At least 35 foreign hostages are feared slaughtered after Algerian forces attacked the BP gas plant where Islamic terrorists are holding them captive, according to reports.
The bloodbath is said to have occurred when the al Qaeda-linked militants tried to transport their captives to another part of the compound after coming under fire from surrounding soldiers.
A tense standoff has developed between the Algerian army and the kidnappers since they stormed the complex before dawn on Wednesday, slaughtering a Briton and an Algerian.
The militants reportedly claimed the hostages were killed after Algerian helicopters began strafing the plant. Fifteen kidnappers were also reportedly killed.
A number of Britons and an Irishman were known to be among the hostages. One Briton was thought to have been killed earlier when the militants attacked the gas field.
The group, calling itself the "Battalion of Blood", said it seized 41 foreigners, including Brits, Irish, Americans, French, Norwegians and Japanese, after raiding the natural gas pumping station and employee barracks in the Sahara desert.
The attackers have demanded an end to the French military campaign in Mali, where hundreds of French paratroops and marines are launching a ground offensive against rebels a week after Paris began firing on militants from the air.
Earlier on Thursday it was reported that 40 Algerian workers, mainly women, had escaped before it emerged later that another 15 foreign nationals, including a handful of French and Americans, had also fled to safety.
An unidentified hostage who spoke to France 24 television said prisoners were being forced to wear explosive belts. Their captors were heavily armed and had threatened to blow up the plant if the Algerian army tried to storm it.
Governments around the world were holding emergency meetings to respond to one of the biggest international hostage crises in decades, which sharply raises the stakes over the week-old French campaign against al Qaeda-linked rebels in the Sahara.
Meanwhile, British Foreign Secretary condemned the action, describing the event as an 'absolute tragedy'.