* Graphic on Brazil's TOR auction: https://tmsnrt.rs/35YuObI (Adds analyst comments)
By Gram Slattery, Marta Nogueira and Marianna Parraga
RIO DE JANEIRO, Nov 6 (Reuters) - Brazil's biggest-ever oil auction frustrated expectations on Wednesday, as high prices and the dominant role of state-run oil company Petrobras scared off global oil majors.
Petroleo Brasileiro SA, as the Brazilian firm is also known, and Chinese state firms CNOOC and CNODC made the only bids out of over a dozen major oil firms who had registered. Two of four blocks on offer got no bids.
The setback was a harsh reminder that, even as promising offshore fields make Brazil a rare bright spot in Latin America's petroleum industry, steep signing bonuses and tricky production-sharing deals can keep foreign players at bay.
Officials said the results were satisfactory, yet some acknowledged that giving Petrobras preferential rights in Brazil's most promising offshore areas was bad for competition, suggesting the government wants to scrap that legal requirement.
Petrobras shares erased early gains made on hopes of attracting more foreign partners. Brazil's currency, the real , slipped 2%.
"We thought there would be competition. There wasn't, but it's not my place to comment," Petrobras Chief Executive Roberto Castello Branco said following the auction.
Brazil's government still got about 70 billion reais ($17 billion) of signing fees from the minimum bid by Petrobras in a consortium with the Chinese for the round's biggest block, Buzios, and a lone Petrobras bid for the smallest block, Itapu.
If all four blocks had received a bid, the government would have won 106.5 billion reais in signing bonuses, offering more relief for a tight federal budget and highlighting Brazil's ascendance as Latin America's oil powerhouse.
The auction fell short of expectations, according to Raphael Figueiredo, an analyst at Sao Paulo-based Eleven Financial, as a greater foreign presence in the bidding was desired.
"Total disaster is the best way to describe this morning's round," said Ivan Cima, a managing director at consultancy Welligence, referring to lack of private participation and the loss of $9 billion in potential signing bonuses to be received by the government.
"The round was doomed by high signature bonuses, the overly complex and non-transparent Petrobras reimbursements, and marginal economics," he said.
'A LOT OF CAUTION'
Andre Araujo, the top executive for Royal Dutch Shell Plc in Brazil, characterized the blocks as expensive.
"We've said for a long time that (Shell) will continue exercising very strong discipline when it comes to investments," he told journalists after the auction. "We make any new investment decision with a lot of caution."
In the run-up to the auction, several other companies, including majors Total SA and BP Plc, said they would not bid or found the terms expensive.
Brazilian Mines and Energy Minister Bento Albuquerque said the government was "satisfied" with the results of the auction.
He said the Sepia and Atapu blocks, which attracted no interest, would be put up for auction next year.
Marcio Felix, Brazil's former oil and gas secretary and a key architect of the auction, said the government may need to reduce the signing bonuses in those fields.
In a note, analysts at Wood Mackenzie said they expected greater competition from oil majors in Brazil's sixth pre-salt bidding round, a much more conventional oil auction scheduled for Thursday.
The sale of Buzios and Itapu alone makes the auction a success, government officials previously said.
Petrobras had already committed to bidding on those two blocks and operating them, paying the signing fees with the funds from a settlement with the government related to the so-called "transfer-of-rights" (TOR) area.
On the monster Buzios block, Petrobras took a 90% stake while 5% went to each of two Chinese partners: China National Offshore Oil Corp (CNOOC) and China National Oil and Gas Exploration and Development Corp (CNODC), a unit of China National Petroleum Corp.
Petrobras already has four operating platforms in Buzios, and plans to install four more in Buzios and the other nearby blocks by 2023.
($1 = 4.0650 reais)
(Reporting by Gram Slattery, Marta Nogueira and Marianna Parraga; Additional reporting by Rodrigo Viga Gaier, Roberto Samora and Gabriel Stargardter in Rio de Janeiro, Jake Spring in Brasilia, Paula Arend in Sao Paolo and Ron Bousso in London; Editing by Brad Haynes, Marguerita Choy and David Gregorio)