British energy giant BP has agreed to President Barack Obama's demand to place $20 billion in a special fund to pay damage claims from the Gulf of Mexico oil spill.
Speaking in the White House this evening, Mr Obama said the agreed sum would not be capped and BP as a "strong and viable company" will be required to pay all damage claims.
BP also has agreed to put another $100 million aside for oil workers.
"The people of the Gulf have my commitment that BP will meet its obligations to them," he said.
Mr Obama announced the agreement following a more than three-hour White House meeting between administration officials and company executives, including Chairman Carl-Henric Svanberg and Chief Executive Officer Tony Hayward.
Mr Feinberg will act as an independent third party to judge claims and authorize payments to Gulf Coast residents affected by the biggest oil spill in US history.
BP's chairman apologised to the American people for the catastrophic oil spill on the Gulf coast.
Emerging from the meeting with President Barack Obama, BP Chairman Carl-Henric Svanberg promised to look after people affected by the spill and to repair damage to the environment.
"We have agreed today with the president a framework that should assure the American people that we mean what we say," Mr Svanberg told reporters.
The company said it would cut three quarters of dividends, significantly reduce its investment program and sell $10 billion of assets to fund the planned $20 billion fund.
The commitments, outlined in a statement this evening, 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 and had not expected BP to be forced to sell assets and cut investment - moves that will curb BP's growth going forward.
The decisions to cut investment and sell assets come despite the fact BP is only committed to putting $5 billion this year into the new fund, which will be administered by a body independent from BP.
BP's free cashflow and massive credit lines could easily cover such an amount.
In 2011 and beyond, BP will make payments into the fund of $1.25 billion per quarter, until the fund amounts to $20 billion.
Up to that, BP's commitments will be assured by the setting aside of US assets with a value of $20 billion, the company said.
Reuters