The government is also considering other measures to help cash-strapped Petrobras (>> Petroleo Brasileiro Petrobras SA), as the company is known, pay for the large investments it is required to make in Libra under a 2010 Brazilian oil law, Estado reported citing an unnamed government source.

These measures include the raising of Brazilian fuel prices, reduction of dividends on the government's shareholding in Petrobras and changes to the terms of a 2010 oil-for-stock swap, Estado said.

Petrobras Chief Executive Officer Maria das Graças Foster said this week that Petrobras has the capacity to explore and produce 100 percent of the oil from Libra, but does not have the financial capacity to cover the investments needed to develop the area, Estado said.

Under the oil law, Petrobras will have to come up with 4.5 billion reais no matter which of 11 companies signed up for the auction win the offshore area, the paper said.

The payment is Petrobras' minimum share of the 15 billion real up-front fee winners will pay Brazil for the rights to Libra. The winning bidder will be the company or group that gives Brazil's government the biggest share of Libra's future output to sell on its own account.

Under the law, Petrobras must take a minimum 30 percent stake in the winning group and lead exploration and development in the area as the group's operator.

Petrobras must also supply at least 30 percent of the estimated 400 billion reais ($180 billion) over 35 years that the government believes will be needed to develop the area. Libra, Brazil's largest-ever oil discovery, has an estimated 8 billion to 12 billion barrels of oil, enough to supply world needs for three to five months.

Decreasing output from older offshore oil fields, delays in bringing on new areas, and government refusal to let the company charge Brazilians world prices for gasoline, diesel fuel and cooking gas has crimped revenue and forced the company to borrow more to pay for investments.

The Rio de Janeiro-based company is also in the middle of a $235 billion five-year expansion plan. That plan, the world's largest corporate spending program, does not include spending for Libra.

On Thursday, the government said the Libra auction attracted only a quarter of the interest expected after many large, wealthy oil companies with experience in the region declined to sign up for the sale.

With Exxon Mobil Corp (>> Exxon Mobil Corporation), BP Plc (>> BP plc), BG Group Plc (>> BG Group plc), Chevron Corp (>> Chevron Corporation) and other investor-owned oil companies choosing to stay away, Asian state-owned companies, such as India's Oil & National Gas Corp Ltd (>> Oil & Natural Gas Corporation Limited), Malaysia's Petroliam Nasional, or Petronas , and China's CNOOC Ltd (>> CNOOC Limited), dominate the list of 11 companies that agreed to pay the 2.05 million real ($931,818) registration fee.

Magda Chambriard, head of Brazilian petroleum regulator ANP, said on Thursday that she had expected "more than 40" companies to bid for Libra.

Petrobras officials were not immediately available for comment. Brazilian government officials at the Presidential Palace and Energy Ministries were not immediately available for comment.

($1 = 2.22 Brazilian reais)

(Reporting by Jeb Blount; editing by Gunna Dickson)