UPDATE 3-BP in $7 bln asset sale talks with Plains Exploration-source
* Deal could be announced as soon as this week-report
* Sale part of efforts to pay for 2010 oil spill damages
* BP said in May it is looking to sell Gulf of Mexico fields
NEW YORK, Sept 9 (Reuters) - BP is in talks to sell some of its Gulf of Mexico oil fields to Plains Exploration & Production Co for roughly $7 billion, a person familiar with the matter said on Sunday, as the U.K. oil firm looks to raise money to pay for damages from the 2010 oil spill.
The amount BP will have to pay in damages for the Deepwater Horizon oil spill -- America's worst ever -- is still in dispute. But last month the U.S. Justice Department accused the company of gross negligence and willful misconduct over the spill, a position that could lead to nearly $21 billion in civil damages if a federal judge agrees.
BP said in May that it was looking to sell a number of mature fields in the Gulf of Mexico, including its positions in the Marlin, Horn Mountain, Holstein, Ram Powell, and Diana Hoover fields.
A deal would be transformational for Houston-based independent oil explorer and producer, Plains, which had a market capitalization of $5.2 billion as of Friday. The company already has assets in the Gulf, as well as in California, Texas, Louisiana, and the Gulf of Mexico.
Like many other independent U.S. oil and gas companies, Plains has been working to build up its oil assets, as the price for U.S. natural gas has been in a prolonged slump. It had previously estimated that about 57 to 60 percent of its 2012 production would be oil.
The Wall Street Journal, which earlier reported news of the talks, said a deal could be announced as soon as this week.
The source, who declined to elaborate on the timing of a potential deal, cautioned that the companies were in continuing discussions and talks could still fall apart.
Another person familiar with the matter said that BP has been shopping the Gulf of Mexico offshore oil fields to potential buyers.
The sources asked not to be named because the matter was not public. Representatives for BP and Plains Exploration were not immediately available for comment on Sunday.
BP has been selling off other assets to help pay for the spill. The April 20, 2010 explosion of the Deepwater Horizon drilling rig killed 11 workers and triggered the largest U.S. offshore oil spill from the ruptured Macondo well, in which BP held a 65 percent stake.
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