WASHINGTON (Bloomberg) - BP plc. tentatively agreed to put about $20 billion over time into a fund to pay damages resulting from the Gulf of Mexico oil spill, with claims administered by the lawyer who oversaw executive compensation under the government's financial bailout, people familiar with the talks said.

The agreement was worked out in a White House meeting today between company executives, including chairman Carl-Henric Svanberg, and President Barack Obama and his top advisers.

Kenneth Feinberg, who also oversaw the fund that paid families of the September 11 attacks, will act as an independent third party to judge claims and authorise payments to Gulf Coast residents affected by the biggest oil spill in US history.

The meeting, which included BP CEO Tony Hayward, Lamar McKay, president of BP America Inc., and company lawyers, ran at least three hours, delaying a statement by Obama originally scheduled for 12.15 p.m. Washington time.

In a nationally televised address last night, the president vowed he would make BP set aside however much is needed to "compensate the workers and business owners who have been harmed as a result of his company's recklessness".

BP was down 52 cents, or 1.6 percent, to $30.92 as of 1.08 p.m. in New York. Shares are down almost 48 percent from the April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers and triggered the oil spill.

Earlier yesterday, David Axelrod, Obama's senior adviser, said there is no limit on the so-called escrow account.

"There'll be no upward cap there. If they owe more money, they'll have to pay more money," Mr. Axelrod said on NBC's "Today" show. "This is not a get-out-of-the-situation-free card."

Obama also named Mr. Feinberg in June 2009 to oversee executive pay at companies that received aid from the Treasury Department's $700 billion Troubled Asset Relief Program.

He is managing partner of law firm Feinberg Rozen LLP in Washington. Mr. Feinberg, 64, has spent his career resolving legal claims, including settlements for those affected by the defoliant Agent Orange in Vietnam, the Dalkon Shield birth- control device, and the 2007 Virginia Tech shooting that killed 32 people.

The amount for the fund is in line with what Senate Majority Leader Harry Reid, a Nevada Democrat, had suggested that BP set aside to compensate residents and businesses affected by the spill, which is threatening the shoreline of four states.

The government on Tueserday increased its estimate of the amount of oil gushing from a damaged BP well to 35,000 to 60,000 barrels a day.

Based on the low end of the estimate, the BP well may have leaked 1.99 million barrels so far. That exceeds the 262,000 barrels spilled by the Exxon Valdez in 1989 and the US record 300,000-barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute.

Obama called the BP leak "the worst environmental disaster America has ever faced".

BP has spent about $1.6 billion on containing and cleaning up the spill so far. The London-based company's spending for cleanup and liabilities may reach $40 billion, Standard Chartered plc. estimated last week.

BP is unlikely to pay a cash dividend in the second and third quarters, Bloomberg forecasts show. BP spokeswoman Sheila Williams said no decision on the second-quarter dividend has been made.

BP's payments accounted for about 14 percent of all dividends in the UK's FTSE 100 stock index last year. Fitch Ratings yesterday lowered BP's credit rating by six grades yesterday to BBB, two levels above junk, on concern that costs will escalate.

BP had $5 billion of cash available, $5.25 billion of credit lines it had not used and another $5.25 billion of stand- by bank facilities, the company said in an investor conference call on June 4. Fitch said yesterday it expects BP's lenders to let the company use the credit lines if needed.

BP generated $27.7 billion in cash flow from operations last year and posted profits of $6 billion in the first quarter. Capital spending will total about $20 billion, the company said in a strategy presentation.