By Pascal Fletcher and Anna Driver
MIAMI/HOUSTON (Reuters) - BP <:BP.LO:>advanced on Monday on the final lap toward permanently killing the source of the world's worst offshore oil spill and kicked off a $20 billion compensation fund with a first $3 billion deposit.
A relief well being drilled by BP is on track to start this week a definitive "bottom kill" shutdown of the crippled Gulf of Mexico well, unless an approaching weather system disrupts the timing, the top U.S. oil spill response chief said.
The biggest environmental response operation ever launched in the United States passed a critical milestone last week by subduing the blown-out deepwater well with injections of heavy drilling mud, followed by a cement seal.
BP's Macondo well, a mile- down in the Gulf of Mexico, had been provisionally capped on July 15 after spewing an estimated 4.9 million barrels of oil into the Gulf, soiling marshlands, fisheries and tourist beaches along several hundreds of miles (kilometers) of the Gulf Coast.
But the relief well is regarded as the final solution to plug the well 13,000 feet beneath the seabed.
"They are closing in on the last 30-40 feet ... It's ongoing and going in segments," response chief retired Coast Guard Admiral Thad Allen said in an update on the relief well.
"We expect that sometime before the end of the week we will be able to ... commence the kill," he told a conference call.
As the deepwater engineering operation progressed, BP said it was also moving to fulfill its public commitments to compensate for economic damage caused by the spill.
BP said it had made an initial deposit of $3 billion into a $20 billion escrow fund.
Allen 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.
He said that depending on its strength and direction, this system could affect the timing of the relief well "bottom kill" operation. Forecasters were giving this disturbance a 30 percent chance of strengthening into a tropical cyclone.
"MAKING IT RIGHT"
The CEO of BP's Gulf Coast Restoration Organization, Bob Dudley, said the $3 billion initial contribution to the escrow fund was intended to back up the company's repeated pledge to "make good" economic losses caused by the spill to Gulf Coast fishermen, tourism operators and home owners.
"Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast," Dudley said in a statement.
The U.S. Justice Department confirmed the contribution, saying it had completed negotiations with BP on the fund.
"We have made clear that the company still needs to ensure that the necessary funds will be available if something happens to the subsidiary that established the trust and we look forward to completion of an appropriate security arrangement in the near future," Associate Attorney General Tom Perrelli said in a statement.
BP shares were initially up around 2 percent in London, but later fell back slightly to close 1.74 percent up.
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.
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.
OBAMA: "FISHERIES REOPENING"
BP, whose corporate image has been pummeled by 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 is expected to take place after August 14-15 when the relief well is scheduled to intersect the well shaft. But the actual kill operation could still take several days, officials say.
(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)
