Britain is working on crisis action in case energy giant BP is ruined by the costs of coping with its oil spill in the Gulf of Mexico, The Times reported yesterday without citing its sources.
The talks, with officials from the British government's Department for Business and the Treasury, show mounting concern that the company could collapse, the report said.
The Treasury and the Department for Business were unavailable for comment on the newspaper report.
"It is not clear how bad this will get, but the government needs to be prepared for any eventuality," said a person familiar with the talks cited by The Times.
The daily paper added that British Prime Minister David Cameron and Energy Secretary Chris Huhne would discuss BP's future with US government officials in a trip to Washington on July 20.
An insider also told the newspaper that the question has been raised as to whether, under extreme circumstances, the government should intervene to save BP.
That would spark a rescue similar to the British banking sector bailouts at the height of the global financial crisis.
On Monday, BP revealed that its costs over the Gulf of Mexico oil spill have soared above $3 billion for the first time.
The company has now spent about $3.12 billion on the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs.
The latest estimate was far higher than the $2.65 billion given by the energy firm on Monday of the previous week.
BP's share price has collapsed more than 50 per cent since the Deepwater Horizon oil rig it leased sank on April 22, two days after a blast that killed 11 workers.
BP chief executive Tony Hayward was visiting ex-Soviet Azerbaijan yesterday as the company seeks to offload assets to cover its rising costs from the Gulf of Mexico oil spill.
"The chief executive officer of BP has arrived in Azerbaijan. The aim of the visit is to discuss ongoing projects," BP Azerbaijan spokeswoman Tamam Bayatly said.
The company agreed last month to create a $20 billion fund for costs arising from the spill and is selling non-core assets to raise $10 billion.
BP owns considerable assets in Azerbaijan, including a 34 per cent stake in the Azeri-Chirag-Guneshli offshore oil fields and a 25.5 per cent stake in the Shah Deniz offshore gas field, Azerbaijan's largest.
It also owns 30.1 per cent and is the operator of the strategic Baku-Tbilisi-Ceyhan oil pipeline, the main export route for Azerbaijani oil.
The head of Russian gas giant Gazprom, Alexei Miller, said last month that the company is interested in buying BP's stake in the Shah Deniz field if it is offered for sale.
Experts said that while Azerbaijan could easily afford to purchase stakes in projects from BP, it was unlikely Hayward would announce any major sales during his visit.
"If you look at a global level, BP projects are represented in the Caspian only in Azerbaijan and all of them are highly profitable... Usually in this kind of situation non-core segments are sold," said Ilham Shaban, the director of the Baku-based Centre for Oil Studies.
Amid reports that BP has approached several sovereign wealth funds in the Middle East and Asia in a bid to bring in new investors, Shaban said it was possible that Hayward would also raise the issue of Azerbaijan's $14.8-billion State Oil Fund buying BP shares.
Azerbaijan is a key partner in projects to deliver Caspian Sea energy reserves to the West through oil and gas pipelines to Turkey, bypassing Russia.