Following a record fine, BP may not pursue any future contracts with the US, though the British Company remains unconcerned.
The fallout from the Deepwater Horizon oil spill two years ago continues to rage as we learn that the US government has banned BP Plc. from any future government contracts as punishment for the lack of integrity shown by the company in the aftermath of the event. However, current contracts and oil drilling rights will not be affected in any way, and the ban can be removed once the US governing bodies are satisfied.
BP is one of the United States’ largest producers of both oil and gas, and is the biggest supplier of military fuel to the country. The US accounts for a third of all of BP profits. Earlier this month, the British company was ordered to pay a record $4.5 billion, more than a quarter of which was a criminal fine.
Proceedings are not yet over; the US government is still pressing for additional fines that they want BP to settle. The company must be found grossly negligent in regards to the 2010 disaster, but the fines could rack up to a massive $20 billion if it is.
EPA Going Through The Motions
This ban on new contracts has been announced by the Environmental Protection Agency, and they insist that this is nothing out of the ordinary. The banning of future contracts will continue until BP can show that they comply with federal standards, though BP are adamant that they are preparing a meeting which will immediately resolve the issue and lift the ban.
The EPA appear to have implemented this ban mainly as a way of showing that it will not tolerate substandard federal contracts, and is not afraid to confront even the world’s largest companies, and critical suppliers to the military.
Many experts believe that the timing of this suspension has in fact been orchestrated by BP and the US government. It seems very unlikely that the criminal fee meeting would have taken place without discussions of a potential contract suspension, and it could be seen that the EPA are simply going through the motions in punishing BP.
Wednesday saw BP abstain from a federal auction of 20 million acres in the Gulf of Mexico. Critics have praised BP for this, suggesting that perhaps they have rethought their supposedly aggressive and reckless policies.
Little Impact on Share Prices
This is reinforced by very little movement in BPs shares on either side of the Atlantic. UK shares dropped very slightly, but are now up at 431 pence, and US shares closed flat yesterday. Forex experts do not believe the ban has had a wide impact, with the FTSE 100 and GBP remaining bullish.
It seems as though this temporary suspension of future contracts is of little concern to BP. It is likely to end soon, and even if the Pentagon did not renew its contract, BP would have little trouble finding one somewhere else.
Clint Grossman is a financial writer focussing mainly on investments.
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