The trouble with oil

Here's a subject that we will be returning to again: Uganda's newly discovered oil reserves.

Since late 2007, reserves of between 2-6 billion barrels have been found by the UK's Tullow Oil, in the Lake Albert basin. When production starts later this year, Uganda could become the fourth biggest producer in Africa.

In a recent report, the National Planning Authority (NPA) suggested that oil revenues will transform the country's economy, reducing its reliance on foreign aid (which currently accounts for 32% of the budget), and turning it into a middle income country by 2015.

However, much will depend, of course, on how the oil funds are distributed, and the arguments have already begun:

• Museveni initially refused to make the Tullow contracts public, amid rumours that he was negotiating the terms himself. Damagingly, the contracts were then made public by a UK-based activist group, Platform. They can be viewed here.
• The opposition Forum for Democratic Change (FDC) now plans to challenge the legality of the contracts through the courts.
• Arguments have also begun at the local level. Once production starts, the government plans to retain 80% of the revenues for itself, and to return 20% to the region from which it came (Bunyoro). However, some are now saying that this should go only to ethnic Banyoro, and not to any of the region's other ethnic groups (Bunyoro is also home to large populations of Baganda and Bakiga).

Thus, before even a single barrel has been produced, the 'black gold' is already raising both political and ethnic tensions.