The promise of enormous domestic reserves has convinced Dr. Marcio Mello that the time is ripe to form an independent oil company in Brazil.

"There is no doubt that Brazil's stable economic growth and the news of massive oil reserves in the country's presalt areas in 2007 have made it easier for consulting firm HRT Petroleum (HRT-P) to create a new independent oil company, HRT Oil & Gas," Mello said.

Mello, who is president and founder of HRT-P, is now also president and founder of HRT Oil & Gas.

From consultant to operator

For more than a decade, AS and HRT-P, two geology and geophysical service companies with offices in Brazil, helped local and international companies in their oil and gas exploration efforts, including providing lab work and petroleum systems mapping. Familiarity with the country's geology gained while carrying out this work had convinced Mello of the country's significant prospectivity.

In July 2009, when an opportunity came up to acquire certain blocks in the onshore Solim?es Basin in the Amazon, the prospect was too good to pass up.

After a successful private placement to obtain the initial capital of around US $280 million, the company was off and running, acquiring 51% of 21 blocks in the Solim?es Basin. Only a few months after the domestic acquisition, the company had gained a new asset offshore Namibia as well.

In October 2010, with a five-year business plan in hand, HRT-P went to the market and obtained an additional $5 billion to execute its plan. Two years later HRT comprises a group of companies, with 370 direct employees and around 2,000 third-party workers with a market value around $5 billion.

Dr. Marcio Mello, president and founder of HRT-P, is also president and founder of HRT Oil & Gas. (Image courtesy of HRT Brazil)

E&P operations

The blocks HRT-P acquired in the Amazon previously belonged to Petro Energia and M&S Brasil.

"We acquired a 51% stake, and we are now the operators of these blocks," Mello said. "What made me change direction from a service provider to an oil and gas manager was the convergence of several components that made an old dream come true – an economic crisis that brought asset values down, the offer of high potential assets, and knowledge. I believe I have something that was lacking in others, a deep knowledge of the Solim?es Basin geology as well as Namibian offshore basins. I came to the conclusion that the right time had arrived to use all the knowledge to find oil for myself."

Thirty years after he first visited the Amazon to observe natural gas seeps, Mello is back to fulfill what he calls his "destiny" – to lead a rush for the region's oil.

In mid-July Russian-British joint venture TNK-BP signed an agreement with Petro Energia to purchase 45% in their Solim?es Basin blocks. HRT will remain the operator of the Solim?es project, with TNK-BP playing a more active role during development and production activities.

Onshore opportunity

Covering an area about half the size of Europe, Brazil's onshore basins represent huge exploration challenges but possible large rewards. Most of these basins remain largely unexplored because many areas were off limits when Petrobras held an exploration monopoly in Brazil. Thought the monopoly no longer is in place, the great exploration success in the offshore presalt has pushed these areas to a low priority.

"The potential is enormous," Mello said. "The basin contains large, undrilled anticlines, with reverse faults sealed by halite and anhydrite. The whole depocenter is at the end of the oil window stage generating light oil and humid gas."

The Solim?es Basin is one of the more explored of the onshore basins. Petrobras made the first discovery in 1978 with the Juru? field. That discovery, along with his knowledge of the geological data, has convinced Mello that he is in the right place at the right time.

"This basin has all the elements that make for an unbelievable petroleum system," Mello explained, noting that the Solim?es presalt layer is much older than that of the offshore region. "With Brazil's prolific offshore fields and the huge presalt discoveries receiving all the headlines, onshore exploration has been very quiet," Mello said. "The Solim?es Paleozoic basin has hardly been scratched by the drill bit. This is the place we have chosen to start our campaign to become Brazil's leading independent."

The company certainly is off to a good start. Today HRT O&G has four rigs drilling the first group of exploration wells and in 2012 plans to have 13 rigs at work. This exploration effort indicates the confidence Mello has in the region.

"The Amazon is one of the last frontiers in the whole world where you can find giant and super-giant oil and gas fields," he said. "It has one-third of all the gas in Brazil."

Reserves in the basin are estimated at 783 MMboe. HRT's reserves alone are estimated at 4 Bbl to 6 Bbl of light oil, a number Mello says could change. "We are still assessing and collecting new data," he said.

Environmental challenges

The Amazon forest is very eco-sensitive. To reduce the environmental impact, rigs are transported by helicopter in pieces (more than 500 of them) to the drilling site. Every rig move requires that process to begin again.

Mello said his company's operations will not cause problems like those created in other parts of the Amazon such as Peru, where indigenous groups have protested against gas drilling, or in Ecuador, where oil production sparked a long-running legal battle.

In part, Mello explained, this is because HRT has partnered with a local conservation group to help fund forest protection and create jobs in the area.

Though the environmental challenge is significant, it is not the only obstacle to moving into the basin. Weather, which includes a considerable rainy season, is a challenge as well.

"Another main challenge in exploring the Amazon is creating the infrastructure to transport oil and gas," Mello said. The Solim?es blocks are remote, and there is no infrastructure. On the upside, Mello explained that there is a Brazilian law that stipulates other companies can use a Petrobras pipeline if there is spare capacity.

"Petrobras' gas and oil pipelines cross the region where our blocks can link our future wells to Amazon state capital Manaus," Mello said. He is optimistic that a business deal can be inked with Petrobras.

With acreage in the Amazon secured, Mello is looking for other opportunities. "Offshore Brazil is our future target," he said.

"HRT growth plans include de acquisition of new assets, and some of the areas management has selected lie offshore Brazil, which is our main interest for future expansion in Brazil. Any blocks coming up in new bid rounds conducted by the National Petroleum, Gas, and Biofuels Agency (ANP) will be carefully analyzed."

Mello believes the oil and gas operators are looking in the right places such as the deep and ultra-deepwater areas in Brazil and West Africa, and he is sure HRT is in the right play offshore Namibia.

"The basins off Namibia have been forgotten for decades, being overshadowed by the success offshore Angola. Our recent petroleum system modeling and prospect resource analyses have identified large prospects in three of the studied blocks," Mello said.

"We think there could be more than 5 Bboe in these unrisked prospects with objectives in the Upper Cretaceous turbidite sandstones as well as the syn-rift carbonates and sandstones that are analogous to the Tupi and Jupiter fields in southern Brazil."