The religious in Xayaburi, in northern Laos, was presided over by Vice Prime Minister Somsavat Lengsavat and attended by the Thai partners in the project and the ambassadors of Cambodia and Vietnam, neighbouring countries that have raised objections to the dam in the past, officials said.
"Normally, before we start blasting in the river, the Buddhist tradition is we request the spirit in the area to forgive us for disturbing the river," said Viraphonh Viravong, deputy minister of Energy and Mines, the chief technocrat behind the project.
The 1,200-megawatt Xayaburi hydro-power plant will be the first dam built on the lower Mekong, South-East Asia's longest river, which is also shared by Cambodia, Thailand and Vietnam.
Under a 1995 regional agreement, any project on the lower Mekong should seek a joint agreement from the riparian countries before proceeding.
The Xayaburi project has been delayed by opposition from Cambodia,Thailand and Vietnam in the past.
In December, members of the Mekong River Commission's council,consisting of water and environment ministers from Cambodia, Laos, Thailand and Vietnam, urged a delay to allow further studies on how to mitigate the environmental impact of the dam, the first proposed for the lower Mekong.
In response, Laos and its chief partner in the project, Thailand's Ch Karnchang Public Co Ltd, agreed to spend an additional 100 million dollars to revamp the design of a fish ladder and sediment flowgates.
The Lao government said it has satisfied the demands of thecouncil, and on Wednesday commenced construction in the riverbed.
There are another 10 proposed dams on the lower Mekong, whichenvironmentalists say could follow the Xayaburi model. The lower Mekong Basin has a fisheries sector worth an estimated 2billion dollars per year.
Environmentalists have questioned whether the fish ladder at the Xayaburi dam will work, noting that the technology has never been tried on a river in the tropics.
"Laos is playing roulette with the Mekong River, offering unproven solutions and opening up the Mekong as a testing ground for new technologies," said Pianporn Deetes, a spokeswoman for the conservationist group International Rivers.
The Xayaburi project, to be operational by 2019, will be one of the country's largest, with more than 90 per cent of its electricity to be exported to neighbouring Thailand.