Brazil’s Newest Independent

Author Thomas Smith

A new spin-off from HRT Petroleum, South America’s largest service company, HRT Oil & Gas, is staking their fortunes deep in Brazil’s Amazon Jungle.

Starting a new company in the upper Amazon region of Brazil will have its opportunities and as well as considerable challenges. ©HRT

“With Brazil’s prolific offshore fields and the huge sub-salt discoveries receiving all the headlines, onshore exploration has been very quiet,” says Marcio Rocha Mello, President of the newly formed exploration company, HRT Oil & Gas. “However, onshore opportunities loom large. The Solimões 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. Not restricting ourselves to one basin, we also see other attractive plays in Brazil and West Africa and have already acquired eight offshore exploration blocks in Namibia.”

Dr. Marcio Rocha Mello is President and founder of HRT Petroleum and HRT Oil & Gas. He had 24 years experience with Petrobras before starting his own companies. Dr. Mello has developed specialized studies regarding petroleum systems in sedimentary basins across Latin America and West Africa and has published over 200 papers on the geology and geochemistry of these areas. Photo: Tom Smith

Why a new company?

In 2004, Marcio Mello formed High Resolution Technology and Petroleum (HRT) with the goal “to create the best petroleum system consulting and oil services company within the South Atlantic realm”. (See GEO ExPro v. 5, no. 4, pp. 72-74). Marcio and the company Vice-President, Dr. Nilo Azambuja, built the new company using their extensive experience at Petrobras that set them apart from other working geoscientists.

In forming the company, Marcio recognized that “Oil companies are facing difficult challenges in finding new oil and gas deposits. Most frontier areas pose considerable risks with very high costs. Thus, we built a company that is knowledge-based and by fully integrating the skills necessary to do detailed basin modeling, exploration risks can be reduced.”

“We live by our motto ‘NO MORE DRY WELLS’.”

Thus their optimistic approach, and having essentially had all the ingredients of an exploration company in place, they just needed to add leases. The opportunity came swiftly and, as Marcio did in forming HRT Petroleum in just a few days, HRT Oil & Gas took shape virtually overnight.

“Near the end of 2008, we were hired by the Argentinean/Brazilian Company, MS Oil and Gas, to perform a 3D petroleum system and risk assessment on part of their 21 blocks in the Solimões Basin,” says Marcio. “Once the project was completed, we were asked to help raise funds for MS Oil and Gas through BMO Capital Markets in New York but was informed that be very difficult.”

“I was then asked by BMO if I believed in the asset,” Marcio continues. “I was quick to tell them that I would bet my career and company on it. Our credibility and knowledge base convinced them to offer to raise capital if we would explore the Solimões Basin assets. I hesitated two seconds, told them to come to Rio; a new company is being formed.”

Located in the western portion of the Amazon region, the Solimões Basin has an established Paleozoic petroleum system including discoveries of light crude oil, gas, and condensate. ©HRT

Why the Solimões Basin?

From June 2009 to November 2009, HRT Oil and Gas bought a controlling interest in MS Oil and Gas’s 21 blocks. It was like a dream coming true for Marcio since he started his career here over 30 years ago participating in the discovery of the basin’s largest gas and condensate field. He has also published several papers about the area’s petroleum systems.

Covering an area about half the size of Europe, Brazil’s onshore intracratonic basins represent huge exploration challenges but possible large rewards for the adventurous (See GEO ExPro v. 5 no. 5, pp. 44-50). Most of the basins remain largely unexplored because, at first, many areas were set aside for Petrobras when they had the exploration monopoly in Brazil. They were further ignored and put to a low priority due to the great exploration success in the offshore Campos, Santos and Espírito Santo basins.

The Solimões basin is one of the more explored of the onshore basins containing proven reserves of 200 MMbo and 3.1 TCF gas and has already produced over 200 MMbo. The first discovery was by Petrobras in 1978 when the Juruá field unveiled a large gas and condensate province along the basin axis. In 1988, Petrobras encountered light oil and gas in the Urucu and Urucu East fields.

In spite of Petrobras’s success in the basin, only 226 wells have been drilled in a prospective area covering over 480,000 km2 or an area nearly the size of Spain. Of those 226 wells, there have only been 78 wildcat exploration wells drilled to date.

The basin is currently producing the largest amount of natural gas and the third largest amount of boe of any Brazilian sedimentary basin. Light oil production peaked at 70,000 bopd in 1998 and has dropped to 34,000 bopd and 13,000 boe of natural gas at present day. Petrobras has recently completed a $2-billion pipeline project that brings production to Manaus, a major trading hub located where the Rio Negro and Amazon rivers join.

Map showing existing fields, 2010 Petrobras light oil discovery, and HRT’s 21 lease blocks covering 46,000 km². ©HRT

Why now?

“In January 2010, Petrobras discovered light oil only 12 km from our leases,” says Marcio. “Based on correlation with important producing basins such as those in the north of Africa (Murzuq, Kufra, Illizi, Sirte, and Ghadames), as well as our recent analysis of the area, shows this to be the ‘tail of the elephants’, just the first discovery of a sequence. The majority of exploration wells drilled in the Solimões basin is positioned over structural highs and rarely reaches the depocenters with the Silurian/Devonian organic rich shales and associated reservoirs. This recent discovery reinforces our interpretations for the high potential in the deep horizons in the basin depocenters.”

The sedimentary record is comprised of five sequences separated by unconformities related to orogenic events, attaining thickness of more than 4,800 m in which at least 3,400 m are Paleozoic. The basal sequence corresponds to continental to shallow marine siliciclastic rocks of Ordovician age.

“Organic rich, marine Silurian and Devonian shales are the primary source rocks for the basin,” says Marcio. “The Devonian black shales attain a thickness of 80 m and have TOC values up to 12%. Due to lack of sampling, the Silurian source rocks are poorly understood. Very good reservoir characteristics are found in the Juruá Formation, Pennsylvanian age eolian sandstones that average 18% porosity and reach 100 m in thickness.”

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

“This basin has all the elements that make for an unbelievable petroleum system.”

The South Atlantic joined showing the close ties between the sedimentary basins in Brazil and those of West Africa. ©HRT

What is next?

“Our current holdings in the Solimões basin have existing wells that have already proven larger amounts of gas, light oil, and condensate,” says Marcio. “We have plans to start drilling by October, 2010 and to drill over 100 wells in the next four years. Brazil currently imports 60% of their gas needs from Bolivia. This basin has the largest potential for gas and light oil of any onshore province in Brazil and provides us with a huge exploration and production opportunity.”

Not content with the huge potential opportunities the Solimões basin provides the new company, Marcio is seeking exploration opportunities throughout Brazil and is already looking at international projects in areas such as Namibia, Colombia and Angola. It seems he likes the “forgotten basins” like the Solimões and has obtained eight offshore exploration blocks in Namibia together with Universal, Inc., a Canadian public company.

“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,” says Marcio. “We think there could be more than 5 Boe 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.”

HRT Oil & Gas plans to spend a lot of money in both areas, not only to prove that their analyses are correct, but more importantly to certify billions of boe and start production before June 2011.

Finally, Marcio Rocha Mello admits, “People believe in destiny. This is my destiny. I worked in the Solimões basin as a young geologist. I was there for the first discovery. Now, this has come back into my hands.”

High TOC values and generation potential for the basins source rocks are a key element when evaluating the petroleum system. ©HRT