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HOUSTON (Reuters) - BP Plc (BP.L) is headquartered at St. James's Square in London, but the energy company's fate lies in the deep waters of the Gulf of Mexico.
Though the worst U.S. offshore oil spill has ravaged BP's reputation and its stock price, BP will likely remain a top operator in the Gulf, a region which is key to future U.S. and global energy supplies.
More than six months after BP's Macondo well ruptured and caused more than 4 million barrels of oil to spew into the sea, BP's attention turns to scouring the oil-soaked shoreline and salvaging an image that has taken a beating from furious Gulf Coast residents and politicians.
BP faces a barrage of civil and likely criminal prosecution from the U.S. government and hundreds of injured rig workers, but is unlikely to abandon the Gulf.
That's because the U.S. government needs deep-pocketed energy companies like BP that can foot the soaring cost of drilling there, and BP needs access to the region's reserves, which are some of the most profitable in its portfolio.
BP's new chief executive, American-born Bob Dudley, must defend his company's turf in North America, home to nearly half of its global assets and its biggest earnings driver.
"I can promise you that I did not become chief executive of BP in order to walk away from the U.S.," Dudley said on October 25 in a defiant speech which criticized the media and industry rivals of stoking fears. "BP will not be quitting America."
In its quarterly earnings statement on November 2, BP raised its estimated cleanup costs by $7.7 billion (4.7 billion pounds) to $40 billion.
"The path to rehabilitation post Macondo and Bob Dudley's new strategic direction are the key to performance rather than Q3 earnings," analysts at Citigroup Global Markets said.
Institutional investors say BP can shoulder cleanup costs and the added expense of new offshore regulations. But BP must convince sometimes sceptical officials that disasters like Macondo are in the past.
"Bob Dudley's first priority is reestablishing BP's credibility with the U.S. government and with various regulators so that BP can continue to operate in the Gulf of Mexico," said Will Riley, co-manager of the Guinness Global Energy Fund, which includes BP.
In the darkest days of the spill, U.S. politicians and even President Barack Obama referred to BP as "British Petroleum," the now-defunct name the company carried from the 1950s until it merged with U.S.-based Amoco in 1998 to become BP Amoco, and then BP Plc in 2001.
But BP is as American as apple pie -- or almost.
After striking a major find in Alaska's Prudhoe Bay field in 1969, BP grew its market share to be a top producer in the United States, for years the biggest global energy user until China supplanted it this year.
Since the Amoco acquisition, "BP is inextricably bound to the US energy industry," said Christopher Wheaton, portfolio manager at Allianz RCM Energy Fund, which owns BP shares.
In an era when U.S. politicians demonize foreign oil and extol the virtues of energy independence, BP plays a vital role as one of the biggest producers of home-grown U.S. crude oil and natural gas.
BP is the biggest Gulf producer, accounting for about a quarter of the oil and natural gas output from a region that generates about a third of total U.S. domestic production.
"It's not oil that Obama can turn his back on," Riley said.
It would also be hard for BP to walk away from the deepwater Gulf, which yields some of the most profitable barrels that it produces. As a whole, the United States accounts for about 25 percent of BP's upstream production, and about a third of its upstream profits, according to Citigroup.
As a result of several asset sales meant to generate cash to cover spill liabilities, BP's reliance on Gulf operations will only rise.
BP doesn't have too many other expansion options apart from the Gulf, said Gary Adams, U.S. oil and gas leader at Deloitte, a consultancy.
That's because they will be the only ones with enough money to cover new liability rules for deepwater drilling, which are likely to require companies to put up billions of dollars of collateral to cover potential future spill costs.
For a mid-sized independent like Apache Corp (APA.N) or Newfield Exploration Co (NFX.N), "a $10 billion liability risk is a 'bet the company' situation, and clearly that will discourage activity," Wheaton said.
To be sure, BP faces a barrage of civil and likely criminal prosecution from the U.S. government and hundreds of injured rig workers, and accusations from Macondo well partner Anadarko Petroleum Corp. (APC.N) of gross negligence in drilling the well, a claim that BP protests.
"It would clear the air enormously if BP could reach some agreement on the issue of gross negligence," said Ivor Pether, fund manager for Royal London Asset Management, which owns BP stock. A gross negligence finding could carry a $17.5 billion fine.
After the Macondo disaster wiped about $70 billion from BP's market value and forced it to temporarily suspend dividend payments, BP's institutional investors see the company as undervalued versus other big oil companies.
"We ultimately come back to the numbers, which point to the fact that BP is cheap," Riley said.
And even environmentalists concede that BP is in the Gulf to stay.
"BP is not going to be hounded out of the Gulf," said Elgie Holstein, a senior director at the non-profit Environmental Defence Fund. "The reserves are too important."
Reporting by Chris Baltimore. Additional reporting by Tom Bergin in London, Anna Driver in Houston and Braden Reddall in San Francisco. Editing by Robert MacMillan