BP Has More Than $2 Billion in Defense Awards Set to Expire

BP Plc (BP/), suspended from winning new U.S. government contracts for its role in the biggest oil spill in the nation’s history, has military deals with a potential value of more than $2 billion set to expire in the next two years.

The British oil company has at least 11 awards that will be up for competition, said Mimi Schirmacher, a spokeswoman for the Defense Logistics Agency, which buys most of the Pentagon’s fuel.

The defense agency has no plans to apply for a waiver so it can continue to award contracts to BP, Schirmacher said in an e- mail. The office “anticipates receiving offers from other suppliers to fill future requirements,” Schirmacher said.

While she didn’t say when the contracts would be opened for bidding, agencies typically make big awards months to years before the expiration dates. The existing agreements may be valued at as much as $2.43 billion, according to data compiled by Bloomberg.

Eight of the 11 contracts will expire before the end of the 2013 fiscal year, Schirmacher said.

Robert Wine, a spokesman for London-based BP, declined to comment. BP shares rose 0.1 percent to 431.60 pence in London trading. They have dropped 6.3 percent this year.

The U.S. Environmental Protection Agency on Nov. 28 temporarily banned the company from winning new federal awards due to a “lack of business integrity” in the 2010 Deepwater Horizon well blowout in the Gulf of Mexico. BP on Nov. 15 agreed to plead guilty to criminal charges after the worst oil spill in U.S. history, which killed 11 people.

Photographer: Kari Goodnough/Bloomberg

BP Plc , suspended from winning new U.S. government contracts for its role in the biggest oil spill in the nation’s history, has military deals with a potential value of more than $2 billion set to expire in the next two years. Close

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Photographer: Kari Goodnough/Bloomberg

BP Plc , suspended from winning new U.S. government contracts for its role in the biggest oil spill in the nation’s history, has military deals with a potential value of more than $2 billion set to expire in the next two years.

BP Awards

BP was the Defense Department’s biggest fuel supplier in 2011, the year following the Gulf explosion. That year, it won awards valued at about $1.35 billion, a surge of 33 percent from $1.02 billion in the previous year, according to data compiled by Bloomberg.

The EPA didn’t say how long the ban would be in place, though suspensions generally last for fewer than 18 months or until the end of legal proceedings. BP and the government are still in a dispute over civil charges.

The temporary ban doesn’t affect existing contracts. BP won 22 contracts from the Defense Logistics Agency in fiscal 2011, according to Schirmacher.

Contract Competition

Among the companies that might benefit from BP’s suspension are San Antonio, Texas-based Valero Energy (VLO) Corp., San Ramon, California-based Chevron (CVX) Corp., and the Hague, Netherlands-based Royal Dutch Shell Plc. (RDSA) The firms are top suppliers to the U.S. military, the world’s single largest consumer of energy excluding countries.

BP received 49 percent more in defense contracts in that year than the No. 2 fuel supplier, Valero Energy. The third- largest recipient of the contracts was Kuwait National Petroleum Co., followed by Shell, Miami-based World Fuel Services Corp. (INT) and Chevron.

The company on Nov. 15 reached a settlement with the Justice Department, agreeing to pay $4.5 billion to end all criminal charges and resolve securities claims relating to the Gulf explosion. At the time, the company said it hadn’t been advised of any U.S. action on contracts.

BP produces about 770,000 barrels of oil equivalent a day in the U.S., more than 20 percent of the company’s global output. The company had revenue of $131 billion in U.S. last year, more than a third of its global total.

To contact the reporter on this story: Danielle Ivory in Washington at divory@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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