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First oil boom in Azerbaijan

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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First oil boom in Azerbaijan

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  1. 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

  2. Introduction • 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

  3. Azerbaijan oil in history • 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

  4. Late-1800s Baku during the Oil Boom, view from Bibi-Heybat region

  5. Early Views of Baku-continued

  6. Contents • 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

  7. Turkmenchay Treaty (1828) • Azerbaijan was divided into North and South between Russian and Persian Empires

  8. Importance of Azerbaijan’s Oil for the Russian Empire • 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

  9. Early Oil Extraction Methods • 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

  10. Oil Gushers • 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

  11. The first successfully drilled well in the world • 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.

  12. Drivers of First Oil Boom • 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

  13. Early Oil Well from Late-19th. Century

  14. First Oil Boom Takes Off • 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

  15. Demand for Oil • Lighting • Heating • Automobiles • Medicines

  16. Changes to Baku • 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 • Multi-cultural city with Azeris in the minority • Building boom

  17. Research & development • 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

  18. 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. • 1896-1906 the construction of Baku-Batumi pipeline carrying 900 thousand tons of oil per year

  19. Transportation of Oil • 1873 - The first marine transportation of oil from Baku to Astrakhan • 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

  20. First oil tanker

  21. 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. Azeri Oil Barons

  22. Famous Azeri Oil Barons - Haci Zeynalabdin Taqiyev (1823-1924) • Born in a poor family • Earned his fortune after he discovered oil on a small piece of property • Became an oil-millionaire when he was about 55 • Shared his fortune with his countrymen by building houses, schools, factories, theatres etc. • Founder of the Alexandrian Russian-Muslim 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

  23. Institute of Manuscripts which served as the first school for girls. Built by Taghiyev • Classes at first secular female boarding school

  24. Famous Azeri Oil Barons – Musa Nagiyev (1849-1919) • 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

  25. Foreign Investment • 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 • 1898 : Baku was in a pick of its oil industry • With the abolition of the Government monopoly, Baku attracted foreign capital resulting in the epoch of oil boom

  26. 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

  27. Nobel brothers • 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

  28. 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

  29. 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.

  30. Dynamics of Oil Production

  31. Shares of oil production

  32. What are the positive lessons of the First Oil Boom for today? • Development of a modern oil industry • Property rights attracted private sector investment • Significant foreign investment • Investment in oil transportation (water, rail & pipelines) • Technological innovations • Charity provided by Oil Barons • Building boom in Baku

  33. What are the negative lessons of the First Oil Boom for today? • Under a colonial regime • Inequality • Unsafe working conditions • Pollution • Operating Losses

  34. Thank You for your attention!!!

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