BP will slash its capital spending budget, sell $10bn in assets and drop its dividend to pay for a $20bn spill response fund, it has been revealed.

US President Barack Obama announced the creation of the account this week after meeting with top BP officials, including chairman Carl-Henrik Svanberg and chief executive Tony Hayward.

BP said it will pay $3bn into the fund in the third quarter this year and $2bn in the fourth quarter, followed by payments of $1.25bn per quarter until it reaches $20bn.

The total is not a cap on liabilities and BP said the response has cost $1.75bn to date.

In addition, BP will set aside $100m to pay offshore oil workers who are unemployed due to the six-month moratorium on drilling in the deepwater Gulf of Mexico.