“This is very funny, because one day I was here and I just had the idea,” said Mello, recounting his thought process with bubbling enthusiasm. “I say, ‘Why don’t I fulfill my dream and build my own oil company? Why am I finding oil for the other ones?’ ”
It was an expensive gamble, Mello said, but he had an easy explanation: “You know, Brazil is like that, where everything is possible.”
His company was buoyed by an initial public offering in 2010 that netted $1.5 billion and an alliance with Russia’s TNK-BP. Now HRT Oil & Gas is drilling in one of the most challenging and isolated spots on Earth: the heart of the Amazon.
Mello represents a new breed of Brazilian oilmen, and his company’s arrival heralds the entry of start-ups in a Brazilian industry long dominated by the state-run behemoth, Petrobras, and multinational giants.
This is not the first time that Mello, 58, has worked in the Solimoes basin, a swath of jungle twice the size of Maryland and located 2,500 miles northwest of Rio. More than 30 years ago, he was a young geologist there with Petrobras.
“I was there in 1979, drilling a well, and I dreamed that one day I would be back,” he said. “I always have the Amazon in my mind, and I knew there was a huge potential.”
Mello gets revved up just talking about oil, particularly Amazon crude.
In his office on the 10th floor of a sleek tower, he has a mounted telescope that he uses to track the oil-producing platform vessels being towed out to sea.
And he waxes on about the importance of oil to modern life — not just for motor fuel, he pointed out, but as a component of pretty much every object in his office.
“I dream oil 23 hours a day. I don’t sleep. My mind is rrrrrr,” he said, making the sound of a motor.
“Oil is life, my friend,” Mello added, noting that carbon dioxide — that byproduct of combustion and bane of climate scientists — is used to produce food for plants.
“People think oil is pollution,” he said. “That is a big mistake.”
Of course, such views are widely contested. And Mello’s nonstop narration of all his plans, big and small, prompt some observers in the oil industry to describe him as “agitated,” “unconventional” and “egotistical.”
Mello seems to relish the nicknames bestowed on him in industry publications because of his work discovering oil, including Mr. Go Deep and the Oil Detective.
‘The best oil we have’
Cleveland Jones, a petroleum engineer who teaches at the State University of Rio de Janeiro, believes that Mello’s focus on the Amazon could be misdirected, given that Brazil’s energy future appears to be under the waves far off Rio’s coast.
“There’s a lot of potential there. Why go crazy somewhere else?” he said.
But energy analysts say Mello happens to be right about the Amazon.
Magda Chambriard, director of the National Petroleum Agency, regulator of Brazil’s oil industry, called the crude produced in the jungle “the best oil we have in Brazil” because it requires far less refining than the heavy oil pumped offshore.
Jean-Paul Prates, director of the Center for Strategies in Natural Resources and Energy in Natal, in northeastern Brazil, said geologists have known for years that the Amazon has “excellent potential” for oil and natural gas production. Petrobras, which began producing in the Amazon in the 1980s, pumps more than 100,000 barrels a day there.
Prates said that with so many multinational oil companies drilling off the coast of Brazil, it made sense for Mello to make his mark elsewhere.
“That’s why Marcio is trying to get into that niche and say, ‘We’re the jungle company,’ ” Prates said.
A smaller footprint
What oil industry observers agree on is the logistical difficulty of drilling in virgin forest. “The only really big obstacle or challenge, let’s say, is the jungle itself,” Prates said.
Mello talks a lot about that, too.
HRT did not build roads into the Solimoes, Mello said, opting instead for helicopters to fly in workers and drilling equipment. The company is laying flexible pipelines to carry oil over hills and around vegetation. The crude would be conveyed to floating terminals and transported by river to the first big city, Manaus.
A handful of wells are operating now, and HRT foresees having as many as a dozen online by the end of the year, with production expected to hit 50,000 barrels a day in 2014. With 2,500 workers there, it is not a small operation.
Yet, HRT’s activities have not met with the kind of bitter protests oil companies face in the Ecuadoran or Peruvian Amazon.
“The footprint on oil drilling — the way HRT is doing it — is significantly less than what is usually produced in the oil sector,” said Virgilio Viana, chief executive of the Foundation for a Sustainable Amazon, or FAS, an environmental organization.
FAS, which works with villagers to develop sustainable industries that rely on an intact jungle, is partnering with HRT. The oil company will provide FAS with about 60 cents for each barrel produced, which could translate into $11 million in two years.
“We speak the same language from a science standpoint,” Viana said.
Mello is already looking farther afield.
HRT is gearing up to produce off the coast of Namibia, and Mello said he wants to drill in Colombia. The goal, he said, is to turn a company with little name recognition outside Brazil into an international player.
“That is our dream,” he said. “You cannot perform this dream standing in one place.”