The deal was revealed as top executives from the British energy giant met at the White House with Obama to discuss the crisis, which has triggered the nation's worst environmental disaster.
BP today agreed to pay $20 billion into an independently run fund to meet the spiralling costs of the Gulf of Mexico oil disaster, bowing to tough demands from president Barack Obama.
The deal was revealed as top executives from the British energy giant met at the White House with Obama to discuss the crisis, which has triggered the nation's worst environmental disaster.
Both sides were armed with legal teams, after Obama vowed to make BP pay for its "recklessness" which triggered the massive spill.
A source with knowledge of the deal confirmed to AFP that BP had bowed to Obama's demands to set the money aside in the fund, adding it would be overseen by prominent lawyer Kenneth Feinberg.
Feinberg managed the compensation fund for victims of the September 11, 2001 terror attacks.
"We're going to use every device, legal device, at our disposal if necessary," senior White House adviser David Axelrod said earlier on CNN.
BP initially declined to confirm whether it would agree to set up an escrow fund to meet the thousands of compensation claims pouring in from the stricken southern states.
The New York Times reported BP would pay the $20 billion over several years, after Obama warned Americans that the country was fighting an "epidemic" which could take years to control.
US experts now estimate between 35,000 and 60,000 barrels a day is spewing into the waters off the Louisiana coast, after an explosion in April sank an exploratory deepwater drilling rig operated by BP.
The massive slick is threatening the coastlines of four southern US states, and has crippled the fishing and tourist industries -- vital economic lifelines for the region.
Obama said in a national address yesterday that he would tell BP chairman Carl-Henric Svanberg "to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company's recklessness."
Svanberg attended today's talks with BP chief executive Tony Hayward, along with a battery of lawyers from both the British company and the US justice department and US administration.
Just hours before, British prime minister David Cameron said while BP was not "running away" from its responsibilities, it had to be assured it would not be landed with claims which were nothing to do with the spill.
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