The Obama administration prepared a new moratorium on deepwater oil drilling on Monday, seeking to make the industry safer while protecting thousands of jobs during the worst spill in U.S. history.

As oil from BP Plc's damaged well gushed into the Gulf of Mexico for an 84th day, Interior Secretary Ken Salazar was due to unveil a more flexible six-month moratorium after a U.S. appeals court last week struck down the original freeze.

Under the new ban -- to be issued at 4:00 p.m. EDT (2000 GMT) -- some deepwater drilling will be suspended but deepwater production can continue and shallow drilling can go forward if new safety and environmental rules are met, a government source said.

The White House is confident the new moratorium will stand up in court, spokesman Robert Gibbs said.

The freeze could end sooner than November 30 if Salazar determines that deepwater drilling can be carried out safely, the government source said.


No matter what happens with the new ban, fear of new rules and regulations has already led many drillers to slow their exploration in the Gulf of Mexico. Some energy analysts have said the hesitation could last longer than six months.

President Barack Obama is under pressure to make offshore drilling safer and hold BP accountable. The disaster now sits atop his domestic agenda and has complicated the close ties between the United States and Britain.

As costs of the cleanup mount, British-based BP is in talks with U.S. energy company Apache Corp and others to sell assets worth up to $10 billion, sources said.

BP shares surged more than 9 percent in London and 8 percent in New York on Monday, driven by the potential asset sales and hopes for a new system to capture almost all of the spewing oil that has fouled coastlines and hurt tourism and fisheries in five states along the Gulf of Mexico.

It's probably worth more than what it's trading for right now if they can ever get this well capped and get the cleanup effort really going, said Ted Parrish, a co-portfolio manager at Henssler Equity Fund in Georgia.

(Additional reporting by Kristen Hays in Houston, Alexandria Sage in New Orleans, Jeff Mason and Richard Cowan in Washington, Matthew Lynley and Matt Daily in New York; Writing by Timothy Gardner, Editing by John O'Callaghan.)