In response to rapidly growing demand for petroleum products on the foreign and domestic markets, central Soviet agencies repeatedly amended Five-Year Plan production goals almost every year. Such plan reviews adversely affected the operations of petroleum enterprises, especially given the severe limits on capital construction and the insufficient availability of materials and equipment in the oil industry. Achievement of success and avoidance of the negative consequences of such chaos required a series of emergency measures by economic, Party, and social organizations.
One of a series of organizational restructurings of the administrative system of the national economy created the USSR People’s Commissariat for Heavy Industry on July 6, 1932. It was headed by Sergo Orjonikidze, and its structure included the Main Administration of the Oil Industry.
The next plan established by the new agency started with a production volume of 46 million tons of oil for 1932–1933 instead of the 24 million tons that had been adopted earlier. In accordance with the adjusted development program for 1932–1933, oil production in the USSR had to be substantially increased.
But practically speaking, it was impossible to achieve a further sharp increase in oil production volumes on the Absheron Peninsula and in the North Caucasus. Many fields showed a natural decline in oil production volumes, and this applied in particular to the Surakhany petroleum area, which had been producing two-fifths (38.6%) of Azneft’s total production.
At the start of the 1930s, it should be noted that the Soviet oil industry was operating in the midst of a general world economic crisis and an oil crisis in particular. World oil production in the first half of 1931 had fallen by 8.6%. During the same period, oil production in the USSR increased by a quarter (24.2%) over the corresponding period in 1930. Thus, at the start of 1931, the USSR was the world’s third largest oil producer, behind only the US and Venezuela.
At the height of the world economic crisis, the physical volume of the USSR’s petroleum products exports steadily began to grow, but at the same time, its earnings from oil exports began to decline. Whereas crude oil and petroleum products exports were 4.25 million tons in 1929, earning the nation 138 million rubles, these figures were 5.19 million tons and 157 million rubles, respectively, in 1930, and 5.7 million tons and 116 million rubles in 1931.
The increase in the volume of Soviet oil exports over the years of the Great Depression caused great concern on the part of the leading oil companies of the West, which had combined into a world oil cartel. In May 1932, an oil conference opened in New York, with Soviet participation, whose basic question had to do with the export of Soviet oil. English and American oil companies proposed that the USSR refrain from acting independently on world markets and deliver 5.5 million tons of oil to them every year for 10 years at a fixed price. The proposal by the Western partners to eliminate Soviet oil sales organizations overseas was rejected by the Soviet Union. Moreover, the Soviets immediately responded with excessive counterdemands. Joseph Stalin, general secretary of the AUCP(b) Central Committee, wrote about this to the prominent Party functionary Lazar Kaganovich, a member of the AUCP(b) Central Committee Politburo: “The oil group is economically stronger than we are. It can always interfere with our oil exports; it can drive down prices and cause us great losses, even if we assume that we will have more and more worthless oil for export. But the point is that we will not have more worthless oil, and our fund of export oil will decrease because of the colossal and constantly growing demand for petroleum products by ships and railroads, the freight and automobile industry, and the tractor and aviation industry.... [Commissar of Foreign Trade] Rozengolts’s directive does not take into account the strength and relative importance of oil workers in the matter of interventions. It does not take into account the fact that it is beneficial to us to more or less politically neutralize the Anglo-American oil group if we really want to protect the peace for at least the next two to three years.”
Intense negotiations continued in New York for several weeks, but given the unreasonable nature of the proposals and the impossibility of reaching a mutually acceptable decision with the Western partners, the Soviet representatives never achieved the necessary agreement.
Table 9. USSR Oil Production by Year, in millions of tons
Source: Economy of the USSR [Narodnoye khozyaystvo SSSR]. Moscow, 1959, pp. 204–208.
Despite the raging world economic crisis, the Soviet government targeted a sharp increase in the volume of oil exports as it prepared the goals of the Second Five-Year Plan. For example, in December 1931, Gosplan planned for USSR oil exports to climb to 11.5 million tons by 1937; among export products, first place was to be occupied by gasoline and naphtha with 4.68 million tons; then residual oil with 2.48 million tons; kerosene with 1.3 million tons; gas oil with 1.1 million tons; and lubricants with 579,000 tons. According to this version of the plan, crude oil was to account for less than 6% of oil exports, or 661,000 tons.
At first, everything went according to plan, and 6.7 million tons of Soviet crude oil and petroleum products were delivered in 1932, earning 107 million rubles. However, USSR oil export volumes significantly declined at the beginning of the Second Five-Year Plan, and in 1933 only 5.39 million tons of crude oil and petroleum products were delivered to foreign countries, bringing in only 76 million rubles. This was largely due to the fact that the growth in oil production in the industry had sharply slowed, while the domestic demand for petroleum products had continued to grow. Gasoline had become necessary for transportation using automobiles, the numbers of which had increased dramatically. For example, automobile production in the USSR grew from 671 units in 1927–1928 to more than 2,000 units in 1932. The situation with tractor production was similar: in comparison with 1926–1927, the consumption of fuel by tractors in the Soviet Union increased by a factor of 18.7 during the Five-Year Plan. And more and more petroleum products were being demanded by the Soviet armed forces—the army, air force, and navy.
The new Five-Year Plan, begun in 1933, placed special emphasis in the oil industry on accelerating the development and exploitation of new oil fields.
In the middle of the 1930s, several developments were introduced in Grozny that did not have any precedent in drilling practice in the USSR or elsewhere in the world. In 1932, metal derricks began to be used in the Grozny region. In 1934, the first experiments were carried out with directional drilling, and work began using apparatus for rotary drilling with the help of casing pipes. In 1935, scientist A. N. Shangin studied the mechanism of borehole deviation. An attempt at turbodrilling was made at that time by lowering a turbodrill on a cable. The height of drilling derricks increased from 112 to 135 feet, which made it possible to work with 82-foot drill stands.
The intensive search for new fields in the Bashkir Autonomous Soviet Socialist Republic (ASSR) continued. On May 16, 1932, a well near the village of Ishimbayevo on the territory of the Bashkir ASSR became a gusher that brought around 55 tons of oil to the surface within four hours. After the discovery of this field, the academician Ivan Gubkin wrote: “There could be hundreds of millions of tons of petroleum reserves in Bashkiria. And what if Ural petroleum is not limited to Bashkiria? If the Verkhnechusovskiye Gorodki fields compelled prospecting along the Urals, then the Ishimbayevo field will compel prospecting work to be performed broadly along the entire western approaches to the Urals and the entire Volga region.”