BP denied a report its embattled chief executive would leave soon, as it lined up $7 billion in asset sales to help pay for the worst oil spill in U.S. history, lifting its shares on Wednesday.

CEO Tony Hayward, who has been heavily criticized for his handling of the disaster, had the full support of the board and would stay in office, a BP spokesman said, dismissing a report in the Times that he would step down within the next 10 weeks.

BP shares rose 3.4 percent to 400.6 pence by 1216 GMT, buoyed by its sale of assets in the United States, Canada and Egypt to U.S. company Apache Corp, a large part of a $10-billion asset disposal plan.

Such a material sale, achieved so quickly, should ease if not banish any lingering concerns about BP's liquidity position, JP Morgan said in a note, adding that the terms of the deal looked robust and underlined the mismatch between what BP could get for its assets and its battered stock price.

Dutch bank ING said that BP could afford to go further than its $10 billion target, potentially making over $45 billion from divestments without denting its core activities.

BP's market value has fallen by around 39 percent since an explosion on an oil rig killed 11 people on April 20 and sent oil gushing into the Gulf of Mexico, soiling the coastline and devastating tourism and fishing industries in the region.

BP capped the well last week, choking off the flow of oil for the first time in the three months since the explosion, and on Tuesday U.S. officials gave the company permission for another 24 hours of pressure tests on the seal.

Hayward's ouster has been the subject of speculation after a series of PR gaffes and a failure to quickly stem the flow of oil into the Gulf.

The Times cited a person close to the matter as saying Hayward would have to step down so that BP could build its defences against a potential buyout threat by ExxonMobil or Royal Dutch Shell.

There was a growing expectation that Hayward would announce his departure in late August or September, with Robert Dudley, chief of BP's Gulf Coast restoration efforts, seen as frontrunner to replace him, The Times said.

Al Troner, president of Asia Pacific Energy Consulting in Houston, said Hayward was not entirely responsible for the disaster, although he seems to have an unfortunate tendency to put both his feet in his mouth.

There is more than enough blame to spread around here, whether it's BP, the drilling company, or the federal government reaction, he said.

BP said Apache would pay a $5 billion cash deposit on July 30 as part of the deal for exploration and production facilities in North America and Egypt. The company said the deal would include assets in New Mexico, natural gas in western Canada and concessions in Egypt.

Earlier, it announced it would sell $1.7 billion worth of assets in Vietnam and Pakistan.

The head of India's Oil and Natural Gas Corp told Reuters from Vietnam that the company would be interested in buying BP's stake in a Vietnam project, and Vietnam's deputy minister of industry and trade said that BP should give priority to its partners in stake sales before offering them to outside parties.

POLITICAL REVERBERATIONS

The continuing disaster remains high on the American and British political agendas and dominated a visit to Washington by British Prime Minister David Cameron.

Cameron said he had asked for a review of government documents on the release last year by the Scottish government of Abdel Basset al-Megrahi, the Libyan convicted of bombing a Pan Am flight in 1988 in which 270 people, mostly Americans, died.

U.S. lawmakers are pressing for an investigation into any possible BP role in the release. BP has confirmed it lobbied the British government in late 2007 over a prisoner transfer agreement with Libya but said it was not involved in talks on the release of al-Megrahi.

Scotland's First Minister Alex Salmond told BBC Radio 4 on Wednesday that there was no conspiracy in his country's decision to release the bomber.

We had no contact with BP either written or verbal or any lobbying of that kind as far as the process of compassionate release was concerned, he said.

TEST TO CONTINUE; STATIC KILL?

The well test, which has been extended in 24-hour increments by the U.S. government, will continue until Wednesday afternoon and then be re-evaluated.

Scientists are now weighing another option -- a static kill to help smother and plug the leak.

The top U.S. oil spill official, retired Coast Guard Admiral Thad Allen, said BP could have a plan to proceed with the static kill option within 24 hours. This would involve pumping heavy drilling mud and possibly cement into the well, much like BP's failed top kill in May.

Louisiana residents remain cautiously optimistic about the seal that has stopped the flow for now, but concerns remain.

I am happy it's stopped the flow, said New Orleans resident Barbara McGuinness. But do I worry about this thing blowing? Yes. We don't need any more bad news.

(Additional reporting by Karolina Tagaris in London, Matt Spetalnick in Washington, Francis Kan in Singapore, Nidhi Verma in New Delhi and Ho Binh Minh in Dalat, Vietnam; Writing by Lincoln Feast and Sitaraman Shankar; Editing by Hans Peters and Simon Jessop)

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