Author: Ismail Agakishiyev, "History of the Baku Oil Industry"
After the discovery of oil fields, Baku became a special place, where various economic and political interests of international coalitions, industrial clans and leaders were concentrated and clashed. VK begins publishing chapters from the book by Ismail Agakishiyev "History of the Baku Oil Industry and the Second Oil Boom (second half of the 19th century - beginning of the 20thcentury)" The book presents a historical analysis of the emergence and current state of the Azerbaijani oil industry.
Oil Company LUKOIL was created by the decision of the Russian Council of Minister from April 5, 1993, after the presidential decree no. 1403 from November, 17, 1992 "About the details of privatization and the transformation of the state companies of the oil industry into the stock companies".
In the opinion of the company's president Vagit Alekperov, this day can be considered the birthday of the company. In fact the company was created in 1991. The LUK abbreviation in its names refers to Langepasneftegaz (L), Uralneftegaz (U) and Kogalymneftegaz (K). These three companies enterprises united in the company that now extracts 25% of all oil in West Siberia and 15% in Russia. In addition, Lukoil included two oil processing plants (Permnefteorgsintez and Volgograd oil-processing plant) and the company Nizhnevolzhskneft.
The first big Russian private oil company took followed the examples of the so-called "seven sisters" meaning their vertically integrated system "from the drill to the gas station". The advantages of this structure appeared in the very first years. In many important respects LUKOIL showed better results than the average indexes for the oil branch in Russia or in the Tyumen region.
Thus, in 1993, compared to 1992, the usage of the drill funds was 99.3% in Russia, 102.1% in Tyumen region and 103.8% in LUKOIL. The fall in oil extraction at that time was 16.4% in Tyumen region and 14.5% in LUKOIL. The introduction of the new oil drills in Russia stood at 110.7%, in Tyumen at 106.3% and in LUKOIL 137.8%. The introduction of the new drills in Russia grew by 1.5%, in the region by 9.7% and in LUKOIL by 47.3%. The decrease in the volume of oil extraction in the 1990s was typical not only of Baku but of the entire oil industry in the post-Soviet space because of the decay of the infrastructure and the lack of the possibilities for investments. However, even in this respects the situation in LUKOIL was much better.
If in Russia in general the annual decrease in oil extraction in 1994 was set at 8%, in LUKOIL it was 5%. In 1994 LUKOIL was the most active in implementing the projects in the CIS countries. On February, 14, 1994 it registered a joint Russian-Uzbek enterprise LUKOIL-Uzbekneftegaz to develop the gasfields in Gubibulak, Adamtali, Zafar and some others. It invited investments to introduce modern technologies of drilling and the transportation of oil and gas.
LUKOIL also negotiated with the Oil and Gas Ministry of Turkmenistan on cooperation in the development of oil and gas in the country. The cooperation between LUKOIL and Yuzhkazneftegaz was also discussed. LUKOIL and SOCAR signed an agreement about the creation of a joint company to develop the oil and gas fields.
The analysis of LUKOIL's activity in post-Soviet space suggests that the company achieved the most in Azerbaijan and Uzbekistan, where the real basis for the future was laid.
It was already typical for the company back then to finance the creation and production of the equipment for oil extraction and the reduction of imports. In early 1994 LUKOIL approved the organization of production of the most important equipment with the volume of investment set at 27.4 billion rubles (for December 1st 1993) and 14 million dollars. The expenditure of LUKOIL for these purposes reached 5 billion rubles in 1993.
The success of any company is impossible without a reasonable and professional team. LUKOIL managed to create one like this. Vagit Alekperov gathered people capable of analyzing the economic situation both in Russia and abroad in order to devise effective programs. LUKOIL started working in a traditional area of oil extraction north of the Tyumen region, but was gradually moving towards the Caspian Sea. On May 12th 1993 in Elista, Vagit Alekperov and the president of Kalmykia, Kirsan Ilyumzhinov, signed an agreement that allowed LUKOIL to develop the oil deposits in the Kalmyk part of the Caspian Sea. This “Kalmyk” agreement was a logical step, as LUKOIL was planning to expand beyond West Siberia. To extract 45 million tons annually it was necessary to have one million tons from exploring, while in the Tyumen region the maximum was 200 thousand cubic meters.
