BP bows to Obama’s demand for $20bn fund

BP HAS bowed to US President Barack Obama’s demand for a $20 billion fund to compensate victims of the disastrous oil spill in the Gulf of Mexico.

The humbled chairman of the giant British company Carl-Henric Svanberg apologised to the American people for the for the worst spill in US history and said BP was suspending its dividends to shareholders to help pay for the costs.

Obama called it “an important step toward making the people of the Gulf Coast whole again”.

Speaking alone in the State Dining Room of the White House, Obama also announced that BP had voluntarily agreed to establish a $100m (€81.25m) fund to compensate laid-off workers affected by his six-month drilling moratorium.

Obama said the independent fund will be directed by lawyer Kenneth Feinberg, who oversaw payments to families of victims of the September 11 terrorist attacks. 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,” Obama said after a meeting that stretched more than four hours, with the President darting in and out of the room.

“The structure we are establishing today is an important step toward making the people of the Gulf Coast whole again, but it will not turn things around overnight,” he said.

Obama and top advisers met with BP officials, including board chairman Svanberg and chief executive Tony Hayward.

Svanberg 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”.

Obama said the $20bn fund was “not a cap”.

“The people of the Gulf have my commitment that BP will meet its obligations to them,” Obama said. “This $20bn amount will provide substantial assurance that the claims people and businesses have will be honoured.”

The claims system sets up a formal process to be run by a specialist with a proven record. Instead of vague promises by BP, there will be a White House-blessed structure with substantial money and the pledge that more will be provided if needed. The news was applauded in the Gulf – a rare positive development in a region that has been hurt so badly.

The company has been accused of failing to follow proper procedures in the run-up to the explosion on the Deepwater Horizon rig on April 20.

The blast led to the deaths of 11 people, caused the rig to sink and has since seen millions of barrels of oil spew into the Gulf of Mexico.

Much of that is now washing ashore in states along the Gulf coast.

The fallout is affecting businesses and wildlife, as well as wiping billions of dollars off BP’s value.

BP announced yesterday that it had begun operating a second containment system designed to bring oil and gas to the surface for burning.