The US government has temporarily banned BP from new federal contracts over its "lack of business integrity" in the Deepwater Horizon oil spill in 2010, a move that could imperil the British energy giant's US footing.
The suspension, announced by the US Environmental Protection Agency on Wednesday, comes on the heels of BP's November 15 agreement with the US government to plead guilty to criminal misconduct in the Gulf of Mexico disaster, the worst offshore oil spill in US history.
BP announced earlier this month that it will plead guilty to manslaughter, obstruction of Congress and other charges and will pay a record $4.5bn in penalties to resolve a Justice Department investigation of the disaster.
Attorneys and a federal judge will meet in December to discuss a plea date.
"The BP suspension will temporarily prevent the company and the named affiliates from getting new federal government contracts, grants or other covered transactions until the company can provide sufficient evidence to EPA demonstrating that it meets federal business standards," the EPA in a statement said.
The suspension marked yet another obstacle for a company that has struggled to revive its tarnished image in the US and abroad after the 2010 explosion that killed 11 workers.
In a further blow to the company, BP will be disqualified from winning new leases to drill for oil or gas on taxpayer-owned land until the suspension is lifted.
BP were hopeful the suspension may in fact be lifted quite soon.
"The EPA has informed BP that it is preparing a proposed administrative agreement that, if agreed upon, would effectively resolve and lift this temporary suspension," BP said.
"Over the past five years, BP has invested more than $52bn in the United States - more than any other oil and gas company, and more than it invests in any other country where it operates. On top of this business investment, BP has to date spent more than $14bn in operational response and clean-up costs."
The EPA said the suspension was standard practice when a criminal case raises responsibility questions about a company.
The suspension came the same day two BP rig supervisors and a former executive were scheduled to be arraigned on criminal charges stemming from the deadly explosion and the company's response to the resulting oil spill in the Gulf of Mexico.
But the suspension could still remain in effect while civil claims against BP move forward, said an EPA official, who spoke on condition of anonymity to discuss terms of the agreement.
In addition to the criminal proceedings, BP faces huge civil claims covering the billions of dollars in civil penalties the US government and the Gulf states are seeking from it because of environmental damage.
BP has been a major supplier of energy to the US military, and in 2012 sold more than $1bn of mostly fuel products to the Defence Department and other US agencies, including the General Services Administration and the Labour Department.