At least eight foreigners, including an Irishman, have been kidnapped from a gas facility part-operated by BP in Algeria.
The Foreign Office confirmed a "terrorist" incident was ongoing soon after BP said it had reported a "security incident" to the UK authorities.
But the company was yet to confirm a link to reports that Islamist militants, said to be connected to al Qaeda, had seized a number of people in an attack that had a possible revenge motive for French military action in Mali.
A French citizen was killed, according to the AP news agency, which quoted an Algerian security official.
He suggested the attack on the base, about 60 miles from the Libyan border, came at 2am and the militants involved came from Mali.
The In Amenas field (courtesy BP.com)The official claimed that the Algerian army had since surrounded the militants and their hostages and negotiations had started.
In its statement BP said: "We can confirm that there has been a security incident this morning at the In Amenas gas field in the eastern central region of Algeria.
"The In Amenas field is operated by a joint venture of which BP is a member. Algerian authorities are engaged with the incident; UK authorities have also been advised.
"BP has activated its emergency response system and is setting up a helpline for relatives."
The company did not say whether foreigners were taken away from the facility.
The Foreign Office said: "The British embassy in Algiers is aware of the incident and is liaising with local authorities.
"We are aware that British nationals are working in the area. We cannot confirm at this stage whether any are involved in the incident. We are urgently seeking clarification from oil companies working in the area."
Downing Street sources added that the Prime Minister was being given regular briefings.
Ireland's Department of Foreign Affairs (DPA) confirmed a 36-year-old married man from Northern Ireland, travelling on an Irish passport, was among those taken.
It is understood that Japanese, Norwegian and French nationals were also part of the group.
Ireland's Deputy Prime Minister Eamon Gilmore called for the Irishman's immediate release.
He 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."
The country's DPA added it was providing consular assistance to the family and was in close contact with its international partners and a wide range of other contacts in order to establish the facts of the situation.
A spokesman said: "At this stage, the identity and motives of the kidnappers is unknown."
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