History of oil industry in Russia

Although commercial oil production only began in the second half of the nineteenth century, for centuries oil was gathered by peoples who lived in parts of the world where it seeped to the surface. In Russia, the first written mention of the gathering of oil appeared in the sixteenth century. Travelers described how tribes living along the banks of the river Ukhta in the far northern Timan Pechora region gathered oil from the surface of the river and used it as a medicine and a lubricant. Oil gathered from the Ukhta river was delivered to Moscow for the first time in 1597.

In 1702, Tsar Peter the First ordered the setting up of Russia's first regular newspaper, Vedomosti. The paper's first issue carried a story about the discovery of oil on the surface of the river Sok in central Russia, while later issues carried similar stories about oil seeps elsewhere in Russia. In 1745, Feodor Pryadunov received permission to begin gathering oil seeping from the bed of the river Ukhta. Pryadunov also built a primitive refinery, delivering some of the products to Moscow and St Petersburg.

Oil seeps had also been reported in the North Caucasus by various travelers who passing through the region. Local people even gathered the oil using buckets to haul it up from wells up to one and a half metres deep. In 1823, the Dubinin brothers opened a refinery in Mozdok to process oil gathered from the nearby Voznesensk oilfield.

Oil and gas seeps were recorded in Baku on the Western shores of the Caspian Sea by an Arab traveler and historian as early as the tenth century. Marco Polo later wrote how people in Baku used oil for medicinal purposes and to administer blessings. By the fourteenth century, oil gathered in Baku was already being exported to other countries of the Middle East. The first oil well in the world was drilled at Bibi-Aybat near Baku in 1846, more than a decade before the drilling of the first well in the US. This event marked the birth of the modern-day oil industry.

The Baku region harbored many large fields which were very relatively easy to exploit, but transporting the oil to market was difficult and expensive. The Nobel brothers and the Rothschild family played a major role in the development of the oil industry in Baku, which was at that time part of the Russian Empire. The industry grew rapidly, and by the turn of the century Russia accounted for over 30% of world oil production. Shell Transport & Trading, which later became part of Royal Dutch/Shell, began life by ferrying oil produced by the Rothschilds to Western Europe.

In the second half of the nineteenth century, Russia also began to discover oil fields in other parts of the country. In 1864, a well drilled in Krasnodar Krai produced the first gusher. Four years later, the first oil well was drilled on the banks of the river Ukhta, while 1876 saw the start of commercial production on the Cheleken peninsula in present-day Turkmenistan. The rapid development of oil production was accompanied by the construction of various plants for processing crude oil, with a lubricants plant opening in 1879 near Yaroslavl and a similar facility opening the same year in Nizhny Novgorod.

Oil production suffered as a result of the Russian revolution in 1917, and the situation worsened with nationalization of the oil fields by the Communists in 1920. The Nobels sold a significant part of their Russian holdings to Standard Oil of New Jersey, which was later to become Exxon. Standard Oil protested the decision to nationalize the oil fields and refused to cooperate with the new Soviet government. But other companies, including Vacuum and Standard Oil of New York, which was later to become Mobil, invested in Russia. The continued inflow of Western funds helped Russian oil production to recover, and by 1923 oil exports had climbed back to their pre-revolutionary levels.

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