Extraction of Crude Oil and Associated Petroleum Gas (OKVED 06.1) in the National Economy of Russia. A Brief History of the Industry

The first mention of oil in Russia dates back to the 16th century. Travelers of that time left records indicating that the inhabitants of the Ukhta River banks collected oil from the water's surface and used it for medicinal purposes and as a lubricant.

In 1687, the renowned Dutch scientist and statesman Nicolaas Witsen published a work titled "Northern and Eastern Tartary," dedicated to describing Siberia. In this work, he mentioned the Ukhta River, where, according to him, the water released a black, oily liquid—oil.

The early 18th century marked the interest of Tsar Peter the Great in this information after reading Witsen's book. He tasked the search for the mentioned oil source, which was accomplished by a prospector from the Arkhangelsk Governorate, Grigory Ivanovich Cherepanov, in 1721. Cherepanov discovered a deposit in the Pustozersky Uyezd and reported the find to the Berg Collegium in St. Petersburg. By order of Peter I, the source was examined, and oil samples were taken for further study. The samples were delivered to Moscow, but they were soon forgotten due to the emperor's death.

It was not until 1745 that another prospector from Arkhangelsk, Fyodor Savelyevich Pryadunov, received permission from the Berg Collegium to open an oil field in the Pustozersky Uyezd on the Ukhta River. This moment marked the beginning of the first significant oil extraction in Russia. Pryadunov also laid the foundations for oil refining by building one of the first oil processing facilities near the deposit. However, a few years later, Pryadunov was arrested for debt and died in prison in 1753. After this, the enterprise changed hands multiple times before ultimately declining and ceasing to exist.

As for Eastern Siberia, historical documents from the 17th century mention oil seeping to the surface in this region. For example, it is known that in 1684, Leonty Kislyansky, a scribe from Irkutsk, found oil near the Irkutsk Fort. The locals collected oil from the water's surface and used it as a lubricant. Later, new oil deposits were discovered in the same area, as reported by the newspaper "Vedomosti" on January 2, 1703.

In the 19th century, the main oil extraction region in Russia shifted to the Caucasus. In the 1840s, on the Absheron Peninsula, then part of the Russian Empire, the world's first exploratory oil well was drilled in a settlement near present-day Baku, while the first operational oil well in Russia appeared in the Kuban region, in the village of Kievskoye, in the Kudako River valley.

In 1853, the kerosene lamp was invented, leading to a sharp increase in demand for oil and its refined products. The first oil refinery, specializing primarily in kerosene production, was opened in Baku in 1863 by engineer David Melikov.

The Nobel brothers made a significant contribution to the development of the oil industry in the Caucasus, founding the "Nobel Brothers Petroleum Production Company" in 1879. This enterprise was engaged in oil extraction and refining in Baku and also created an extensive transportation and distribution system, including pipelines, tankers, rail tank cars, and storage facilities with docking and railway infrastructure.

Foreign investments began flowing into the Russian oil industry in the late 19th century. For example, in 1886, the Rothschild family acquired shares in the "Batumi Oil Industry and Trading Company," founded by entrepreneurs Bunge and Palashkovsky, who had to seek financial support. Later, the company was renamed the "Caspian-Black Sea Oil Industry Company."

By the early 20th century, Russia accounted for about 30% of global oil production. After the October Revolution of 1917, the nationalization of oil fields began, leading to a decline in production volumes. Despite this, foreign investors continued to operate in the country, allowing oil exports to recover to pre-war levels by 1923.

Between the 1917 revolution and World War II, the main oil-producing regions in the USSR remained the North Caucasus and the Caspian region. Control over these territories was one of the key goals of Nazi Germany during the Great Patriotic War.

After the war, alongside continued development of the Caspian deposits, a decision was made to intensify oil exploration and extraction in the Volga-Urals region. The ease of developing these deposits and their proximity to key transport routes contributed to rapid production growth in this area. By the 1950s, the Volga-Urals deposits accounted for approximately 45% of all Russian oil, and by the 1960s, the USSR had become the world's second-largest hydrocarbon producer.

By the late 1960s, the problem of maintaining oil production levels arose due to the depletion of the Volga-Urals reserves. To address this, active efforts began to develop the deposits of Western Siberia. In a remarkably short time, the West Siberian oil and gas basin became the country's largest oil-producing region. In 1965, the giant Samotlor field was discovered there, with reserves of 14 billion barrels of oil. By 1975, daily production in Western Siberia reached 9.9 million barrels. To this day, the Khanty-Mansi Autonomous Okrug remains Russia's leading oil-producing region, accounting for about 50% of the country's total oil production.

In the 1980s, the Soviet oil industry faced difficulties. The desire to increase production volumes led to mass drilling of wells, while funding for new field exploration was significantly reduced. This resulted in the USSR reaching its peak oil production in 1988—11.4 million barrels per day (569 million tons per year) (see Fig. 1).

Fig. 1. Oil Production in the RSFSR, USSR, and Russia from 1980 to 2022

The late 1980s and early 1990s marked the beginning of a decline in the oil industry, which intensified significantly after the collapse of the Soviet Union. The transition from a planned to a market economy brought confusion and chaos to the management of the now-fragmented industry. It was not until 1997 that the decline in production halted, thanks to the completion of the industry's privatization process. New owners, having assumed control, streamlined management and investment processes in oil extraction. As a result, large vertically integrated oil companies emerged, covering the entire production cycle—from field exploration to the sale of petroleum products.