No. 3, 2009

On the 180th anniversary of the birth of the famous German entrepreneur Karl Siemens, the founder of the Siemens Company’s oil division in Russia

The German firm Siemens was first heard of in Russia in 1851, when the first 75 of Werner Siemens's new self-repeating telegraphs were put into operation on the Moscow-St. Petersburg railroad. Since then, the company has played an exceptionally important role in the development of electronic technology and communications in Russia. More than 9,000 km of telegraph and telephone lines were strung with the help of its technicians, and factories for the production of cable, dynamos, and different types of electrical equipment were built. Few know, however, that in the second half of the 19th century, the Siemens brothers, in addition to producing electrical hardware, made their own impressive contribution to the development of Russia's oil industry.

The German oil gambit

In 1882, a detailed article written by a technical engineer named Stepan Gulishambarov, "Sources of Oil in Imeria, Georgia, Guria, Ossetia, Kartalinia, and Kakhetia," was published in the newspaper Kavkaz (The Caucasus). The article gave special attention to the ambitious moves being made in the oil business by the Siemenses, Prussian nationals whose firm was better known for its success in setting up telegraphic communications and manufacturing electrical hardware. The six Siemens brothers - Werner, Wilhelm, Friedrich, Karl, Walter, and Otto - had all had a technical education and become extraordinarily successful businessmen by betting on the Russian market. They made their first business contacts in Russia in 1851, just four years after the firm was founded. Collaboration began with the delivery of 75 self-repeating telegraphs for Russia's first telegraph line, running from Finland through St. Petersburg, Moscow, and Kiev, to Odessa and the Crimea. This was an exceptionally important order for the firm, which at its start had a very small manufacturing plant and only ten workers.

A year later, Werner Siemens (1816-1892), full of ambitious plans, arrived in St. Petersburg. His great expectations were fully justified and, as a result, his firm was at once supplied with enough orders to keep it busy for the next 15 years.

The expansion of their business in Russia compelled the heads of the Siemens & Halske Company to open their own representative office, headed by Werner's younger brother, 24-year-old Karl Siemens (1829-1906), in St. Petersburg in 1855. Karl learned Russian quickly and confidently joined in the Russian business community.

Werner Siemens himself would travel across Russia twice, visiting the Caucasus in 1865 and 1868.

In 1867, immediately after obtaining the rights to cobalt and iron mines in Kedabeg (Tiflis Province), the Siemens brothers acquired leases to the Mirzan, Shirak, and Eldar oil springs in Georgia, for the sum of 4,500 rubles a year. Long before their operations commenced, the annual fee for their leases had begun to rise steadily: it was 1,000 rubles between 1848 and 1858; 2,800 rubles between 1858 and 1862; and 3,100 rubles between 1862 and 1866. The volume of oil produced, however, was at first very modest. According to data from the Caucasus Bureau of Mines, the springs produced only 10,000 barrels of crude in 1865.

Demand for oil was rising quickly, and the task of reorganizing oil production at the Imperial Springs field fell upon Walter Siemens (1833-1868), Acting Consul of the North German Alliance in Tiflis (modern-day Tbilisi). Residing in the Caucasus since 1865, he contributed much to the development and launching of a number of the firm's commercial projects, including the production of oil, in their preliminary stages. Unfortunately, a horrific fall from a horse resulted in a number of fatal injuries, and he was buried at the Tiflis city cemetery on June 12, 1868. His brief obituary in the newspaper Kavkaz described him as "someone who stood out from the mass of ordinary people by virtue of his individuality."

Otto Siemens resumed the Siemens & Halske Company's Caucasian oil project, and it was here that his brilliant abilities as a businessman, engineer, and production organizer were fully displayed.

Foreign methods and equipment that were then state-of-the-art were employed in reorganizing oil production in the vicinity of the Imperial Springs. Following the development of new, deeper springs on obviously oil-rich sites, the drilling of the first three wells began in 1869, accompanied by the construction of an oil refinery. According to data from the Bureau of Mines, in 1870 the Siemens brothers' oil field contained 80 oil springs and 7 drilled wells, the combined oil production of which was 58,410 poods (1 pood = 16.38 kg). The oil refinery had four thermal stills with volumes of from 100 to 120 vedros (1 vedro = 10-12 l), four air coolers, three jigging vessels, and eight basins for storing oil and oil residues. From the oil produced, 12,915 poods and 27.5 pounds of photonaphthyl, 1,035 poods of benzine, 1,807 poods and 15 pounds of heavy oil, and 33,600 poods of oil residues were obtained.

The Caucasus Division of the Imperial Russian Technical Society (IRTS) was established in Tiflis in July 1868, with Otto Siemens being elected an associate member of the prestigious engineering organization. At general meetings, he would invariably take the most active part in discussions on important technical issues associated with the oil industry.

Otto Siemens was one of the first in the Caucasus to find an effective way to solve the problem of using oil residues as fuel for the smelting of copper ore. At the March 13, 1871 meeting of the Caucasus Division of the IRTS, he presented diagrams of two "regenerative apparatuses for the combustion of oil residues," one of them designed by Friedrich Siemens and the other by his own hand.

Vladimir Bogachev, a member of the IRTS Caucasus Division, assessed the apparatuses thus: "...the idea on which the design of the aforementioned devices was based was extremely clever; but just how much the latter shall be practical can only be resolved by an experiment which Herr Siemens is thinking of performing at one of his factories."

It would also be entirely fair to consider Otto Siemens as one of the pioneers in the asphalting of roads in the Caucasus. The production of surfacing asphalt was soon under way at a plant on the Imperial Springs site. The asphalt was used successfully "in the construction of Mr. Izmailov's Russian bathhouse" in Tiflis. In addition, Otto Siemens proposed the laying of "urban sidewalks" of asphalt "for 20 rubles per square sazhen" (1 sazhen = 2.13 m) to Tiflis Governor K.I. Orlovsky, but the conservative official decided in favor of ordinary cobblestone pavements instead.

Great success awaited the Siemens & Halske Company at the 1870 National Manufacturers' Exhibition in St. Petersburg, where it won two medals, the Gold and the Silver, in short order. The Siemens brothers' contribution to the development of Russian industry was thus honored, as were their fruitful activities in Russia over the previous 16 years.

Unfortunately, Otto Siemens was unable to bring all his creative ideas to fruition. He died in the fall of 1871, during a cholera epidemic in Tiflis. A notice appeared in the newspaper Kavkaz announcing that "the Imperial German Consul, Dr. Otto Siemens," passed away on September 23, 1871. The newspaper also offered its condolences to the Siemens Company, saying that it had, "in the persons of Walter and Otto Siemens, lost honest and honorable representatives."

At the October 11, 1871 meeting of the Caucasus Division of the IRTS, held in Tiflis, mining engineer Ivan Shteiman, head of the Bureau of Mines, "read out the obituary for Otto Fyodorovich Siemens," in the course of which he especially emphasized that "we in the mining industry are pleased that his name shall forever hold an honored place in the history of the Transcaucasus."

The firm's Caucasus branch now bore the name "Siemens Bros. Caucasus Industrial and Metallurgical Company."

The German businessmen's Moscow triumph

After the death of Otto, representative office head Karl Siemens assumed responsibility for implementing the Caucasus oil project. In the summer of 1872, the firm Siemens & Halske took part in a polytechnical exhibition in Moscow. Vasily Minin, a columnist for one of the city's newspapers, wrote: "From Siemens & Halske in Berlin, the physics section got a number of interesting devices, including a magnetoelectric distance gauge, an electrical pyrometer, and an apparatus for detonating mines.... Meanwhile, the Caucasus section's exhibit featured, alongside ‘historical Petrine-era artifacts,' a mineralological collection that contained items from the Kedabeg copperworks and products from their oil refinery."

On the same topic, the newspaper Russkiye vedomosti (The Russian News) noted: "The Caucasus exposition revealed a great many riches that Russia has yet to start using." On display in Pavilion 14 of the Caucasus section were "samples of oil and products from the Siemens brothers' photogen plant in the Imperial Springs district," the extended list of which included products entirely new to Russia, such as gasoline (specific gravity, 0.682); ligroine (sp. gr., 0.692); separated benzine (sp. gr., 0.716); light oil (sp. gr., 0.760); raw benzine (sp. gr., 0.725); photogen (sp. gr., 0.820); doubly-rectified photogen (sp. gr., 0.818); diesel fuel oil for burning in lamps (sp. gr., 0.867); heavy fuel oil for furnaces (sp. gr., 0.875); vulcan oil for lubricating machinery (sp. gr., 0.935); oil tar (sp. gr., 0.968); oil tar for marine use; dermatological ointment; liquid cleanser for removing grease stains; bituminous varnish "for metal and wood"; and asphalt.

The extended list of exhibits in the Siemens brothers' refinery exposition shows it was at their refinery that the process for the deep refining of oil first found practical application in Russia. An expert jury rated the contribution made to the development of Russian industry by the Siemens & Halske Company very highly. For their "many practical applications of electric current," Werner, Wilhelm, and Karl Siemens were awarded an Honorary Diploma (First Class) and a Grand Gold Medal for their "collection of oil and its products." Friedrich Siemens also received a Grand Gold Medal separately for "perfecting regenerators for glassmaking and steelmaking furnaces." In addition, their refinery's director, Karl Masing, was awarded the exhibition jury's written thanks "for his diagrams of the regenerative apparatuses for the combustion of oil residues, which are converted into steam and gas."

After the exhibition, the Siemens brothers' oil business continued to grow. This was reflected primarily in the scale of its drilling. By 1875, according to data from the Bureau of Mines, there were already 101 drilled wells in production and just 14 oil springs. The former included 72 wells in the area of the Mirzan, Shirak, and Eldar oil springs, and 29 wells in the Nabamberi district.

Two refineries were already operating in the area of these fields: the Siemens brothers', and one belonging to Karl Masing, their former manager, who had started his own business. In 1875, the Siemens brothers' refinery turned out 21,131 poods of photogen (lamp oil) and 31,155 poods of other products, while Karl Masing's refinery, which had just begun production, turned out 252 poods of the former and 110 poods of the latter.

In 1878, the leasing system for Tiflis Province oil fields was replaced with a rental arrangement, with the annual payment of 10 rubles per desyatina (1.1 hectares of land) directly into the treasury. This gave new impetus to the development of oil production. By 1880, according to data from the Bureau of Mines, there were already 15 drilled wells in the Tiflis Province and only one oil spring, from which a combined 71,682 poods of oil were produced; after their refining, 33,884 poods of lamp and lubricating oils were obtained.

The end of the Siemenses' non-core business

Acceleration of the oil industry's development on the Ashperon Peninsula, along with the completion of work on the Transcaucasian railroad, radically changed the situation on the Tiflis Province's oil market. Objective circumstances of a geological and mining nature led naturally to the exhaustion of the oil fields at the Imperial Springs. In 1882, the 41 wells there produced only 37,540 poods of oil, while the refinery turned out just 14,356 poods of kerosene and 7,455 poods of lubricating oils. It became clear to the company's directors that additional new financial outlays would be needed to recapture its former position in oil production, primarily through large-scale geological exploration, and to modernize the refinery. At the same time, carrying out its ambitious Russian projects in the area of electrical equipment and communications would take up all the firm's financial resources, and then some.

This finally led to the directors of Siemens & Halske to decide to abandon their non-core oil division and concentrate fully on the development of electrical hardware. In the second half of 1883, the Siemens brothers shut down their oil business in Russia.

To start with, the Siemens brothers handed over the Imperial Springs refinery and 20 desyatins of oil-rich fields to one Colonel of Engineers Fyodor Minkevich, who quickly relinquished them to a Signakh merchant named Otarov. For a very long time, the Georgian businessman would enjoy the legacy left by the Siemens brothers without making even the slightest effort to modernize either the fields or the refinery. As a result, they produced only 37,241 poods of oil in 1884; 40,694 poods in 1885; and 40,635 poods in 1886. Oil production would never surpass this mark in the future. Fifteen workers were employed at the oil fields. In 1888, the refinery's equipment was moved to the immediate vicinity of the Shirak drilling rigs. It comes as no surprise that the technological stagnation in production inevitably led to a decline in the volumes of oil produced. In 1890, 46,444 poods of oil were produced at the merchant Otarov's fields, and only 41,161 poods in 1891.

Today, in retrospect, we should once again give the Siemens brothers their due for their entrepreneurial energy, exceptional capacity for hard work, and engineering talent. In the 1860s and 1870s, it was they who knew how to determine the right path for the development of the oil industry, which became a key sector of the Russian economy at the turn of the 19th and 20th centuries.