Brazil experienced a disappointing week as it suffered two failed oil auctions in two day where no major oil company from the U.S. or Europe even placed a bid. Only Petrobras, Brazil's state run oil company, and a few Chinese firms submitted bids in an auction that was supposed to be the largest oil auction in history according to the Brazilian government. So why did it go bust?

The auction failed mostly because the terms were too favorable for Petrobras and the government required those participating in the auction to pay too much money up front, just to partake. The government had asked for $28 billion in fees over the two-day auction but the total came out to $18.3 billion instead. Petrobras also has preferential rights in some of Brazil's offshore areas which pushes away competition.

Ivan Cima, a managing director at Welligence, referred to the auction as a "total disaster" and added that "The round was doomed by high signature bonuses, the overly complex and non-transparent Petrobras reimbursements, and marginal economics".

Especially with the currently low oil prices, it is simply not favorable for investors. Out of all the firms who were registered, only Petrobras and two Chinese state firms CNOOC and CNODC placed bids. Petrobras, alone, bid for the smallest block, Itapu, and both Petrobras and the aforementioned Chinese companies bid for the biggest block, Buzios. Oil blocks are geographical units of division on the continental shelf that define a company's drilling rights and ownership.

The government had hopes that this auction would help lift the economy into healthy growth levels. However, interest from the private sector was not as high as they had expected. Back in 2006, Brazil discovered large offshore oil reserves; however, for the next several years politicians couldn't agree on how to build Brazil's oil sector and how to spend the profits. This cost the country an estimated $300 billion in government revenue and investment as a result of the prolonged delays in exploration.

Brazil has been struggling to attract foreign investors due to issues of corruption, high taxes, and political instability; however, they are nonetheless eyeing the country's market as the US has placed sanctions on oil conglomerates in Iran and Venezuela, limiting their investment opportunities. Fernanda Delgado, a research coordinator at Fundação Getúlio Vargas university, stated that Brazil is still an attractive market because "Despite Brazil's difficulties in doing business and its political issues, it's still the safest area in terms of oil investments."