NEW YORK ( TheStreet) -- BP ( BP) has entered short-term finance talks with banks as it continues to battle the costs of its massive Gulf of Mexico oil spill, according to a report.

The Financial Times reported that BP is in discussions with banks to raise roughly $5 billion in short-term loans to help fulfill its oil spill liabilities.

As of last week, BP had managed to raise about $20 billion in cash and credit for this purpose, the report said -- despite a credit rating downgrade by ratings agency Standard & Poor's, which warned that it could slash the oil giant's rating again.

According to Reuters, BP is currently looking at various debt-financing options, which include extending bank credit lines. The report says that BP is looking for credit lines of as much as $7 billion from banks. Earlier, the company had also considered a corporate bond offering and additional asset sales, but is putting that idea on hold for now -- confident that it has enough cash resources to meet the costs of the clean up without having to resort to these options, according to Reuters sources.

BP said this week the costs of cleaning up the mess in the Gulf of Mexico has now reached $2.65 billion, $300 million more than its estimate from last week. On June 16, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill.

By Thursday, BP's oil spill will become the largest-ever in the Gulf of Mexico, according to an Associated Press report. Its damaged oil well -- about a mile under the ocean in the Gulf of Mexico -- has been pumping out oil for about two and a half months now, and is expected to surpass 140 million gallons spilled by Thursday, overshadowing the record-setting Ixtoc I spill near Mexico's coast from 1979 to 1980.

-- Reported by Andrea Tse in New York

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