In the winter of 1878, Sakhalin peasant Philip Pavlov, returning from a hunt, accidentally discovered a pit filled with a strange oily liquid with a sharp smell. Having been to cities and knowing what kerosene was, he decided that he had found a kerosene lake. Pavlov collected some of the liquid in a bottle and headed to Nikolayevsk-on-Amur, hoping for a good profit. Merchant Ivanov, to whom he offered to sell the bottle, was thrilled, as it turned out to be pure oil, and asked where Pavlov had found it. The peasant told him about the 'kerosene lake.'

The entrepreneur quickly realized what enormous profits oil extraction could bring in the Far East. He sent his assistant to the pit, and the clerk marked all the clearings with oil puddles with large crosses on the trees. In 1880, merchant Alexey Ivanov submitted a request to the Amur Governor-General for the allocation of 1000 hectares of Sakhalin land for oil exploration and extraction. Ivanov invested significant funds in production but did not receive any profits and died a year later. The Sakhalin oil was soon forgotten.

However, in 1886, the head of the Sakhalin penal servitude prisons, Fyodor Lindenbaum, stumbled upon new oil puddles. He noticed that even in the cold, this liquid did not freeze. Lindenbaum sent a barrel of oil to St. Petersburg for analysis, and after testing the samples, it was decided to begin the development of the Far Eastern island. Thus, the Sakhalin Oil Industry Partnership Zotov and Co. was established. The company invited engineer Leopold Batsevich, a specialist in oil extraction. He recalled that half an hour before arriving at the site, he smelled the familiar scent of oil. Work was done manually, wells were drilled for days, but the efforts paid off. Thus began the industrial extraction of oil in Sakhalin.