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DOI: BP Can Bid for US Gulf Oil Leases Despite Suspension

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Deepwater Horizon Gulf of Mexico Oil Spill

BP PLC can bid in Wednesday's Gulf of Mexico oil lease sale but won't be granted a contract if a suspension from obtaining new contracts with the federal government is still in force at the time of the award, the U.S. Department of the Interior said.

The notice from the U.S. DoI Thursday highlights how slow BP's recovery has been from the devastating April 2010 Deepwater Horizon accident in the Gulf of Mexico, that resulted in the worst offshore oil spill in the U.S. It also comes as BP is still contesting potentially billions of dollars in civil fines in a court in New Orleans.

BP is one of the biggest producers of oil and gas in the Gulf and one of its most active prospectors. BP sees the Gulf as one of the main drivers of medium- and long-term growth for the company.

In November, the U.S. government's Obama-led administration imposed the temporary ban on BP obtaining new contracts with the government, including oil-drilling leases, citing a "lack of business integrity" that resulted in the 2010 oil spill.

If the suspension has been lifted and the DoI determines that BP is the highest bidder then it will be awarded the lease. If the suspension hasn't been revoked and BP is the highest bidder, it will be disqualified from that position and the next highest bidder will become the highest qualified bidder, the DoI said.

BP declined to comment on whether it would be submitting a bid in the upcoming Gulf round. The bids are opened on March 20; this is followed by an evaluation period which lasts 90 days before the winners are announced. A BP spokesman also declined to comment on what progress was being made to get the ban lifted.

In February, BP Chief Executive Bob Dudley said the company may decide not to bid for oil drilling leases in this March round as the company already holds a large number of contracts in the U.S. Gulf.

"We didn't, as a matter of course, bid on the last round of leases in the Gulf and may not in the next one. We have such a large position in the Gulf of Mexico that it's questionable how much we want to add to that," Mr. Dudley said in February.

The ban doesn't impact current operations and BP continues to receive the permits it requires to drill in the Gulf, where it already has around 700 licenses, Mr. Dudley said.

Since the 2010 Deepwater Horizon disaster, BP continues to incur huge costs from the spill. To date, BP has spent over $24 billion in response, cleanup and restoration costs and in payments of compensation claims made by individuals, businesses and governments.

Copyright (c) 2012 Dow Jones & Company, Inc.

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