IN a bid to stimulate the debate on Uganda's newly discovered oil and the sharing of the oil wealth, Business Vision runs a series of articles by Professor Kasozi, the director of the National Council for Higher Education. This week's article focuses on issues of oil ownership that may help the country get appropriate oil revenue sharing modalities

Mineral discovery, particularly oil, ignites personal and national expectations of plenty. Plenty often has welcome benefits, but when misused, it can make the rich also cry. Unless strategies for satisfactory sharing of oil revenues are refined, oil plenty, like diamonds, can be "always a gun-fight". Nigeria, the Congo Republic, Angola and Sudan show that the struggle for control and distribution of oil revenues is at the heart of conflict in these African oil-producing countries.

So far, the open debate and discussions on the oil issue in this country has enlightened many and we hope that it will inform future policy and actions.

This article will discuss some known mechanisms for sharing oil revenues. Failure to distribute oil revenues properly is one of the major causes of the oil curse we have discussed in earlier articles. (I understand that ACODE - Advocates Coalition for Development and Environment - is preparing a more in-depth study on oil sharing mechanisms that it may publish later). This article, like those I have written before, is entirely for discussion.

The first point to note in discussing this issue is to name the stakeholders in the oil resource exploitation. These are the citizens of the country in which oil and other minerals are located, the Government that represents the citizens, the oil companies that render the intellectual and menial labour to exploit the oil and the local governments.

Others are the land-owners, the people in the oil-producing area whose way of life could be affected by the exploitation of minerals and the workers in the oil sector.

Having isolated the stakeholders, the legal ownership of minerals, in this case oil, must be clearly defined. Failure to do so is often a major cause of conflict.

Any sharing mechanism must explain in detail this apparently obvious factor if conflict over levels of take-home have to be avoided.

In Uganda, there is some vagueness over whether oil is owned by the citizens or the Government.

According to the constitution, Article 237, "Land in Uganda belongs to the citizens of Uganda" and the Government, as guard of the state, holds it on their behalf.

But according to the constitution amendment Act, Section 244, "minerals and oil are vested in the Government on behalf of the Republic of Uganda".

Citizens are not mentioned. Notwithstanding this subtle change, Parliament is still responsible for legislating on the exploitation of minerals, sharing of royalties, payment of indemnities and restoration of derelict lands. Secondly, the constitution and the Petroleum Exploration and Production Act of 1985 do not provide for natural gas, which is often a bed-fellow of oil.

In many countries, oil and other minerals are owned by the central government on behalf of all citizens. In Nigeria, the 1969 Petroleum Act made all oil in the country a national possession and the federal government was to distribute all oil revenue to all other stakeholders.

The 1975 Land Decree in Nigeria put land ownership matters to the governors. However, all underground resources belonged to the state. The land-owner was left with only structures, plants and animals raised on that land.

The next major stakeholders of oil are the oil companies who invest money, intellectual/ expertise in the industry. These are the tenants, who pay rent to states to commercialise what was previously dormant capital. The percentage share the companies take of the proceeds of oil depends on agreements they negotiate with governments (on behalf of citizens).

There are many types of agreements, including concessions, service, joint and production sharing agreements. In the latter agreements, which Uganda has opted for, the usual share is normally 80% for the government and 20% for the company after all production costs have been paid.

It is only when the companies have been paid that states can distribute the remaining 'cakes' to stakeholders. Mind you, without the firms, the black gold could not have been turned into cash.

The next stakeholders are usually local governments. These include regions, (provinces or states) and districts. In decentralised or federal political systems, regional or state governments could own minerals/oil. In the US, the state of Alaska owns most of the oil as does Alberta in Canada. This is also the case in the United Arab Emirates.

Some states permit private ownership of minerals and oil. In the US, "freehold owners" own wells on their land. The situation in Russia is under transition from complete state ownership to a system difficult to define now.

In Uganda, the ownership by local authorities also need clarification. Section 244(2) of the constitution states that "minerals and mineral ores shall be exploited taking into account the interests of the individual land owners, local governments and government." This implies that local authorities and individuals could have a share of the mineral proceeds.

The pretex to this is the Uganda Wildlife Act, which gives 20% of revenue collected at gates to local authorities. It is operational, concerning Murchison Falls National Park where the share of proceeds is 80%, 17% and 3% for the Government, local governments and land owners. Kasese is reported to be getting some money from some of the industries located in the district.

It is clear that while the constitution recognises local governments, cultural leaders are not recognised as governments. Section 246 (3c) makes a cultural leader enjoy "benefits and privileges as may be conferred by the Government".

The Government will have to determine the number of recognised cultural leaders in the oil-producing region to get special benefits if it chooses to do so. The multiplication of districts might also transform the sharing ground. There will be many district authorities demanding a share. However, while it is clear that adversely affected people and the harmed environment should be compensated for, the Government will have to remember that for the last 100 years, cotton, coffee and tobacco were the basis of the economy.

The Government took a surplus from these crops and used it for the development of the whole country. If the people of oil-rich areas ask for special benefits, will cotton, coffee and tobacco producers ask for the same favours, and retrospectively so?

Resources, either produced by people in a given polity or natural, should belong to, and benefit, all nationals as per the Constitution. This is not to say that losses incurred by residents of mineral-producing enclaves such as environmental degradation, loss of arable land or inflation should not be compensated.