Corrects to say three, not four quarters of dividends cut, in first paragraph

Oil giant BP said it would cut three quarters of dividends, significantly reduce its investment program and sell $10 billion of assets to fund a planned $20 billion fund to pay for its Gulf of Mexico oil spill.

The commitments, outlined in a statement on Wednesday, are harsher penalties than most investors had expected and follow BP chairman Carl-Henric Svanberg's meeting with President Obama on Wednesday.

Investors had expected the suspension of BP's dividend, or payment in shares for a couple of quarters and had not expected BP to be forced to sell assets and cut investment -- moves that will curb BP's growth going forward.

The decisions to cut investment and sell assets come despite the fact BP is only committed to putting $5 billion this year into the new fund, which will be administered by a body independent from BP.

BP's free cashflow and massive credit lines could easily cover such an amount.

In 2011 and beyond, BP will make payments into the fund of $1.25 billion per quarter, until the fund amounts to $20 billion.

Up to that, BP's commitments will be assured by the setting aside of U.S. assets with a value of $20 billion, the company said.

(Reporting by Tom Bergin; Editing by Doina Chiacu)

Oil Spill United kingdom