The news of the first Grozny gusher was pivotal in spurring the government to abolish the feudal tax-farming system at the fields of Tersk Region. On May 22, 1894, the “Rules for Oil Fields on the Lands of the Kuban and Tersk Cossack Hosts” were approved. These rules created reasonable terms for the development of oil entrepreneurship on a competitive basis.
On the threshold of this, retired Lieutenant Colonel Aleksandr Rusanovsky founded the first joint-stock company in the Grozny District, the Grozny Petroleum Industry Company, whose charter received imperial approval on January 25, 1894. The company’s fixed capital was 800,000 rubles, and it began operations on September 24, 1894.
On August 27, 1895, Well 7 on Parcel 977, which was leased by the merchant Ivan Akhverdov, produced a powerful new gusher at a depth of 462 feet; for the first three days, it produced 120,088 barrels of oil per day. According to eyewitness accounts: “The gusher was of such fearsome force that the roar could be heard and odor of gases could be smelled at a distance of 15 versts [9.9 miles]. A column of oil gushed from the twelve-inch pipe to a height of up to 30 sazhens [210 feet]. The lack of storage facilities to collect the oil led to the flooding of an enormous territory, including pastures and approach roads, and the formation of large lakes of oil. The derricks of Wells 3 and 6 were hidden under the level of the petroleum.” A correspondent of the newspaper Terskiye vedomosti [“Tersk Gazette”] described the event as follows: “By September 6, the dam no longer held and crumbled. The oil gushed through the two-sazhen-wide [14-foot-wide] breach that formed, and flowed rapidly across the steppe to the Neftyanka River, threatening to go out into the Sunzha River and spoil the water.... The breach in the dam was closed and major reinforcements were made to the embankment; the work involved 200 carts and 400 workers.” The newspaper Kaspiy [“Caspian”] provided further details of the event: “The height of the dam had already reached 4 sazhens [28 feet] and its strength decreased in proportion to the increase in height. On the day before the catastrophe, ominous signs had already appeared in the form of small streams seeping through it, and on September 5, at about 3:30 in the afternoon, the embankment gave way and an enormous stream of oil gushed through the breach that had formed; an enormous waterfall of oil raged, forming a rare sight.... The noise close to the oil fall was so loud that one had to shout to be heard. The oil fall flowed for five hours, weakening slowly.”
Nevertheless, despite these formidable consequences, the gusher became a symbolic event for the promising oil-producing region. Mining engineer Yevgeny Yushkin, who was an eyewitness to the event, wrote: “August 27, 1895 was the beginning of an era for the Grozny fields. The gusher in Akhverdov’s Well 7 demolished all recent doubts about the vitality of the Grozny oil business.” Well 7 continued to flow uncontrollably until the end of 1898, and over three years produced up to 7,205,279 barrels of oil (around 1.1 million tons).
These successes allowed entrepreneur Ivan Akhverdov to take his business to the next level. On April 12, 1896, the charter of the joint-stock company I. A. Akhverdov & Co. Grozny Oil Industrial Company was approved and its fixed capital was 8,812,500 rubles. The new company leased an additional 82.5 acres on the land of Alkhan-Yurtovsky (Yermolovsky) village for a term of 24 years. By the end of 1896, the company was producing nearly 68% of all Grozny oil.
News about the mighty Grozny oil gusher quickly spread through the country. And an ever-increasing number of new joint-stock companies and partnerships quickly began to form in Tersk Region to develop oil fields.
Even the Ukrainian entrepreneurs I. Mantsev, B. Veyser, and D. Margolin decided to try their luck at producing “black gold” on the shores of the Terek River, and in June 1895 they founded the Grozny-Dnepr Oil Industrial Company, based in downtown Kyiv. The company’s fixed capital was 375,000 rubles. According to the results for 1896, 67.9% of Grozny oil was produced by the I. A. Akhverdov & Co. Grozny Oil Industrial Company, 17.9% was produced by the Grozny Petroleum Industry Company, and 1.2% was produced by the Grozny-Dnepr Oil Industrial Company. In 1897, Grozny had three refineries, and in that year they produced petroleum products valued at 750,000 rubles.
The large quantity of Grozny oil being produced demanded prompt resolution of the urgent problem of transporting oil from the oil fields. In September 1895, the first oil pipeline was put into operation at the Grozny fields; it had a diameter of 5 inches and was 7.9 miles long. By January 1898, the fields of Zavodskoy District were connected by five oil pipelines. The Vladikavkaz Railroad Company owned two pipelines with diameters of 5 and 7 inches and a daily capacity of 6,000 and 12,000 barrels, respectively. The I. A. Akhverdov & Co. Grozny Oil Industrial Company had a 9-inch diameter oil pipeline capable of transporting 18,000 barrels daily. One of the remaining two oil pipelines, which had a diameter of 5 inches and a daily capacity of 9,000 barrels, belonged to the partnership A. R. & Co., and the other, which had a diameter of 8 inches and a daily capacity of 18,000 barrels, belonged to the Moscow Oil Industrial Company. The annual combined capacity of the five oil pipelines was estimated at 23 million barrels.
The increased volume of oil production likewise accelerated the development of the refining sector in the Grozny region. On November 10, 1895, a refinery of the I. A. Akhverdov & Co. Grozny Oil Industrial Company was put into operation; it had been built by specialists from the British company Steward Ltd. The refinery comprised five kerosene stills having a volume of 720 barrels, and refined 2,400 barrels of oil per year. In addition, there were two gasoline stills, a pumping station, nine metal tanks, and a generating station on the refinery grounds.
In December 1895, the Uspekh partnership, headed by Grozny merchant Nikolayev, put into operation a refinery designed by engineer A. I. Isakovich. Incidentally, in 1897 this refinery became the first to carry out secondary distillation of the gasoline fraction.
The Vladikavkaz Railroad Company put a refinery into operation in the second half of 1896. It had been designed by the talented inventor Feliks Inchik using the principles of heat regeneration. After visiting the refinery in 1897, Moscow University professor Vladimir Markovnikov made the following assessment: “There is nothing like it in Russia, and such will hardly be found even in foreign countries. It gives the impression of an elegant mechanical toy: Once the spring is wound up, it does everything itself, and it is remarkably regular.” Shortly after the refinery was put into operation, it opened the first analytical laboratory in the region and the outstanding scholar Konstantin Kharichkov (1865–1921) was invited from Baku to serve as its director. Kharichkov, a candidate of natural sciences from St. Petersburg University, worked in Grozny for over 13 years, and during this time was able to convert the small laboratory into one of the leading Russian scientific research centers in the field of refining.
In 1901, the Kazbek Syndicate Company put the Nadezhda Refinery into operation. Four years later, Grozny refineries were refining a combined total of more than 3.6 million barrels of oil annually (more than 540,000 tons).
Springheads of Sakhalin Oil
Around the turn of the 20th century, the island of Sakhalin, off the Pacific coast of Siberia, attracted domestic and international attention after explorers regularly stumbled on oil.
The earliest official Russian record of Sakhalin oil dates back to June 6, 1880, when an affluent merchant named Ivanov petitioned the military governor of the Amur Region for the right to develop an oil spring he discovered: “I traced the flow of oil to the tip of North Sakhalin Island where the eastern shore projects into the Sea of Okhotsk. The source is between two mountains, the right called Uragan and the left—Murgun. The small river lying between the mountains is the Okha. These names were learned from indigenous travelers on the island.” An official inspecting Ivanov’s source in 1886 wrote that “there is an abundance of petroleum... around 25 versts [16.5 miles] north of the Nivkh village of Pomor as the crow flies.” Dutifully, the official sent several dozen pounds of oil to the Imperial Russian Technical Society in St. Petersburg. Ivanov’s heirs received the right to develop what would eventually become the Okhinskoye oil field, but they never broke ground.