Image copyright AFP Image caption Eleven men were killed when the Deepwater Horizon rig exploded

The US has lifted a ban on oil giant BP that prevented it from bidding for US government contracts.

The ban was imposed after the 2010 Gulf of Mexico oil spill, caused by an explosion on BP's Deepwater Horizon rig, which killed 11 people.

The ban has been lifted after the firm agreed to a set of safety, operations and compliance requirements.

As part of the agreement, BP will also drop its lawsuit against the US Environmental Protection Agency (EPA).

The firm had sued the EPA after it imposed the ban for "improper statutory disqualification and suspension".

"After a lengthy negotiation, BP is pleased to have reached this resolution, which we believe to be fair and reasonable," John Mingé, chairman of BP America Inc, said in a statement.

"Today's agreement will allow America's largest energy investor to compete again for federal contracts and leases."

BP has failed to prove that it is a responsible contractor deserving of lucrative taxpayer deals Tyson Slocum, Public Citizen's Energy Program

Government support

The move will allow BP to enter into new contracts with the US government, including in the Gulf of Mexico.

In December, the UK government intervened in support of BP over the ban.

In a court filing lodged as part of BP's appeal against the ban, the government said the move could be "excessive" and "destabilising".

It had said that what happened to BP affected UK jobs and pensions.

"It is the view of Her Majesty's government that the EPA's disqualification and suspension of multiple BP entities may have been excessive," the document said.

"The government is concerned that such a broad sanction can and will have serious and unjustified economic consequences."

However, Tyson Slocum, director of the campaigning group Public Citizen's Energy Program, criticised the agreement as letting BP "off the hook".

The company "has failed to prove that it is a responsible contractor deserving of lucrative taxpayer deals," he said.

Following the news, BP's US-listed shares rose about 1% in after-hours trading.

Investors are hopeful that BP will now grow its important US offshore operations.

"It's time to let them out from the doghouse. Let's let them get back to work," said Mike Breard, energy analyst with Dallas-based Hodges Capital Management.