"If Bem-Te-Vi is as large as Petrobras officials suggested in 2008, Brazil's government will forgo billions of dollars in royalties, taxes, and jobs that Bem-Te-Vi's oil was expected to provide," Reuters reported.
"This doesn't make any sense unless somebody screwed up or Bem-Te-Vi is a dud," Brazilian Petroleum Institute geologist Cleveland Jones reportedly said.
"Sure, Petrobras doesn't have money to develop it, but then you sell the area, get some cash and in the worst case cut your losses. I don't see how anybody wins here, not Petrobras, not the government."
An undisclosed industry source confirmed the discovery was actually a dud. He reportedly said returning it to the oil regulator made sense as Bem-Te-Vi never amounted too much after the initial drilling which indicated it could have held billions of barrels of oil.
The Bem-Te-Vi play was one of the first subsalt oil finds that created a boom in 2007-08 - with the term referring to the area under the Santos and Campos basins where large oil discoveries were made under a layer of salt beneath the seafloor.
Meanwhile, the CarcarÃ¡ discovery in the same block, BM-S-8, is reportedly what "many believe to one of the largest ever in Brazil".
State-owned Petrobras owns 66% of the block, Brazil's QGEP ParticipaÃ§oes SA and Barra Energia each own 10%, while Portugal's Galp Energia SGPS and China's Sincopec jointly owns 14%.