First oil boom in Azerbaijan
The development of oil industry in
Azerbaijan
and its relevance for us today
Created by Gulnaz Hajiyeva and Ulker Aslanova
Introduction
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Azerbaijan is recognized as one of leading
countries in the oil industry in the world
enriched with knowledge and experience in oil
production
Information on oil production in Azerbaijan was
repeatedly mentioned in the manuscripts of
scientists and travelers in the Middle Ages and
it was noted that such an uncommon product
would generate a significant income
Today we want to take you back many years
and show you how the oil industry was
developed in our country
Azerbaijan oil in history
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Arabian historian Masudi Abdul Huseyn (9th
century)-There are two main sources of Black oil
and white oil (kerosene) on Apsheron
Marco Polo (13-14th century) – Apsheron peninsula
was dotted with oil wells and the oil extracted was
used for lighting and for heating purposes.
Engelbert Kaempfer (15th century) - oil was
transported via wineskins on four-wheeled carts to
Shamakhi and Baku. From Shamakhi it is taken
across country on camels. From Baku it is taken by
sea to other regions
Turkish traveler Ortakoy (17th century)- The area
around Baku has a “burning ground”. The ground is
hot from the burning fuel beneath it
Late-1800s Baku during the Oil Boom,
view from Bibi-Heybat region
Early Views of Baku-continued
Contents
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General characteristics of the pre-oil boom
period
Beginnings of first oil boom
First oil boom
Local oil barons & their activities
Inflow of foreign capital to oil industry
Affects of first oil boom
Relevance to modern Azerbaijan
Turkmenchay Treaty
(1828)
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Azerbaijan was divided into North and South
between Russian and Persian Empires
Importance of Azerbaijan’s
Oil for the Russian Empire
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North Azerbaijan became the source of oil
for industry in Czarist Russia.
The whole economy of Azerbaijan was
under Russian control
Russian government took monopolistic
control of oil production and contracted to
individuals under the otkupchina / iltizam
short-term lease system
This was considered to be the main obstacle
for oil development in Azerbaijan
Early Oil Extraction Methods
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Early oil extraction
methods were very
primitive - mainly hand
dug wells drilled to very
shallow depths (2-3
metres)
In 1813, 136 wells were
in Absheron which
produced total volume of
only 64 barrels of oil per
day
In 1825, oil was
produced on the
Absheron peninsular in
Balakhani, Sabunchu,
Binaqadi, Bibi-Heybat,
Shubani
Oil Gushers
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Much of early oil
production was wasted in
blowout gushers and this
was a very uneconomical
and environmentally
harmful process
Workers were dying
because of the gushers
The strong gushers were
flooding the houses in
the nearest villages
Oil from wells was lost
for nothing because of oil
gushers
The first successfully drilled
well in the world
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In 1844 in Baku, more than a decade earlier than
the oil well in Pennsylvania (USA, 1859), V.
Semyonov, the Baku mining engineer, drilled a well
21 m deep using primitive percussion method in the
settlement of Bibi-Heybat near Baku
This is considered the starting point of industrial oil
extraction in Azerbaijan and in the whole world.
Drivers of First Oil Boom
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Replacement of Iltizam leasing system with an
auction system for the leases in 1872
Replacement of all hand dug wells with wells drilled
using the percussion method by 1871 which
increased the number and depth of oil wells
Partial replacement of manpower with steam
engines
Building of the first oil pipeline in the world from the
oil wells in Balakhani to the oil refinery
Early Oil Well
th
from Late-19 . Century
First Oil Boom Takes Off
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1873 marked the beginning of oil well
drilling on a massive scale
By 1900, Azerbaijan was producing
more than ten million tons of oil each
year which was more than half of the
world’s oil supply
Demand for Oil
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Lighting
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Heating
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Automobiles
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Medicines
Changes to Baku
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Attracted migrant workers from all over the
Russian Empire, Iran and other places
Population of Baku increased from 3,000 in
1807 to roughly 250,000 in 1900
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Multi-cultural city with Azeris in the minority
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Building boom
Research & development
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Azerbaijan benefited from the expertise of well known
chemists and geologists from the whole world such as
the Russian chemist D. Mendeleyev, creator of the
periodic table of chemical elements
As a result, innovative new techniques such as rotary
drilling and gas lift were tested for the first time in
Azerbaijan
The first oil refinery was built in 1859 in Baku. By
1867 there were 15 crude oil refineries
After abolishing excise tax on oil products, many new
factories were built with new technologies allowing
the production of new types of refined oil products
Construction of First Oil
Pipeline in the World
1878 - the first oil
pipeline in the world was
constructed between oil
fields in Balakhany and
the oil refinery in Baku.
The length of pipeline was
12 km.
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1896-1906 the
construction of BakuBatumi pipeline carrying
900 thousand tons of oil
per year
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Transportation of Oil
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1873 - The first marine transportation of oil
from Baku to Astrakhan
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The Nobel Brothers were major contributors
to oil transport;
– Built the world’s first oil carrying steamship,
named “Zoroaster” in 1878
– Constructed the first rail tanks for transporting
oil in 1883
First oil tanker
Azeri Oil Barons
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Oil boom gave an
impetus to the
emergence of
Azerbaijani middle
class and millionaires.
This period witnessed
unprecedented
renaissance in
Azerbaijani national
consciousness.
Local Oil Barons:
 Haji Zeynalabdin
Tagiyev
 Musa Nagiyev
 Murtuza Muxtarov
 Shemsi Asadullayev
 Seyid Mirbabayev
 Haji Haci Aga
 Haji Ajdar-bey
Ashurbeyov and etc.
Famous Azeri Oil Barons
- Haci Zeynalabdin Taqiyev (18231924)
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Born in a poor family
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Earned his fortune after he discovered
oil on a small piece of property
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Became an oil-millionaire when he was
about 55
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Shared his fortune with his countrymen
by building houses, schools, factories,
theatres etc.
Founder of the Alexandrian RussianMuslim female Boarding School, the
first school for girls in the Muslim world
in the current Institute of Manuscripts
Founder of Commercial school (now the
pedagogical institute of N. Tusi) and
the Mechanical and Technical School
(now the Oil Academy)
Built the first water pipeline to Baku
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Institute of Manuscripts which served as the
first school for girls. Built by Taghiyev
Classes at first secular female boarding
school
Famous Azeri Oil Barons
– Musa Nagiyev (1849-1919)
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the wealthiest oil baron in Baku
at turn of the 20th. century
Financed the building for the
Muslim Philanthropic Society in
his son’s memory which is now
the building of the Academy of
Sciences
the founder of one of the largest
male technical schools which is
now the State Economic
University and Baku’s Largest
hospital which is now named
after Musa Nagiyev
Foreign Investment
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Oil production in Baku attracted investors and entrepreneurs
from all over the world including the Nobel brothers from
Sweden, the Rothschild from France and Royal Dutch Shell oil
company
The inflow of foreign capital into the Baku oil industry had a
direct impact on the exploration, extraction and transportation
of Baku oil
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1898 : Baku was in a pick of its oil industry
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With the abolition of the Government monopoly, Baku
attracted foreign capital resulting in the epoch of oil boom
Nobel Brothers
Azerbaijan first caught the eye of the Nobel
brothers in 1872 when the Russian government
offered free competition for plots of lands there.
In 1879 created a shareholding company and
became the main owners
Nobel brothers
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In 1882, Ludwig invited
technical staff to Baku and
the aim was to establish a
colony Villa Petrolea,
located in “Black City"
district of Baku
Oil products from their
venture were distributed all
over Russia by train and by
ship to Central Asia and
Europe
Nobel brothers-continued
Picture 1: The Nobel Brothers oil wells in Balakhani, a suburb
of Baku
Picture 2: 1896 -In order to have their own Protestant place of
worship in Baku, the Nobels helped finance nearly 50 percent
of the construction of the German Kirche. But since the Soviet
period, its primary use has been for concerts
Negative Affects of First Oil
Boom
Oil wells in the vicinity of Baku pumping oil into
reservoir lakes more than 100 years ago. The
ecological disaster still plagues the region.
Dynamics of Oil Production
475000
500000
450000
414000
400000
350000
300000
250000
212000
200000
150000
100000
50000
177000
160000
65000
52000
64
2600
0
1842 1872 1898 1901 1918 1920 1929 1940 1967
Barrel Oil
Per day
Shares of oil production
Nobels
15%
Oil Barons
1%
Others
36%
Shell
20%
Russia
28%
What are the positive lessons of the
First Oil Boom for today?
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Development of a modern oil industry
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Property rights attracted private sector investment
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Significant foreign investment
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Investment in oil transportation (water, rail &
pipelines)
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Technological innovations
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Charity provided by Oil Barons
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Building boom in Baku
What are the negative lessons of the
First Oil Boom for today?
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Under a colonial regime
Inequality
Unsafe working conditions
Pollution
Operating Losses
Thank You
for your
attention!!!