Kampala, Uganda - President Yoweri Museveni announced on Sunday that Uganda has discovered oil after years of exploration in the country's west and will soon begin production and start building an oil refinery. He pledged to use the resource to fund development in the country.

Museveni's announcement was the first acknowledgement by a government official that Uganda has oil reserves, bringing it into Africa's oil producing club alongside countries like Nigeria, Equatorial Guinea, Sudan and Chad, although with far fewer barrels.

The president said that he expected production to begin in 2009, with initial production of 6 000-10 000 barrels a day.

By comparison, Nigeria, Africa's biggest producer of crude, can produce around 2,5-million barrels per day, but has seen a drop-off of around 20 percent this year because of militant attacks on pipelines and kidnappings of oil workers.

Museveni gave no details of how the oil will be produced, and did not say whether the fields will be put up for bidding or if the government will do the exploitation itself. The president said only that Uganda has studied various oil production contracts around the world.

Thomas Male, a ministry of energy official, told The Associated Press on Sunday that the three fields in western Uganda where the oil has been discovered have reserves of between 100-million and 300-million barrels, with 30-million barrels ready for extraction at just over 12 000 barrels a day.

Oil exploration in western Uganda began in earnest in 1989, but until now no significant reserves had been discovered.

In his announcement, Museveni said Australian oil exploration company Hardman Resources discovered the oil in June at three western fields called Weraga 1, Weraga 2 and Mputa.

The president said he waited to announce the discovery until after a national day of prayer held on Saturday. He thanked God for wisdom and foresight that helped guide Ugandans to make the discovery.

"A refinery is being set up to begin the production of petroleum products soon," he said.

"The government will also use some of the oil to produce electricity, he said. "We shall be able to produce electricity at affordable rates using our oil," Museveni said.

The president said oil exploration companies have spent at least $70-million (about R540-million) on the search.

Ever since rumours about oil being discovered in Uganda began circulating, wealthy Ugandans have been scrambling to buy land in areas where the exploration work is taking place.

Some opposition politicians have said that the oil could turn out to be a curse if it leads to more conflict in the country.

The president dismissed those fears, saying oil had become a curse in some countries because of poor leadership.

"There is a lot of nonsense that the oil will be a curse. No way. The oil of Uganda cannot be a curse. Oil becomes a curse when you have got useless leaders and I can assure you that we don't approach that description even by a thousandth of a mile," Museveni said. "The oil is a blessing for Uganda and money from it will be used for development." - Sapa-AP