Oil Industry Thrives In Caucasus
Baku is the largest city on the Caspian Sea and of the Caucasus region. It was established in the 1th century and became important in the 12th century. Petroleum was a trade item as of the 3rd century and Marco Polo noted in the 1200’s :
“Near the Georgian border there is a spring from which gushes a stream of oil, in such abundance that a hundred ships may load there at once. This oil is not good to eat; but it is good for burning and as a salve for men and camels affected with itch or scab. Men come from a long distance to fetch this oil, and in all the neighbourhood no other oil is burnt but this.”
In 1806 the Russian empire occupied Baku and took monopolistic control of oil production. In 1859 the first oil well was drilled in America but there was little incentive to increase production in Baku as industrialization was slow to reach Russia. In 1872 the monopolies auctioned off parcels to investors and Baku’s first oil boom took place. In 1884 the oil barons in Baku built banks and established their own organization, the Oil Extractors Congress Council. The city grew into a modern prosperous oil town with schools, hotels, theaters and casinos. In 1898 foreign companies were granted rights to explore and develop oil fields.
By 1912 the Russian oil industry exceeded the US oil production level. Baku produced more than half of the world’s oil. 3 companies – Russian General Oil Company, Royal Dutch Shell and Partnership of Nobel Brothers – held 86% of all share capitals and controlled 60% of oil production.