Osborne: BP will survive oil spill crisis

BP is "a very strong company" that will survive the crisis over the Gulf of Mexico oil spill, according to Chancellor George Osborne.

He said it was important for both the British and American economies that the company should succeed and flourish.

The Chancellor's comments came as BP boss Tony Hayward prepares to face a hostile grilling from US senators.

He has already agreed to scrap dividends this year and set aside $20 billion (£13.5 billion) as a downpayment for a compensation fund.

Kenneth Feinberg, the lawyer who oversaw compensation payments to the families of victims of the September 11 attacks, will supervise payments from the compensation fund.

BP will make initial payments of $5 billion (£3.4 billion) in total during the rest of 2010, followed by payments of $1.25 billion (£851 million) until all 20 billion dollars has been paid in.

As well as the dividend cut, BP is paying for the fund with a cut in capital spending. The oil giant will get back any of the money left when all legitimate claims have been resolved and paid.

Following Wednesday's meeting Mr Obama said that he had "directed" BP to increase its efforts to stop the spill.

This should result in 90 per cent of the leaking oil being captured in the coming days and weeks, he said.

"That is still not good enough. We will continue to press BP," the president added.

BP has launched a second containment system to control the spill as well as working on two relief wells being drilled below the sea bed. These will not be completed until August.