BP relief well closes in

MIAMI/HOUSTON (Reuters) - BP's relief well is closing in to start a permanent kill of the blown-out Gulf of Mexico oil well this week, unless an approaching weather system disrupts the timing, the top U.S. oil spill response chief said on Monday.

"They are closing in on the last 30-40 feet ... It's ongoing and going in segments," retired Coast Guard Admiral Thad Allen told a conference call to update on the final stages of definitively plugging the world's worst offshore oil spill.

"We expect that sometime before the end of the week we will be able to intercept the annulus (space between the well shaft and surrounding rock) and commence the kill," Allen added.

He said the spill response authorities were closely watching a tropical weather system moving east over the Florida peninsula, which forecasters see crossing in a few days near BP's Deepwater Horizon spill site.

Allen said that depending on its strength and direction this system could affect the timing of the relief well "bottom kill" operation to permanently shut down the crippled Macondo well, which was provisionally capped on July 15.

Forecasters were giving this weather disturbance a low 20 percent chance of strengthening into a tropical depression.

As the deepwater engineering operation advanced, BP said it was also moving to fulfill its public commitments to compensate for economic damage caused by the spill, which has hit marshes, fisheries and tourist beaches along the Gulf Coast.

BP said it had made an initial deposit of $3 billion into a $20 billion escrow fund set up for the spill.

The U.S. Justice Department confirmed the initial contribution, saying it had completed negotiations with BP on the fund.

BP shares were initially up around 2 percent in London, but then fell back.

The British energy giant has lost over a third of its market value since the April 20 blast that killed 11 workers, sank the Deepwater Horizon rig and triggered the spill. But its shares have been recovering in recent weeks.

OBAMA: "FISHERIES REOPENING"

A cement cap installed on the top of the Macondo deepwater well last week was holding, Allen said.

In London, BP said the cost of dealing with the oil spill had risen to $6.1 billion, including $319 million in compensation payments to businesses and individuals affected by the spill.

BP, whose image and shares have taken a beating from the spill disaster, has also said it would sell about $30 billion in assets to address costs related to the accident.

With the well sealed, U.S. President Barack Obama's administration is working to reassure Gulf Coast residents that operations to completely clean up what's left of the spilled oil and compensate those affected will not slacken off.

"The final steps will be taken later in August when the relief well is completed, but what is clear is that the battle to stop the oil from flowing into the Gulf is just about over," Obama said during a White House ceremony to honor the Super Bowl champions, the New Orleans Saints.

"With the ongoing reopening of fisheries, we're excited that fishermen can go back to work. Americans can confidently and safely enjoy Gulf seafood once again. We're going to enjoy it here at the White House. In fact we had some yesterday."

But, despite the official optimism, Gulf Coast residents and business owners from Louisiana to Florida have reacted with alarm to a report by government scientists asserting that around 75 percent of the spilled oil had either evaporated, dispersed or been contained.

They say they fear government and media attention will fade and they will be abandoned as they struggle to cope with incomes and livelihoods devastated by the pollution disaster.

The planned "bottom kill" of the Macondo well, expected after August 14-15 when the relief well is scheduled to intersect the well shaft, will complement last week's "static kill" operation on the wellhead a mile below the surface.

This had pumped heavy drilling mud and then cement into the top of the well.

The relief well is regarded as the final solution to plug the well 13,000 feet beneath the seabed.

(Additional reporting by James Vicini and Steve Holland in Washington, Scott DiSavino in New York, Myles Neligan in London; Writing by Pascal Fletcher; Editing by Vicki Allen)