KHOBAR, Saudi Arabia (ONS) 5/29/04 - Suspected Islamic militants wearing military-style uniforms sprayed gunfire inside two office compounds in the heart of the Saudi oil region Saturday, killing at least 10 people - including an American - and then seizing dozens of hostages at a luxury resort.

The Arab News newspaper, quoting witnesses, said the attackers dragged the body of an unidentified victim behind their car in the city of Khobar, 250 miles northeast of Riyadh.

Saudi security forces surrounded the attackers on the sixth floor of a high-rise building in the city's walled Oasis Residential Resorts complex, a police officer told The Associated Press.

After little activity overnight, three helicopters arrived after sunrise and gunfire broke out again. Television footage showed commandos jumping out of a helicopter onto a rooftop.

Security officials said between 45 and 60 people were being held hostage, mostly Westerners - including Americans. The Dutch Foreign Ministry said three Dutch hostages had been released.

A statement posted on several Islamic Web sites claimed the attack in the name of the Al-Quds (Jerusalem) Brigade but was signed the "al-Qaida in the Arab Peninsula." It said the attacks targeted U.S. companies and that a number of "Crusaders" had been killed.

Saudi Arabia's ambassador to the United States, Prince Bandar, called the attack "a cowardly and despicable act of murder."

"These terrorists have no respect for human life and no regard for the principles of Islam," he said in a written statement.

The attack was the second deadly assault this month against the Saudi oil industry and came amid oil prices driven to new highs partly by fears that the Saudi kingdom - the world's largest oil producer - is unable to protect itself from terrorists.

Osama bin Laden, blamed for past terror attacks in Saudi Arabia, has vowed to destabilize the oil industry and the Saudi royal family for its close ties to the United States.

Saudi Crown Prince Abdullah said about 10 Saudis and foreigners were killed in the Khobar attack. The Saudi newspaper Al-Riyadh, quoting security officials in its Sunday edition, put the number dead at 16, including seven Saudi security agents.

An American man, a 10-year-old Egyptian boy and three Filipinos were among those confirmed killed because they were Christians. British citizens and Saudi guards were also reportedly among the dead.

The attack started Saturday morning as the gunmen stormed two oil industry compounds housing offices and employee apartments.

Guards at the compounds said four gunmen wearing military-style dress opened fire and engaged in a shootout with Saudi security forces before fleeing up the street to the Oasis, a vast complex containing apartments and hotels.

Several Saudi newspapers reported Sunday that the attackers threw at least one body from the building where they were holed up and had mutilated some of the bodies of those they killed, which is typical of Islamic extremists.

The Arab News said the gunmen dragged a body behind a car, mirroring an attack earlier this month in western Saudi Arabia. Gunmen in that attack had dragged the body of an American victim from the bumper of their car.

The pan-Arab satellite television network Al-Arabiya showed the body of a man, apparently shot dead, in the driver's seat of a car and the burned-out frame of a sport utility vehicle. Bullet holes were visible in other vehicles, some with windows smashed and blood staining the seats.

Journalists were turned away from the compounds and kept back from the Oasis, where hundreds of Saudi security forces were trying to capture or kill the militants. Saudi forces had fired shots inside the compound, officials said, speaking on condition of anonymity.

According to Oasis residents and an employee, the militants asked questions when they arrived that indicated they were trying to separate Moslems from non-Moslems. Islamic militants have been criticized in the Arab world for previous attacks in which Saudis and other Arabs were killed.

Lebanon's ambassador to Saudi Arabia, Ahmed Chammat, told The Associated Press that five Lebanese hostages had been released.

One of them, Orora Naoufal, said she cowered in her apartment with her four-year-old son for five hours after a brief encounter with two of the gunmen, whom she described as clean-shaven and wearing military uniforms.

She told AP by telephone that the gunmen asked her where the "infidels" and foreigners were, and whether she was Moslem or Christian,

"I replied: 'I am Lebanese and there are no foreigners here.'" She said the gunmen told her to "Go convert to Islam, and cover up and go back to your country."

One of the targeted oil industry compounds contains offices and apartments for the Arab Petroleum Investment Corporation, or Apicorp, and the other - the Petroleum Center building - houses offices of various international firms.

A civilian car had slammed into a sign outside the Apicorp compound, and there was a burned car at the entrance and glass shards on the ground. Witnesses earlier said at least 10 ambulances were outside the Oasis, and that hundreds of policemen had surrounded the complex with helicopters overhead.

In addition to Apicorp, oil industry companies with offices in the compounds include a joint venture among Royal Dutch/Shell Group, Total SA and Saudi Aramco; Lukoil Holdings of Russia; and China Petroleum & Chemical Corp., or Sinopec.

The Egyptian boy who was killed was the son of a Christian Apicorp employee, said Mahmoud Ouf, an Egyptian consular officer in Riyadh.

Egypt's Middle East News Agency quoted his father, Samir, as saying his son was on his way to school with other students. "The terrorists opened heavy fire on the car, killing Rami and setting fire to the car," his father said, adding that his daughter ran from the car uninjured.

Employees from the other companies were safe, Shell spokesman Simon Buerk and a Saudi oil industry official, Yahya Shinawi, told AP by telephone.

Other companies believed to be in the compounds included Schlumberger, based in Houston, Texas, and Aveva, of Cambridge, England. There was no immediate word on their employees. Kelly Ray, spokeswoman for INOVx, which had been believed to have offices in the compounds, said the company's offices in Saudi Arabia closed in 2001 and it no longer had any employees there.

State Department spokesman Tom Casey said an American man who worked for an oil company was confirmed dead, but did not identify him or his employer. U.S. State Department spokeswoman Joanne Moore said two Americans were wounded.

Casey said the State Department has not upgraded its travel warning but noted that it was already about as tough as it could get. It is still recommending that Americans defer all nonessential travel to Saudi Arabia and that those there consider leaving immediately especially if they are Christian.

The attack came as Saudi Arabia, OPEC's most powerful member, is urging the group to boost oil production to try to reduce the high cost of crude.

Peter Gignoux, a London-based oil adviser for GDP Associates in New York, said news of the attacks might trigger a further rise in oil prices but noted that oil facilities were unaffected.

In London, the British Foreign Office was investigating reports that a British citizen was killed. Philippines officials in Manila said they were checking unconfirmed reports that three Catholic Filipinos were among the dead.

Saudi Arabia launched a high-profile crackdown on terrorists after attacks on Riyadh housing compounds in 2003, and claims to have foiled dozens of terror plots in the kingdom.

The most recent attack targeted the offices of Houston-based ABB Lummus Global Inc. in the western city of Yanbu on May 1, killing six Westerners and a Saudi.

Saudi Arabia relies heavily on 6 million expatriate workers, including about 30,000 Americans, to run its oil industry and other sectors. The kingdom produces about 8 million barrels of oil a day.

Updated 30 May 04, 18:49: Terrorists Slit Throats of 9 Hostages in Khobar
Saudi paratroopers dropped by helicopters rescued 25 hostages Sunday as they stormed a living compound where suspected Al-Qaeda militants had already slit the throats of nine people, a survivor told AFP.

Among the dead were seven Asians, a Swede and an Italian, said Nijar Hijazin, who had himself been taken hostage at the housing compound in the kingdom's Eastern Province on Saturday.

"The nine had their throats cut by the kidnappers when they tried to escape at night by the stairs," Hijazin told AFP watching the removal of bodies.

Hijazin, a Jordanian computer engineer, said he was rescued along with 24 fellow hostages and brought out by the roof, where the helicopter-borne Saudi commandos landed at dawn.

Sporadic shooting had been heard from inside the apartment block after the helicopters landed some 40 troops on the roof amid loud gunfire bursts from automatic weapons.

Shots had rung out throughout the night, including an intense volley three hours earlier. However calm returned by about 7:00 a.m. (0400 GMT), a correspondent of the Al-Arabiya TV network reported from scene.

One of the attackers was reported killed and the leader of the militants captured, although there was no official confirmation.

In Washington, Saudi ambassador Prince Bandar bin Sultan said seven US hostages had been rescued by Saudi forces. (AFP)