ISLAMIST militants attacked a gas field in Algeria today, claiming to have kidnapped up to 41 foreigners including an Irishman in a dawn raid in retaliation for France's intervention in Mali.
This evening the militants said they had been surrounded by security forces and warned any attempt to free the hostages would have a "tragic end" Mauritania's ANI news agency reported.
One of the kidnappers, reached by ANI, said the al Qaeda-affiliated group had placed mines around the installation where the hostages were seized.
However, Algeria ruled out negotiating with Islamists.
"The Algerian authorities will not respond to the demands of the terrorists and will not negotiate," said Interior Minister Daho Ould Kablia.
The raiders were reported to have killed three people, including a Briton and a French national.
An al Qaida affiliated group said the raid had been carried out because of Algeria's decision to allow France to use its air space for attacks against Islamists in Mali, where French forces have been in action against al Qaeda-linked militants since last week.
Tanaiste Eamon Gilmore has called for the immediate release of the Irishman who was among the group taken hostage at a Swedish oil plant in Algeria.
The man is travelleing on an Irish passport and is understood to be a 36-year-old married man, from Northern Ireland, and was among Japanese, Norwegian, French and US nationals taken captive.
The Department of Foreign Affairs is providing consular assistance to the family of the man.
The attack in southern Algeria also raised fears that the French action in Mali could prompt further Islamist revenge attacks on Western targets in Africa, where al Qaida in the Islamic Maghreb (AQIM) operates across borders in the Sahara desert, and in Europe.
AQIM said it had carried out Wednesday's raid on the In Amenas gas facility in Algeria, Mauritania's ANI news agency reported.
"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," Mr Gilmore said.
In a statement, the Department of Foreign Affairs said: "The consular assistance unit in the department is providing consular assistance to the family and are in close contact with its international partners and a wide range of other contacts in order to establish the facts of the situation. At this stage, the identity and motives of the kidnappers is unknown."
The Algerian interior ministry said: "A terrorist group, heavily armed and using three vehicles, launched an attack this Wednesday at 5 a.m. against a Sonatrach base in Tigantourine, near In Amenas, about 100 km (60 miles) from the Algerian and Libyan border."
The gas field is operated by a joint venture including BP , Norwegian oil firm Statoil and Algerian state company Sonatrach.
BP said armed men were still occupying facilities at the gas field.
"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," it said.
Algeria's official APS news agency said a Briton and an Algerian security guard had been killed and seven people were injured including two foreigners. A French national was also killed in the attack, a local source said.
Also among those reported kidnapped by various sources were five Japanese nationals working for the Japanese engineering firm JGC Corp, a French national, an Irishman, a Norwegian and a number of Britons.
British Prime Minister David Cameron chaired a 45-minute meeting of Whitehall's Cobra emergency committee today, 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."