By successfully competing with American kerosene, Russian kerosene began to dominate more and more new foreign markets each year and was readily purchased, both in Europe and Asia. Whereas exports in 1877 totaled only 552,404 barrels, subsequent years saw a steady rise in export shipments, and within 10 years more than 3 million barrels of Russian kerosene were being exported.
This decade of “oil freedom” in Russia was also marked by the emergence of a number of joint-stock oil companies, most of which had previously operated as trust partnerships. This led in turn to stronger competition not only in the oil industry as a whole, but in each of its sectors, i.e., the production, refining, and sale of petroleum products.
Thus, the S. & I. Jakeli & Co. Petroleum Industry and Trading Partnership was founded on July 11, 1880, with a fixed capital of 500,000 rubles, and it soon assumed a deserved place among the leading oil production companies on the Absheron Peninsula.
On July 1, 1883, Emperor Alexander III issued his approval of the bylaws of the Batumi Oil Industrial and Trading Company (BOITC). The founders of this company were the enterprising railroad engineers Sergey Palashkovsky and Andrey Bunge, construction supervisors of the new Baku–Tiflis–Batumi railroad line. Having the foresight to realize that the transportation of oil and petroleum products was the key link in sales operations, they focused their efforts on creating a fleet of railroad tank cars capable of transporting large volumes of Absheron oil from the fields to the seaports. The company’s success during its first years of operation demonstrated the wisdom of this decision. In 1884, BOITC handled 200,547 barrels of crude oil and petroleum products, or 44.5% of the total volume of 449,850 barrels exported from Batumi. Such success spurred the founders to go beyond transportation and participate directly in oil production and refining. They leased two parcels in Balakhany, on oil-bearing land belonging to Count Lazarev and Princess Gagarina, and commenced drilling operations. They built four 1,590-ton iron tanks in Batumi: two to store kerosene and one each for lubricants and residual oil (mazut). In short order, the company built a well-equipped enterprise for mass production of packaging for petroleum products, with a daily output of 12,000 tin cans. All of this required considerable resources, so the founders urgently appealed to St. Petersburg. On November 16, 1884, Emperor Alexander III issued his approval “On Permitting the Batumi Oil Industrial and Trading Company to Issue Bonds.”
Another vertically integrated oil company also appeared during this time. On October 2, 1883 imperial approval was issued for the bylaws of the Neft Petroleum Products Production, Transportation, Storage and Trading Partnership, having an equity of 2 million rubles. Founded in part by the well-known Russian industrialist Pëtr Gubonin (1825–1894), the company’s bylaws outlined its main areas of activity, including “acquiring, establishing, and leasing of refineries, oil pipelines, tanks, moorings, and warehouses for storing petroleum products; acquiring and leasing railroad tank cars, as well as seagoing and inland ships for bulk transportation of petroleum products; trading in petroleum products, and supplying them to steam engines on railroads, steamship lines, and to factories and other trade and industrial enterprises; and opening of offices and agencies everywhere to market petroleum products.” Within its first three years of operation, Neft enjoyed robust results: it received 483,000,746 rubles just for the use of its fleet of 1,050 tanker cars for transporting oil and petroleum products, and in 1886 the company recorded a net profit of 60,000,616 rubles.
The activity of the Caspian Partnership Oil Industrial and Trade Company is another example of successful oil entrepreneur ship. The company, founded by Pavel Gukasov (1858–1930), along with his brothers Akop, Arshak and Abram, began operations on January 1, 1887, with a fixed capital of 2.5 million rubles. Coming from a Tiflis merchant’s family, the Gukasovs had all received a very good education (Pavel, for example, had graduated from the Moscow Commercial Academy and then the Dresden University of Technology).
The Caspian Partnership had started out as a trust with a small refinery in Baku. However, a decisive turn towards modern methods of production control and management, as well as the introduction of advanced equipment, soon brought tangible results for the Partnership. Within five years, the company was operating at three oil fields on the Absheron Peninsula, and by 1891 it was operating 18 wells in Balakhany, along with 18 steam engines (total power 236 horsepower) and 14 steam pumps, producing a total of 556,127 barrels of oil that year. At Sabunchu, the Caspian Partnership had 15 productive wells and was drilling six more, and was operating 21 steam engines with a total power of 295 horsepower, along with 28 steam pumps, all told producing a total of 2,127,839 barrels of oil that year. Also in 1891, a total of 6,897 barrels of oil were produced by a single drilled well operated at Romanino field. Overall, the company produced 2,690,883 barrels of oil in 1891, or 7.7% of the total oil production of the Absheron Peninsula. The company’s refinery also produced 652,078 barrels of lighting oils (various types of kerosene), amounting to 6.7% of the total production of kerosene at Baku refineries. This level of output was sustained over the next decade: in 1900 the Caspian Partnership produced 4,517,229 barrels of oil, amounting to 6.2% of the entire oil production of the Absheron Peninsula.
In addition to the aforementioned companies, other entrepreneurs made significant contributions to the development of the oil industry on the Absheron Peninsula, thus helping to secure Russia’s competitive position in world markets. These included such major companies as Mirzoyev Bros. & Co. Partnership, G. M. Lianozov & Sons Oil Production Partnership, Pitoyev & Co. Partnership, I. A. Yegiazarov & Co. Oil Industry Company, A. I. Mantashev & Co. Oil Industrial and Trading Company, Aramazd Petroleum Industry and Trading Company, Aral-Caspian Company, and the Ararat, Massi, Astkhik, and Syunik partnerships.
Russian Oil in the Eyes of a Briton
Oil producers around the world could not help but react to Russia’s appearance among the leading players on the European and world markets in the last quarter of the 19th century. Some companies, such as the American transnational Standard Oil Company, recognized Russia as a real threat to their monopoly on the world kerosene market and reacted immediately with strong competitive countermeasures, making use of all possible means and methods.
At the same time, there were also consistent proponents of mutually advantageous business cooperation with Russia, one of whom was the renowned British columnist Charles Thomas Marvin (1854–1890), a native of the city of Plumstead, Kent, who lived a short but rich life. As a correspondent for The Globe, he visited Russia several times, including its oil regions, went to Central Asia, became acquainted with the prominent Russian military figures General Mikhail Skobelev (1843–1882) and General Nikolay Ignatyev (1832–1908), and was a well-known expert on Russian-British relations.
Charles Marvin was also a prolific writer and his literary work was widely known. In 1878 he published the book Our Public Offices, Embodying an Account of the Disclosure of the Anglo-Russian Treaty of 31 May. During the Russo-Turkish War of 1877–1878 he published 20 pamphlets of various kinds, and in 1880 he published a book on Russo-Indian relations, The Eye-witnesses ‘Account of the Disastrous Campaign against Akhal Tekke Turcomans, which was even recommended in Russia for military libraries, and had commentaries written about it by General Mikhail Skobelev himself.