The use of thermite in the plug and abandonment of wellbores is a promising new method for sealing oil wells. However, the reactants for thermite mixtures are usually in a powder state at ambient conditions, making a perfect homogenization for high heat release a challenging task. In this sense, this study aims to investigate the Fe2O3–Al thermite system prepared through a solvent-based method to maximize homogenization of the mixture and enhance energy release during the exothermic reaction. Tests were conducted to compare the burning velocity, ejected mass percentage, and temperature profiles of the reaction through small steel-tubes, comparing a dry-mixed, stoichiometric composition with a solvent-based mixture. The effect of additives such as Al2O3 and Al were also evaluated. Results showed that the solvent-based process led to higher compactness, higher temperatures on the steel tube's exterior, a more stable reaction, and a 40% decrease in ejected material. Also, Al-rich mixtures had faster reactions, lower temperatures, and more ejected material when compared to the stoichiometric system, while Al2O3-diluted mixtures showed a linear decrease in burning velocity and mass ejection at higher dilution levels, with no significant variation in temperature levels. Mixtures with 40% or higher dilution did not self-propagate. Therefore, a thermite mixture prepared using solvent and diluted with Al2O3 at 20–30% is recommended for the thermal plug and abandonment technology.