The
18th century saw a boom in the oil industry. The United States dominated the
industry with its leading company, Standard Oil. But it faced competition from
the other side of the world – Russia. The oil city of Baku challenged American
domination of world’s oil supply. In this city, it saw the rise of another
member of the Swedish family Nobel – Ludvig or Ludwig Nobel.
Born
on July 27, 1831, Ludvig Nobel was the son of Immanuel and Adrietta Nobel. In
1837, the Nobels moved to Russia and Immanuel started his arm manufacturing
business. Sadly, it did not become successful and became bankrupt within two
decades. But his failure in business did not meant failure as a father. His
sons, Alfred and Ludvig became successful. Alfred became a successful chemist and
credited with the invention of dynamite. Ludvig on the other became a
successful businessman. He revived his family business and started receiving
contracts from the government. But their third brother, Robert seemed to lack
his brothers’ successes. He attempted to start his own business but it failed.
With this failure, he had to work for his brother Ludvig for a living. In 1873,
Ludvig received a contract from the Russian army to manufacture rifles. Ludvig
accepted it and sent Robert to Baku to purchase walnut lumber for rifle butts.
When Robert arrived in Baku, he saw the city on the verge of an oil boom.
Baku
in the 1870’s saw the rise of the large scale exploitation of oil. Even during
the time of Marco Polo, Baku had beoame well-known for its oil that seeped out
from its lands. In the early 1800’s numerous hand-dug oil pits operated. But in
1857, the first oil refinery opened in Baku. And with the rise of kerosene, oil
suddenly became black gold. In the 1860’s refineries and mechanically dug oil wells
began to rise in numbers when the Tsar allowed foreign investments to enter the
region. Baku began to rise in prominence.
In
1873, when Robert went to Baku, word reached him about the growing oil industry
in the city. The captain of the ship he boarded for Baku told stories of oil in
Baku. The captain told Robert about his piece of land with oil and his
refinery. Curious and possibly with his business mindedness, he decided to use
the 25,000 rubles supposedly allocated for walnuts to purchase the captains
land and refinery. Eventually, Robert’s gamble paid off, and he started to make
money.
After
two years, in 1875, Ludvig arrived in Baku to join with his brother Robert in
the oil boom. He saw Robert’s profit and saw a potential in the oil business.
The brothers then founded the Nobel Brothers Association, later known as the
Tovarishchestvo Nephtanavo Proisvodtsva Braitiev (Nobel Brothers Petroleum
Production Compay) or known as the Branobel. Ludvig brought drillers in order
to assist in drilling new oil wells using steam engines in the Abseron
Peninsula. Ludvig then increased production and the distribution reach of
Branobel. By the following year, Branobel shipped their first kerosene to the
Russian capital of St. Petersburg.
Ludvig
proved to be a dynamic, innovative, calculative, and most importantly,
efficient businessman. Under his guidance, Branobel became the first oil
company to make the position of professional petroleum geologist, an important
position in order to find new oil wells. As an employer, Ludvig showed great
care to his workers. Unlike other businessmen or capitalist of his time,
Ludvig’s treatment of workers became exemplary. He did not allowed child labor.
He reduced working hours to 10 and a half hours, although long, other toiled in
difficult working conditions for more than 12 to 14 hours. He also provided
medical care and technical training. He also gave elementary education to the
children of his workers. Other than that, he provided banking services to his
workers. His workers then respected and vowed their loyalty to Ludvig and
Branoble. They proudly labelled themselves as the Nobelites.
Besides
better working conditions, Nobel showed his creative mind in improving Branobel
and even the whole Baku oil industry. For example, back then, either in
railroad or in barges, producers transported oil in barrels. But Ludvig found
ways to improve and even to increase the volume of oil being transported. For
railroads, Branobel began to use special railroad wagons called cistern cars,
wagons outfitted with tanks to carry oil or kerosene. By sea, in 1877, he
ordered the construction of the first oil tanker – the Zoroaster. And in 1878,
it began its service to Branobel and had the capability to haul 750 tons of
oil.
Besides
tanker and cistern cars, Ludvig also borrowed ideas from other oil industries –
most especially from the American oil industry. News of the pipelines in
Pennsylvania got the attention of Ludvig. He saw it as a way to lessen expenses
in transportation via wagon carriers and trains. And so, during the mid-1870’s,
he ordered the construction of the first pipeline in Baku. But the construction
of the pipeline faced enormous difficulty. Wagon drivers opposed the pipeline
for its implications to their livelihood, it will knock them out of the oil
business. Local officials also disagreed with the pipelines. Ludvig had to ask
and convince the officials in St. Petersburg just to make the Baku officials
agree to the planned pipelines. The pipeline opened in 1878, measuring about 12
km and powered by steam engines. With Ludvig’s initiatives and creativity, he
made Branobel a major oil company in the Russian oil industry and even in the
world stage.
But
Branobel’s success caused a rift between Ludvig and Robert. Robert disagreed
with his brother’s interference in a business that he started. He felt astray
from his brother’s very active participation in the business. In 1879, they
incorporated Branobel. Robert in dismay sold his shares to Ludvig and left
Russia for Sweden. Ludvig then continued the business and aimed to compete
globally.
Off
course, Branobel faced serious competition from other ambitious and aggressive
competitors. One centered also in Nobel’s turf – Baku. The Rothschild competed
with the Nobels in the domination of the Baku oil industry. In the 1883, a
Rothschild, Alphonse de Rothschild, financed the Baku-Tblisi-Batumi railroad. A
year later, it bought the bankrupt company that operated it entered the Baku
oil industry. It challenged the supremacy of the Nobels in Baku and also the
domination of the European market. But other than the Rothschild, the other
challenge it faced came from Russia’s rival in the oil industry – the United
States. John Rockefeller’s Standard Oil controlled the majority of the oil
refineries and wells and had a monopoly. Rockefeller also had a huge share in
the global oil trade and he intended to keep it. When the Nobels and Rothschild threatened Standard’s control of the European market, Rockefeller
attempted to stop them by or profit with them by negotiating. Rockefeller sent
W.H. Libby to talk to Ludvig to allow Standard Oil to buy shares of Branobel.
Ludvig, however, wanted to break Standard Oil’s domination of the world’s oil
and declined the offer. As a result, Standard Oil began a war with Branobel. It
set up offices in Europe and began dropping prices. Nobel did not back down and
fought with Standard Oil for European oil market.
But
the competition and stress of the prices took a toll in Ludvig’s health. His
health went to a serious declines. Three years later in 1888, Ludvig Nobel
passed away, leaving Branobel to the capable hands of his son Emmanuel who led
the company through turbulent times until in 1920, when the Soviet government
nationalized Branobel. Ludvig Nobel earned the admiration of many and led him
to be known as the Rockefeller of Russia. He showed ingenuity, creativity, and
energy which every great and successful businessmen should have in order to
succeed.
See
also:
Bibliography:
Travin,
Dmitry & Otar Marganiya. "Resource Curse: Rethinking the Soviet
Experience" in Resource Curse and Post-Soviet Eurasia: Oil, Gas, and
Modernization. Edited by Vladimir Gel'man & Otar Marganiya. Lanham,
Maryland: Lexington Books, 2010.
Vassiliou,
M.s (ed.). Historical Dictionary of the Petroleum Industry. Lanham, Maryland:
Scarecrow Press, Inc., 2009.
Yergin,
Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York, New
York: Simon & Schuster, 1991.
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