By Pascal Fletcher and Anna Driver
MIAMI/HOUSTON (Reuters) - BP <:BP.LO:>advanced 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 $3 billion deposit on Monday.
A relief well being drilled by BP is on track to start a definitive "bottom kill" shutdown of the crippled Gulf of Mexico well this week, unless an approaching weather system disrupts the timing, the top U.S. oil spill response official said.
Optimism has grown since the biggest U.S. environmental cleanup operation ever launched passed a critical milestone last week by subduing the blown-out deepwater well with injections of heavy drilling mud, followed by a cement seal.
"Thankfully, because of the incredibly hard work by people from all across government, we are now finally able to say that the well is contained and we can get a permanent kill of that well over the next couple of weeks," President Barack Obama said at a Democratic fundraiser in Austin, Texas.
BP's Macondo well, a mile down in the Gulf of Mexico, was provisionally capped on July 15 after spewing an estimated 4.9 million barrels of oil into the Gulf, polluting marshlands, fisheries and tourist beaches along several hundreds of miles (kilometers) of the Gulf Coast.
Officials say no more oil has leaked from the site since then, 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 ... We expect that sometime before the end of the week we will be able to ... commence the kill," U.S. oil response chief retired Coast Guard Admiral Thad Allen 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.
It said it had made an initial deposit of $3 billion into a $20 billion escrow fund.
WEATHER WORRIES
Allen said spill response authorities were closely watching a tropical weather system moving into the southeast Gulf of Mexico, which forecasters say could cross near BP's Deepwater Horizon spill site in a few days.
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 medium chance of strengthening into a tropical cyclone.
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 homeowners.
"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.
BP, whose image has been pummeled by the spill disaster, has also said it would sell about $30 billion in assets.
The U.S. Justice Department said it had completed negotiations with BP on the escrow 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 up 1.74 percent.
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.
In London, BP said the cost of dealing with the oil spill had risen to $6.1 billion, including $319 million in compensation payments.
In a separate development, the office of Texas Attorney General Greg Abbott announced he was suing BP for excess pollution in April and May from the energy giant's massive Texas City, Texas, refinery.
GULF RESIDENTS WARY, FEARFUL
With the well sealed, 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 continue.
But, despite the official optimism, Gulf Coast residents, business owners and conservationists from Louisiana to Florida have reacted with skepticism and alarm to government scientists' report asserting around 75 percent of the spilled oil had either evaporated, dispersed or been contained.
Citing official and media reports, the National Wildlife Federation said that instead of receding since the capping of the well last month, cases of oil-impacted wildlife appeared to be increasing.
Over the weekend, the cumulative number of endangered sea turtles recovered alive or dead in the oil disaster topped 1,000, the group said. More oiled turtles were recovered in the past 10 days than during the spill's first three months, it added.
Gulf residents 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.
"I made a commitment to the people of the Gulf Coast that I would stand by them, not just until the well was closed, but until they recovered from the damage that's been done. And that's a commitment my administration is going to keep," Obama said on Monday during a White House ceremony to honor the Super Bowl champions, the New Orleans Saints.
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 take several days, officials say.
(Additional reporting by James Vicini, Steve Holland and Matt Spetalnick in Washington, Erwin Seba in Houston; Scott DiSavino in New York, Pascal Fletcher in Miami; Myles Neligan in London; Writing by Pascal Fletcher; Editing by Stacey Joyce)
