BP, U.S. Near Deal on Fund: Report

BP and U.S. officials are near a deal to use the company's oil production to secure a $20 billion recovery plan, according to a report.
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NEW ORLEANS (TheStreet) -- BP (BP) - Get Report is close to striking a deal with the Obama administration to use future revenue to secure its $20 billion cleanup fund, according to a report Monday.

BP and U.S. officials discussed securing the compensation fund with BP's oil fields in the Gulf of Mexico, but the U.S. government did not want to end up owning wells,

The Wall Street Journal

reported Monday, citing one person familiar with the situation.

On Monday, the Justice Department and BP hammered out the details to establish the $20 billion fund, which will be used to cover damage claims by residents and businesses affected by the oil spill that began in April. BP made an initial deposit of $3 billion into the fund.

The Obama administration wanted security in the form of collateral should BP bee unable to meet its obligation due to financial or legal problems, the report said. BP has said it would meet the fund's payment requirements through ongoing operations and asset sales.

In July,

Apache

(APA) - Get Report

said it will buy $7 billion of assets in North America and Egypt from BP.

The move to use future revenue from BP's Gulf of Mexico operations gives both the oil giant and the U.S. government an incentive to continue production in the Gulf, the

Journal

reports.

Over the weekend, BP said that the cement plug sealing the broken oil well in the Gulf of Mexico had hardened. BP can begin drilling the last 100 feet of a relief well that it hopes will permanently seal the broken well,

The Associated Press

reports.

-- Written by Robert Holmes in Boston

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