BP banned from new US government contracts after Deepwater Horizon blowup

British energy giant BP has been banned from new government contracts in the US due to the oil company's "lack of business integrity" during the Gulf of Mexico oil disaster, the Environmental Protection Agency said yesterday.

With the temporary order, BP would not be able to compete for new oil leases in the Gulf of Mexic, such as the auction of 20 million acres, which took place yesterday, or bids for new contracts for supply of fuel to the Pentagon or other government agencies.

The ban would however not affect existing business, but has wider ramifications regarding the future of the company in a crucial market.

The type of suspension imposed by the EPA usually extends over an 18 months period, but The Guardian newspaper quoted an official as saying that in this case the ban could be extended due to the ongoing legal proceedings.

This could end up with the largest oil producer in the Gulf of Mexico, remaining under an extended moratorium until the resolution of all criminal charges and law suits.

The move seems to have come as a surprise to BP as it struggled to explain the impact on its business. The shares of the company retreated 2 per cent in London as investors reacted with dismay as the order deals a major blow to the company's reputation.