A British national is reported to have been killed after armed Islamist militants stormed a natural gas field in Algeria.
A number of foreign workers are said to have been taken hostage in the dawn attack on the facility part-operated by BP.
Algerian forces are surrounding the hostage-takers and negotiating for the release of their captives, according to local security officials.
An Islamist group claimed it was holding 41 westerners - including seven Americans - in retaliation for the French military intervention against al Qaida-backed rebels in neighbouring Mali.
The Irish government said a 36-year-old Irishman was among the hostages. It is understood the 36-year-old married man, from Northern Ireland, is unharmed.
Prime Minister David Cameron chaired a 45 minute meeting of Whitehall's Cobra emergency committee to discuss the emerging crisis.
The Foreign Office was unable to confirm a report by the Algeria state news agency that a British national was among two people killed in the attack on the In Amenas gas facility close to the Libyan border. Six others are said to have been wounded, including two foreigners, two police officers and two security agents.
The Algerian interior ministry said the attack began when three vehicles carrying heavily-armed-militants ambushed a bus carrying employees from the gas plant to the nearby airport.
Foreign Secretary William Hague said the crisis was "extremely dangerous" and the Government would be working around the clock to resolve it. He said that a rapid deployment team had been sent from the Foreign Office to reinforce British embassy and consular staff in Algeria. The Government's emergency response committee Cobra would continue to meet.
A Downing Street spokeswoman said: "The Prime Minister has spoken with his Algerian counterpart, Prime Minister Abdelmalek Sellal, and was updated on the latest situation on the ground. The Prime Minister expressed his sympathy and support for the Algerian Government. They agreed to keep in touch as the situation progresses."