BP pumps in $20bn to help oil spill victims

BP has agreed to finance a £13.5bn fund to pay the claims of people whose jobs and way of life have been damaged by the devastating oil spill in the Gulf of Mexico.

• BP Chief Executive Tony Hayward (C), BP Managing Director Robert Dudley (R) and BP America President Lamar McKay leave the White House following a meeting with U.S. President Barack Obama. Picture: Getty

Announcing the move yesterday President Barack Obama said the fund will provide substantial assurance that legitimate claims made by people and businesses in the Gulf will be honoured.

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The president also announced that BP had voluntarily agreed to establish a 67m fund to compensate laid-off oil workers affected by his six-month drilling moratorium.

Mr Obama said the 13.5 fund is not a cap, adding that the people of the Gulf have his commitment that BP will meet all of its obligations to them.

He made his remarks after meeting with BP chairman Carl-Henric Svanberg.

The independent fund will be directed by lawyer Kenneth Feinberg, who oversaw payments to families of victims of the September 11 2001 terrorist attacks, the president said. There will be a three-member panel to adjudicate claims that are turned down.

"This is about accountability. At the end of the day, that's what every American wants and expects," Mr Obama said after a meeting that stretched more than four hours, with Mr Obama darting in and out of the room.

Mr Obama and top advisers met with a group of BP officials, including Mr Svanberg and CEO Tony Hayward.

Mr Svanberg, speaking with reporters later, announced the company would suspend its dividend for the rest of the year.

He expressed sorrow for victims of the spill. "This tragic accident ... should have never happened," he said, and he also used the occasion to "apologise to the American people".

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Mr Svanberg's comment that the oil giant cares about "the small people" received an icy reception from residents along the Gulf Coast.

He told reporters in Washington: "I hear comments sometimes that large oil companies are greedy companies or don't care, but that is not the case with BP. We care about the small people."

Justin Taffinder, of New Orleans, was not amused, saying: "We're not small people. We're human beings. They're no greater than us. We don't bow down to them. We don't pray to them."

Mr Svanberg is Swedish, and his comments may have been an unintentional slight. But coastal residents are angry over the oil spill disaster and at Mr Hayward's comments that he "wants his life back".

Menawhile BP chief executuve Tony Hayward plans to tell Congress he is "personally devastated" by the Gulf drilling rig explosion and oil spill and understands the anger Americans feel toward him and his company.

The explosion and sinking of the BP-operated Deepwater Horizon rig "never should have happened, and I am deeply sorry that they did," he said in testimony to be delivered to a House panel today "My sadness has only grown as the disaster continues."

Menawhile BP said it would not pay three quarters of dividends, significantly reduce its investment program and sell $10 billion of assets to pay for the planned

The commitmentsare harsher penalties than most investors had expected

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BP said it would cancel the previously declared first-quarter dividend scheduled for payment on June 21, and said no interim dividends will be declared for the second and third quarters of 2010.

BP announced it had begun early today burning oil siphoned from the ruptured well as part of its plans to more than triple the amount of crude it can stop from reaching the sea.