Lifting BP ban will be more than simple agreement: U.S. source

U.S. officials were surprised that BP Plc suggested an agreement would soon be ready to lift a suspension imposed this week on the company's obtaining new federal contracts, a government source said on Thursday.

"It caught us off guard," the source said. "It's not the case that there is an administrative agreement that is ready to go out the door right now," the source said, adding that any administrative agreement will only be part of a several-step process that could take months.

The Environmental Protection Agency on Wednesday suspended BP from obtaining new U.S. contracts over its "lack of business integrity" following the 2010 Deepwater Horizon accident, that killed 11 men and caused the biggest ever U.S. offshore oil spill.

BP responded with a statement indicating that the EPA had informed the company it was preparing an administrative agreement that would "effectively resolve and lift this temporary suspension," and that the EPA said the draft agreement would be available soon.

The U.S. ban does not end the company's existing contracts. But, if it lingers, it could imperil BP's position as a top U.S. offshore oil and gas producer and as the U.S. military's leading fuel supplier.

NUMBER OF STEPS

While the ban is temporary, it could be months before BP is allowed to obtain new contracts, including oil leases off the Gulf of Mexico, because an administrative agreement is just one of a number of steps BP and the U.S. government must work through, the source said.

For instance, the November 15 plea bargain agreement between BP and the U.S. government, in which the British energy giant will pay $4.5 billion in penalties, still needs to be finalized by the court. A date for that action has not been set.

Once it is, BP has 60 days to send a remedial plan to the Department of Justice and the EPA laying out how it plans to meet all of the stipulations in the plea agreement.

The agencies will review the plan and are likely to send it back to BP with proposed changes. The plan could go back and forth among all three parties before a final plan agreed to by all sides is reached.

"BP's saying there is some kind of administrative agreement to lift the suspension in the short term is not technically accurate," the source said. "They have some work to do."

Washington, is not attempting to create a long, drawn out process to lift the ban, the source said. On the other hand, it is not clear when the draft agreement will be sent to BP, the source said.

The EPA did not say how long the process would take when it announced the ban on Wednesday, but an official said government wide suspensions generally do not exceed 18 months. The official also warned they can go longer if civil cases against BP are not settled.

BP did not make any bids in a Gulf of Mexico lease sale held Wednesday. The next Gulf of Mexico lease sale is scheduled for March. BP would also have to sit that sale out if the ban is not lifted.

A spokeswoman for BP said the company had no comment.

(Reporting by Timothy Gardner; Editing by Theodore d'Afflisio)