BRITISH Prime Minister David Cameron said tonight the country should be "prepared for the possibility of further bad news" in the hostage crisis in Algeria.
With a confused picture of what is happening on the ground following an Algerian military operation, Mr Cameron has postponed his speech on Europe in the Netherlands tomorrow to stay in Downing Street.
One British citizen is known to have died in the crisis and several others have been caught up in it.
Mr Cameron said: "It's a fluid situation, it's ongoing, it's very uncertain.
"We should be prepared for the possibility of further bad news, very difficult news, in this extremely difficult situation."
The Government has confirmed that there are "several" British nationals among the foreign hostages held by Islamist militants at the gas plant at In Amenas, deep in the Algerian desert.
Mr Cameron said: "We face a very bad situation at this BP gas compound in Algeria.
"A number of British citizens have been taken hostage. Already we know of one who has died.
"The Algerian armed forces have now attacked the compound."
He said officials in the Government's Cobra emergency committee, which he has chaired twice today, were "working around the clock to do everything we can to keep in contact with the families, to build the fullest possible picture of the information and the intelligence we have".
The Prime Minister said he would continue to chair the meetings "and I will do everything I can to update people about what is a difficult and dangerous and potentially very bad situation".
Foreign Office minister Alistair Burt said UK officials were pressing the Algerian authorities for access to UK nationals caught up in the violence "in order to help with repatriation and evacuation".
He said: "Although details have yet to become final, I'm afraid we should be under no illusion that there will be some bad and distressing news to follow from this terrorist attack.
"Those who have been working with families during the course of the day will continue that work of advice and support, though this will take some time.
"Our consular staff in Algiers has already been increased and we are pressing the Algerian authorities in order to have access to UK nationals involved who are at the site in order to help with repatriation and evacuation."
He added: "All our thoughts should be with those who have been caught up in this appalling tragedy and in particular with their families who have already suffered so much distress."