Apart from the Baku fields, the most highly developed oil-field of importance in Russia is that of Grosny, which is situated on the northern slopes of the Caucasian range and connected with the Vladicaucas railway by a branch line. The Grosny field, however, has only been developed during the past fifteen years in what may be called a commercial sense, but its operated area is almost double that of Baku. It has greatly suffered owing to the inadequacy of transport facilities, but in 1919 a project was drafted to build a pipe-line to the Black Sea.
It is not a feature of this little publication that minor regions shall be all enumerated, and thus I may be forgiven if I refer but to one of the several new districts which have recently attracted the attention of both oil operators and speculators. I refer to the Maikop fields, which prominently came before the British investing public in 1910, and which were directly responsible for the oil boom of that year. A few months before, a very prolific spouter of oil had been struck in Maikop, which was then quite an agricultural centre, and enormous excitement followed. Land was quickly taken over at ever-increasing prices, and the boom, for which English capital was largely responsible, lasted for several months. There have been many opinions put forward by supposed experts in oil geology for and against the Maikop oil region, but the kindest thing of all that can be said for the district is that, while there was really no justification for the remarkable Maikop oil boom of 1910, there was certainly no reason why public opinion should so rapidly change in regard to its potentialities. I have every reason to believe that some day Maikop will justify the optimistic opinions held for it during the boom, but in the eyes of the English investor the region bears the stamp of fraud, for the simple reason that so many have invested their savings in it, and have been doomed to acute disappointment.
Some millions of English money went into Maikop oil enterprises during that ill-fated oil boom, but a very small percentage of this went to really prove the contents of the lower strata. The fact that the ground was simply “scratched” and condemned because it did not respond with oil fountains, cannot in the slightest affect the ultimate career of the Maikop oil region, the presence of oil in which has been known even from ancient times. Looking back upon that Maikop oil boom, one cannot but express surprise at our gullibility generally: we stake our faith and our capital upon what at the best is a sheer gamble, and we seem content if we find that anything approaching 20 per cent. of the money subscribed actually goes into the serious development of the scheme which we fancied. There are a few who grow suddenly rich upon the spoils of such oil booms—I know some of these personally, and to me it has always been a source of keen regret that the State does not exercise something of a rigid control over these publicly invested funds. I cannot here refrain, while on the subject of the Maikop oil boom, just making a remark as to the overrated value which the public generally attach to the reports of many gentlemen looked upon as oil experts. Some remarkable stories are associated with the locking up (and loss) of English moneys in the Maikop boom, but the strangest I know is of a Russian who came to England when the boom was at its height, for the purpose of selling a number of Maikop oil claims. There were many prospective buyers, but it was necessary to possess a report from some supposed “oil expert.” To save time, the seller of the claims drafted what he considered quite an alluring statement, and the next day the report, couched in the same language, bore the “expert’s” signature. And the “wheeze” worked.
But to return to the main subject. Prior to 1870, the crude petroleum in the Baku district, as well as in the minor fields of Russia, was obtained from surface pits, dug by hand, and rarely more than 50 feet deep, and the production was carried away from the mouth of the shaft in leathern bottles. The general arrangements were on the most primitive lines, but, nevertheless, the industry—such as it was then—thrived. Even to-day in several fields in Russia we see the survival of the hand-dug wells, but they are steadily becoming a feature of a page of oil-field history which is almost filled.
It was in 1873 that Robert Nobel went to Baku, and to his enterprise and technical genius a great deal of the subsequent rapid development of the Russian industry is due. Boring by steam power was introduced, and the deeper oil horizons were reached, but, owing to the depth at which the strata became commercially productive, it was necessary to commence the well with a starting diameter of 36-40 inches, so as to ensure the requisite depth being obtained with a workable size of baler—for the Baku crude oils are “baled” from the wells. Upon the question of baling wells, I shall have something to say in another chapter.
Under the improved conditions which were introduced in methods of boring and operating the oil-wells, the industry steadily expanded, the general awakening of boring enterprise being best reflected in the number of oil-wells in operation in subsequent years. For instance, in 1893, the Baku fields could boast of but 458 bore-holes; in 1898, the number had increased to 1,107; in 1903, it was about 2,000; while in 1911, there were over 3,000 bore-holes in the Baku fields. There has been a steady decline in the number of these bore-holes since 1914 due in some part, I assume, to the difficulties of securing the requisite materials for new boring, combined with the enormous increase in the cost of the same. The drilling of the wells in Russia is a very expensive item, for they cost from anything over £10,000 up to £15,000, and usually take a couple of years to drill. But when they are down to the producing strata and commence production, it can be taken for granted that they will continue, providing ordinary care is taken of the well itself, for many years to profitably produce.
The Russian petroleum industry is in the hands of a large number of operating firms, the majority of which work quite independently of each other, and these independent firms are responsible for more than one-half of the total output. The other production of the crude oil, representing certainly over 40 per cent., is in the hands of combines representing the large and middle-class firms, prominent among which we get the firm of Messrs. Nobel Brothers, the “Shell” group, and the General Russian Corporation.
The refining of the crude oil is carried out in Baku, the portion of the town in which this operation takes place being known as Blacktown. It does not belie its name either. At one time these refineries, or at least many of them, were erected in the centre of the town of Baku, or near it, and made it almost uninhabitable by their smoke, smell, and refuse, the latter flowing into the streets and the harbour. A special district was therefore selected, to which all had to remove, and it is this portion of the town which forms “Blacktown” to-day.
One of the great difficulties of the Russian refining industry in its commencement was due to the fact that sulphuric acid, so absolute a necessity in petroleum refining, had to be brought from Europe at great expense, but in 1883, Messrs. Nobel built a factory for its production on the spot from Caucasian pyrites, mined in the neighbourhood of Alexandropol. Other factories for the same purpose and for the regeneration of the acids have since that time been established.
As in other great industries, so in regard to the methods by which the Russian crude oil is transported and to-day handled, great strides forward have been made since the early days. Then the whole of the prevailing conditions were primitive: crude oil, for instance, was carried from the Baku wells to the refineries in skins and barrels loaded on carts or camels. Messrs. Nobel Brothers were the first to lay a pipe-line to their factory, but later on pipes were laid between the refineries and the harbour, these obvious improvements meeting with fierce resistance on the part of the workpeople. The transport of the refined products from Baku to the consumers was equally difficult. There was then no railway from Baku to Tiflis, and the only way to the Black Sea was thus effectively shut off. On the other hand, the navigation of the Volga was only possible during six months of the year, while the monopoly of water transport on the Caspian Sea imposed high rates on all Baku petroleum products.