Algerian media reports a British national has been killed in an attack by Islamist militants on a BP-run gas field in the north African country, with British workers amongst others who were kidnapped.
The Briton and a French national were among several people reported to have been killed in the attack onthe In Amenas facility in which at least seven workers were kidnapped. Conflicting reports have named the nationalities of those kidnapped as Irish, Norwegian, Japanese, British and American.
A group which has claimed responsibility for the attack has said it was in response to Algeria allowing the French military to pass through its airspace in order to launch attacks on Al-Qaeda linked insurgents in northern Mali.
The British Foreign Office has confirmed that a number of British nationals were caught up in the incident. Prime Minister David Cameron chaired a 45-minute meeting of Whitehall's Cobra emergency committee on Wednesday afternoon, at which ministers were updated on the developing situation.
Speaking after the meeting, Mr Cameron's official spokesman said: "The ongoing incident has involved various nationalities, including several British nationals. We are working with BP to support the families of staff and provide consular assistance."
An al-Qaeda linked group has claimed responsibility for the attack, Mauritania's ANI news agency reported. The agency, which is said to be in regular contact with the group, said the attackers were under the command of Mokhtar Belmokhtar - a former leading al-Qaeda figure who set up his own armed Islamist group late last year.
The group, known as the 'Masked Brigade', is reported to have said the hostages include seven Americans, two French, two British and two Japanese. The claim of responsibility has not yet been verified, and the reason for the differing descriptions of hostage nationality have not been explained.
It was reported that the armed group arrived in three vehicles and attacked a bus taking workers to the nearby airport, but were driven away by armed escorts. The group then launched an attack on the living quarters of workers at the facility.
Algerian Interior Minister Daho Ould Kablia said the government "The Algerian authorities will not respond to the demands of the terrorists and will not negotiate,"
A Foreign Office spokesman said: "A terrorist incident is on-going near the town of In Amenas at an oil installation near the Algerian border with Libya. The British embassy in Algiers is aware of the incident and is liaising with local authorities as appropriate.
"We are aware that there are British nationals working in the area. We cannot at this stage confirm whether any are involved in the incident. We are urgently seeking clarification from the oil companies that are working in the area."
The In Amenas gas production field is jointly run by BP, Norwegian company Statoil and Algerian state company Sonatrach.
A BP spokesman said: "The site was attacked and occupied by a group of unidentified armed people at about 0500 UK time. Contact with the site is extremely difficult, but we understand that armed individuals are still occupying the In Amenas operations site."
Statoil confirmed that a "serious situation involving an attack" was taking place at the facility - which is near the Algerian border with Libya.
Japanese engineering firm JCG Corp is contracted to the site. Japanese news agency Jiji quoted company officials as confirming that five of its workers had been kidnapped.
The wife of a Norwegian gas worker was also quoted as saying she was telephoned by her husband this morning and told he had been kidnapped.
Ireland's Tanaiste (deputy prime minister) Eamon Gilmore said: "The government stands ready to use all the resources available to us to ensure that our citizen is released as soon as possible. I would ask that the family be allowed privacy at this difficult time."
Algeria has the world's sixth largest reserves of natural gas, and currently supplies 30 per cent of Europe's natural gas requirments.
Algerian media said the incident on Wednesday is the first ever terrorist attack on a natural resource facility in the country.