Kampala — WHEN the people of Kanungu and Rukungiri were told that they were sitting on top of massive oil and gas reservoirs, they could not believe it.

"It had never come into our minds that underneath our great land there was oil," said Dodovico Byamukama, a farmer in Kambuga village, Kanungu.

"We will benefit from the resources because there will be jobs for us. I sent my children to Kampala for better education so that they are employed as technical people."

The discovery of vast oil reserves in Uganda has caused excitement across the country, raising expectations and promises of jobs and infrastructural development.

"We are ready to embrace the oil activities because we need support in schools, roads and healthcare to boost our income and social aspects," Christopher Turyatemba, the Kanungu district local council secretary, said.

If managed well, the oil cash could transform the economy, potentially doubling revenues, creating thousands of jobs and precipitating industrialisation.

But there are question marks on how the indigenous people will benefit from this discovery and how the Government will utilise its revenue.

"The people need information about the benefits, opportunities and challenges," Boaz Muyonza, the Kanungu district farmers' representative demanded.

"Lack of information is hindering the building of trust because we want to know how agriculture, tourism and oil exploration activities will be harmonised."

The people want to know issues related to royalty fees, compensation and how the oil revenue will be distributed.

"What should specifically go to the local people? If this is known, then it will reduce their anxiety," Johnson Atuhaire, the Kanungu district planner, said.

"Royalty fees is a big issue because people have not been informed about the benefits clearly."

The farmers are worried that their source of income - agriculture - will cease as their land will be taken away.

"We need oil but on the other hand, we need food. How are our farmers going to be protected?" Muyonza asked.

But Dozith Abeinomugisha, a senior geologist in the petroleum exploration and production department, said before production starts, there was need to resolve the issue of revenue sharing.

"Under the mining law, the Government takes 80% of the revenue, the local government 17%, while the land owner takes 3%," he said.

"Parliament needs to come up with a proposal on how to share petroleum revenue as we do not have a law." The law will also decide on whether to make oil agreements public.

The oil discoveries impose enormous challenges on the country's education system to train the human resources needed in the industry.

"There is need to train a wide range of experts to manage the industry," said Zedekia Karokora, the Rukungiri district chairman.

He said tertiary institutions should be facilitated to deliver their mandate.

"We are expanding Rukungiri Polytechnic College to train our people and the education ministry has allocated sh2b for expansion works," he disclosed.

The first oil production is expected in 2011, though the peak flow of 150,000 barrels a day for up to 25 years may only be reached by 2015.

Some of the oil will be used for power production, but the bulk will be sold domestically and regionally. The Government said the revenue will mainly be used for development projects.

The Government is also sticking to having the oil refined locally to ensure that a greater share of the profit remains here. This would also end reliance on Kenyan ports for imported fuel.

Although the windfall will reduce the Government's reliance on overseas aid, which accounts for more than 30% of the national budget, there are concerns that the huge flow of oil cash could distort the economy or cause the "Dutch Disease," where countries that have oil resources do not normally develop.