U.S. officials told ABC News that at least one American has been killed in the hostage standoff at an Algerian gas plant, and the family of the deceased American has been notified.
An al Qaeda-linked group called the Masked Brigade and led by the one-eyed jihadi Mokhtar Belmokhtar raided the BP joint venture facility in In Amenas on Wednesday, taking an undetermined number of hostages from more than half a dozen nations, including at least two Americans.
On Friday, the group demanded the release of two convicted terrorists held in U.S. prisons, including the "blind sheikh" who helped plan the first attack on New York's World Trade Center, in exchange for the freedom of two American hostages, according to an African news service.
The terror group reportedly contacted a Mauritanian news service with the offer. In addition to the release of Omar Abdel-Rahman, who planned the 1993 World Trade Center bombing, they demanded the release of Aifia Siddiqui, a Pakistani scientist who shot at two U.S. soldiers in Afghanistan in 2008.
Asked about the unconfirmed report of a proposed swap, State Department spokeswoman Victoria Nuland said firmly, "The United States does not negotiate with terrorists." She repeated the statement again when questioned further. She also said she was not prepared to get into any details about the status of Americans in "an ongoing hostage situation."
At least three Americans were being held hostage by the militants when the Algerian military mounted a rescue operation at the facility Thursday that reportedly resulted in casualties.
Five other Americans who were at the facility when it was attacked by the terrorists are now safe and believed to have left the country, according to U.S. officials.
Reports that dozens of hostages were killed during the Algerian military's attempt to retake the compound have not been confirmed, though Algeria's information minister has confirmed that there were casualties. It's known by U.S. and foreign officials that multiple British, Japanese and Norwegian hostages were killed.
According to an unconfirmed report by an African news outlet, the militants said seven hostages survived the attack, including two Americans, one Briton, three Belgians and a Japanese national. U.S. officials monitoring the case had no information indicating any Americans have been injured or killed, but said the situation is fluid and casualties cannot be ruled out.
On Friday, a U.S. military plane evacuated between 10 and 20 people in need of medical attention, none of them American, from In Amenas and took them to an American medical facility in Europe. A second U.S. plane is preparing to evacuate additional passengers in need of medical attention.
British Prime Minister David Cameron told parliament today that the terror attack "appears to have been a large, well coordinated and heavily armed assault and it is probable that it had been pre-planned."
"The terrorist group is believed to have been operating under Mokhtar Belmokhtar, a criminal terrorist and smuggler who has been operating in Mali and in the region for a number of years," said Cameron.
Cameron said Algerian security forces are still in action at the facility. On Thursday, he said that the situation was "very bad … A number of British citizens have been taken hostage. Already, we know of one who has died. ... I think we should be prepared for the possibility for further bad news, very difficult news in this extremely difficult situation."
The kidnappers had earlier released a statement saying there are "more than 40 crusaders" held "including 7 Americans."
U.S. officials had previously confirmed to ABC News that there were at least three Americans held hostage at the natural gas facility jointly owned by BP, the Algerian national oil company and a Norwegian firm at In Amenas, Algeria.
"I want to assure the American people that the United States will take all necessary and proper steps that are required to deal with this situation," said Panetta. "I don't think there's any question that [this was] a terrorist act and that the terrorists have affiliation with al Qaeda."
He said the precise motivation of the kidnappers was unknown.
"They are terrorists, and they will do terrorist acts," he said.
The terror strike came without warning Wednesday morning, when an estimated 20 gunmen first attacked a bus carrying workers escorted by two cars carrying security teams. At least one worker was killed. The terrorists moved on to the residential compound, where they were holed up with the American and other Western hostages, including Norwegian, French, British, and Japanese nationals.
The FBI has begun gathering evidence and conducting interviews as they lay the groundwork for a criminal investigation and possible future prosecution in connection with the taking of American hostages. A squad of FBI counterterrorism agents in the New York office, which has responsibility for Western Europe and Africa, started work on the case Wednesday. As the lead agency, the FBI is gathering intelligence from other U.S. agencies and from other countries.
Mr. Marlboro: Kidnapper, Smuggler
The alleged mastermind of the attack, Mokhtar Belmokhtar, is a rogue al Qaeda leader who also runs an African organized crime network that reportedly has made tens of millions of dollars in ransom from kidnappings and smuggling. He is known as Mr. Marlboro because of his success smuggling diamonds, drugs and cigarettes. Officials think it unlikely that Belmohktar would actually be in the middle of the hostage situation, but would be calling the shots from his base in Mali more than 1,000 miles away.
Belmokhtar fought in Afghanistan alongside the mujahideen against the Soviets in the 1990s, and lost an eye. He was formerly associated with al Qaeda's North African affiliate, al Qaeda in the Islamic Maghreb (AQIM), and was said to be a liaison with al Qaeda's international leadership. Belmokhtar split with AQIM late last year over what other Islamist militants considered his preference for lucre over jihad. He remains affiliated with al Qaeda, however, and is now heading a breakaway group.
Luis Martinez of ABC News contributed to this report.