FEATURE: BP lost US contracts worth $896 mil due to Macondo-related suspension
Washington (Platts)--1Feb2013/337 pm EST/2037 GMT
BP has lost $896 million worth of business with the US military as a
consequence of its guilty plea to criminal charges stemming from the 2010
Macondo well blowout and oil spill in the Gulf of Mexico, according to
Defense Logistics Agency data.
Two contracts with the DLA expired at a time when BP was under
suspension from being awarded any new business with the US because of its
conviction on manslaughter and other charges, including violating the Clean
The two lost contracts are the first tangible consequences of the
suspension that was triggered by BP's guilty plea, which was accepted by a
federal court judge on January 29. BP has agreed to pay a $4 billion criminal
fine and serve five year's probation, as well as pay a separate $525,000 fine
for lying to investors and Congress about the flow rate of oil from its
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The suspension was imposed on November 28 by the Environmental
Protection Agency on behalf of the entire US government. BP has said it is
working with the EPA to reach an agreement that would lift the suspension,
but recently acknowledged that it "may take some time to resolve issues
relating to such an agreement."
At stake for BP is millions of dollars of fuel sales to the US, plus its
ability to secure leases for new offshore oil and gas exploration. The next
US offshore lease sale is scheduled for March 20 in the Central Gulf of
Mexico, an area where BP has been very active in the past. If its suspension
is not lifted before then, it would be ineligible to be awarded any leases.
In addition to its extensive offshore holdings, BP is a major supplier
of jet fuel, gasoline, diesel and other petroleum products for the US
military. In the 2011 fiscal year, the DLA awarded 22 contracts to BP or its
affiliates worth about $1.4 billion. That represents 10.35% of DLA's energy
purchases for 2011, the agency said.
The first of the two BP contracts lost was an annual deal to provide
various fuels to military and Defense Department installations in the western
US as part of a larger fuel procurement arrangement. It was worth $791
million and was performed by BP's affiliate ARCO. The ordering period for the
contract expired on December 31, 2012, with a 30-day carryover period for
The DLA, which procures fuel for military and other Defense
Department-related uses, extended the contract until May 31 of this year. But
ARCO was ineligible to participate because of BP's suspension. Its share of
the contract is being performed by Chevron, a DLA spokeswoman said.
A second contract, awarded to BP Singapore in 2011, was for the
delivery of F-76 diesel fuel and was worth $105 million. It also expired on
December 31, with a 30-day carryover period for deliveries.
That contract was let out to bid on May 7, 2012, and was awarded in
December to Refinery Associates of Texas and S-Oil Corp., according to the
DLA. BP was ineligible for the award. A DLA spokeswoman could not immediately
say whether BP bid on the contract.
BP did not immediately respond to a request for comment.
When the EPA issued its suspension last November, the agency noted that
the action was "standard practice when a responsibility question is raised by
action in a criminal case."
While the suspension process is discretionary, BP's criminal conviction
triggered a mandatory statutory disqualification because it included a
violation of the Clean Water Act. Under this provision, BP is disqualified
from receiving any government contracts, leases, loans or other benefits
until it can persuade the EPA that the condition that gave rise to the
disqualification has been corrected.
Disqualification applies both to the company and the the specific
facility where the Clean Water Act violation took place. In this case, the
EPA has designated BP's Houston corporate headquarters as the "facility."
"Discussions between EPA and BP continue in an effort to address BP's
existing present responsibility issues, and resolve the November 28, 2012
suspension action and today's disqualification," the EPA said in a statement
--Gary Gentile, firstname.lastname@example.org
--Edited by Richard Rubin, email@example.com