BP has agreed to put $US20 billion ($23.1 billion) into a fund to help pay compensation claims from the Gulf of Mexico oil spill after a deal was struck at the White House.
After a four-hour meeting with BP's senior executives US president Barack Obama announced the British company will set up the compensation fund that will be independently run.
"This $20 billion fund will not be controlled by either BP or by the government. It will be put in an escrow account, administered by an impartial, independent third party," Mr Obama said.
The fund is not capped and it does not include BP's costs for repairing the environmental damage done by the oil spill.
Nor does it include the fines and penalties BP may eventually have to pay.
"This is not a cap. The people of the gulf have my commitment that BP will meet its obligations to them," Mr Obama said.
"BP's liabilities for this spill are significant.
"I'm absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people."
The $US20 billion fund will be financed through BP cutting three-quarters of its dividends, significantly reducing its investment program and selling $US10 billion of assets.
The commitments are harsher penalties than most investors had expected.
Investors had expected the suspension of BP's dividend, or payment in shares for a couple of quarters but had not expected BP to be forced to sell assets and cut investment - moves that will curb BP's growth going forward.
BP has also agreed to set up a $US100 million ($115 million) fund for unemployed oil workers affected by the fallout from the Gulf of Mexico spill.
"Additionally, BP voluntarily agreed to establish a $100 million fund to compensate unemployed oil rig workers affected by the closure of the deepwater rigs," Mr Obama said.
Emerging from the meeting with the US president, BP chairman Carl-Henric Svanberg apologised for the oil spill.
"We will look after the people affected and we will repair the damage to this region," he said.
"We have agreed today with the president [to] a framework that should assure the American people that we mean what we say."
The meeting was the first direct encounter between the president and any of BP's senior executives since the disaster began two months ago.
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