3.8 billion hydroelectric project at Xayaburi -- stalled for about 18 months over concerns about its impact -- formally began after Laos said it had adapted the design to assuage its neighbours' fears.

"We started working on the river yesterday after a ground-breaking ceremony," deputy energy minister Viraphonh Viravong told AFP, refuting a previous report that the country's Prime Minister had said work had not begun.

The project, led by Thai group CH Karnchang, has sharply divided the four Mekong nations -- Laos, Vietnam, Cambodia and Thailand -- who rely on the river system for fish and irrigation.

Thailand has agreed to buy most of the electricity generated by the dam, but Cambodia and Vietnam have raised fears it could ruin their farming and fishing industries.

Laos has said the project is on course to be completed by the end of 2019.

"The ambassadors of Vietnam and Cambodia were there at the ceremony yesterday," Viraphonh said, responding to a question over whether Laos' neighbours had complained about the official start of construction.

Communist Laos, one of the world's most under-developed nations, believes the dam will help it become "the battery of Southeast Asia" by selling electricity to its richer neighbours.

But environmentalists say the project will be disastrous for the 60 million people who depend on the river for transportation, food and economy.

They fear Mekong fish species will become endangered as vital nutrients are trapped and dozens of species are prevented from swimming upstream to mating grounds.

Urging further study into its likely impact, Li Lifeng of the WWF conservation group on Wednesday said the region should make a stand now or "risk resting the future of the Mekong on flawed analysis... that could have dire consequences for millions of people."

Vietnam and Cambodia have refrained from criticising the start of construction, and both have backed Laos to stick to a pledge to halt work if a negative ecological impact is detected.

Thai senators, however, were outspoken on Thursday, saying construction should be suspended for at least a decade pending further scientific studies.

"The lives of 60 million people will be wrecked and catastrophically destroyed. It is an act of sabotage to the Mekong River which is the nature's treasure", said Senator Prasan Marukpitak, the head of an environment subcommittee.

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