BP CEO Hayward nears exit as relief well work resumes

LONDON/HOUSTON (Reuters) - BP Plc has decided Chief Executive Tony Hayward should step down over his handling of the Gulf of Mexico oil spill and his departure is likely to be announced in the next 36 hours, sources close to the company said on Sunday.

BP's board is due to meet in London tomorrow to discuss a plan for Hayward to step down and be replaced by Bob Dudley, a senior U.S. executive who is currently managing the oil spill response operation, the sources said.

"The details are being worked out," one source said.

As the boardroom drama intensified, clearing weather in the spill zone allowed work to resume on drilling a relief well to plug the leak that has been spewing oil into the Gulf for some three months.

A Transocean Ltd rig was reconnecting equipment, a BP spokeswoman said. Other vessels that had left the region Friday to get out of the path of what was Tropical Storm Bonnie were also returning.

Replacing Hayward, who provoked public anger in the United States with his gaffes, including a statement that he wanted his life back, and later going sailing as oil spewed into the sea, carries a risk at this point.

The Macondo well, which has been sealed with a temporary cap after leaking up to 60,000 barrels per day into the sea, has not been shut off for good and if problems arise in achieving this, Dudley's reputation could also be tarnished.

However, with the well sealed for over a week by a temporary cap, the board's concern has shifted to the public and market's preoccupation with Hayward's future, which is making it hard for the company to move forward, the sources said.

Hayward has accepted it is in the best interests of BP for him to go, the sources said.

RELIEF WELL NEARS COMPLETION

BP, which has lost 40 percent of its market capitalization since the blast that caused the spill, would not comment on the reports and said Hayward remained the CEO, with the full support of the board and management.

But a BP spokesman declined to repeat the company's statements from last week that the board was not even discussing Hayward's future.

Investors fear Hayward's continued presence at the company will make it harder for BP to rebuild its reputation in the United States, where 40 percent of its assets are based.

A relief well, which should permanently plug the well, is expected to be completed in the coming weeks. BP will finish placing the last bit of pipe sometime in the next week, the top U.S. official overseeing the spill response said.

As remnants of Bonnie dissipated over the Gulf on Saturday, retired Coast Guard Admiral Thad Allen, head of the U.S. spill response, said a "static kill" operation to plug the well by pumping in heavy drilling mud and possibly cement could start in three to five days.

"The static kill could go very quickly," Allen said.

Although vessels were returning to the site on Sunday, Allen said the storm could push back BP's mid-August target date for completing it by seven to nine days.

Though toothless in the end, Bonnie prompted oil and natural gas producers to evacuate many offshore workers, halting more than half of the oil production in U.S.-regulated areas of the Gulf and about 25 percent of gas output.

BP sealed the leak July 15 with a tight-fitting containment cap, choking off the flow of oil for the first time since an April 20 rig explosion killed 11 workers and sent crude spewing into the Gulf, soiling coastlines in five U.S. states and devastating tourism and fishery industries.

As the bad weather passed, the independent administrator running a $20 billion fund set up by BP to compensate people for financial losses from the spill said the energy giant was holding up payments to economic victims.

"I have a concern that BP is stalling claims. ... I doubt they are stalling for money. It's not that. I just don't think they know the answers to the questions" from claimants, Kenneth Feinberg told reporters on Saturday in Alabama.

Thousands of businesses in Gulf Coast states have been crippled by the spill, the worst in U.S. history. BP agreed to set up the $20 billion fund under pressure from President Barack Obama.

At a town hall meeting in southern Alabama, fishermen and other business owners told Feinberg that they were frustrated and angry about what they said was a slow and complex claims process that lacks transparency.

"After today there will be no more business as usual. I learned today the depth of frustration in people here on the coast," Feinberg told the meeting.

(Additional reporting by Leigh Coleman in Alabama, Tom Brown in Miami; additional writing by Doina Chiacu and Emily Kaiser; editing by Paul Simao and Stacey Joyce)