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Updated: June 17, 2010 07:43 IST

BP agrees to set up $20-billion claims fund

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This image from video shows oil continuing to gush from the broken wellhead, at the site of the Deepwater Horizon oil well in the Gulf of Mexico on Wednesday. British Petroleum has agreed to set up a $20-billion fund to compensate businesses hit by the oil spill.
AP This image from video shows oil continuing to gush from the broken wellhead, at the site of the Deepwater Horizon oil well in the Gulf of Mexico on Wednesday. British Petroleum has agreed to set up a $20-billion fund to compensate businesses hit by the oil spill.

Oil giant British Petroleum has agreed to set up a $20-billion fund to compensate local Gulf Coast businesses that have been devastated by the ongoing oil spill, U.S. President Barack Obama said after his first meeting with BP’s top executives on Wednesday.

BP Chairman Carl-Henric Svanberg also announced that the British firm would cancel all dividend payments to shareholders this year as it works to clean up the worst oil disaster in U.S. history. More than $10 billion in dividends were due to be paid out June 21.

Mr. Obama met with Mr. Svanberg, chief executive Tony Hayward and other BP heads for the first time since the April 20 explosion of a BP-leased rig sparked the ongoing oil spill in the Gulf of Mexico. The meeting comes amid a growing furore over BP and the administration’s inability to cap the leaking well head.

The claims fund marked “a good start and it should provide some assurance to the small business owners ... that BP is going to meet its responsibilities,” Mr. Obama said in remarks from the White House after the meeting.

For his part, Mr. Svanberg offered apologies for the spill and said the fund demonstrated that BP was serious about meeting its commitments. He vowed BP would cap the well and repair the environmental and economic damage caused.

“I would like to take this opportunity to apologise to the American people on behalf of all employees of BP, many of whom are living in the Gulf Coast,” Mr. Svanberg said.

BP agreed to pay $20 billion over four years into an independently-administered fund to handle claims for damages from local Gulf Coast fishermen and others who had to virtually shut down their businesses in light of the spill.

BP had also agreed to contribute $100 million into a separate fund to help oil workers affected by the government’s six-month moratorium on deepwater drilling in the Gulf. Mr. Obama halted the drilling until better safety precautions could be put in place.

Mr. Obama said many in the region have complained of a slow and painstaking claims process and that the fund would go some way to resolving those complaints. The fund did not represent a ceiling on claims or clean-up costs from BP.

BP would be able to pay into the fund over multiple years in order to avoid a major hit to its finances that might scare investors and drive the British firm out of business.

Despite the anger and frustration against BP, Mr. Obama said it was critical that the company does not go under, a possibility has sparked major fears among British families that rely on the iconic company for their pension funds.

“BP is a strong and viable company and it is in all of our interests that it remains so,” Mr. Obama said.

The escrow account would be managed by Kenneth Feinberg, who has also handled a compensation fund for victims of the September 11, 2001 attacks. More recently he was the White House “pay czar,” tasked with looking at salaries of financial firms that took emergency government bail-outs during the credit crisis.

The BP heads spent more than four hours at the White House meeting with administration officials. Obama spoke for about 20 minutes at the start of the meeting and held private talks for another 25 minutes in the Oval Office with Mr. Svanberg at the end, White House spokesman Robert Gibbs said.

The discussions came one day after Obama delivered a prime-time speech from the Oval Office vowing to do everything in his power to help stop the oil spill and ensure that BP lives up to its responsibilities over the long term.

Mr. Obama has steadily ratcheted up pressure on BP amid anger from local Gulf Coast residents over its failure to end the worst oil spill in U.S. history. BP hopes to capture about 90 per cent of the oil gushing from an underwater well by the end of the month.

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