AL-KHOBAR, Saudi Arabia: Saudi commandos stormed a housing complex yesterday and freed dozens of foreign hostages from Islamic militants in an assault on Saudi Arabia's vital oil industry.

Security sources said 22 people, including several hostages, were killed during the rescue operation at the upmarket Oasis housing compound after a 25-hour drama in the oil city of al-Khobar in eastern Saudi Arabia. The final death toll was not immediately clear.

An Internet statement purportedly from Osama bin Laden's al-Qaida said it carried out the unprecedented hostage-taking, which raised the stakes in a battle the world's biggest crude exporter has fought against the network for a year.

In a dramatic end to the stand-off, television pictures showed helicopters dropping commandos onto the roof of the complex. After freeing about 50 hostages, Saudi forces arrested several gunmen, including their leader. Three militants escaped.

Saudi security officials flashed victory signs as scores of residents and hostages streamed out of the compound.

But a security source said: "After Saudi security stormed the building where the militants were holding hostages, they (the gunmen) killed some hostages."

It was the second major attack on the Saudi oil industry - critical to the Western economy - in less than a month and raised fears that already high oil prices could rise still further, although experts said production was unaffected.

The stand-off began on Saturday when gunmen in military uniforms shot at Western oil firms and housing compounds, killing nine Saudis and at least eight foreigners before fleeing to the Oasis complex. The body of a Briton was dragged through the streets, witnesses said.

A manager at the Oasis compound said three foreigners were killed in the subsequent rescue, including one American and one Briton. The US embassy said it could not confirm the report.

Al-Qaida, in a purported statement carried on an Islamist website, said yesterday its militants in Saudi Arabia had "slaughtered" an Italian and a Swedish hostage in Khobar.

A top al-Qaida leader, Abdulaziz al-Muqrin, also said in a purported audio statement that militants had "slaughtered" a Japanese.

An earlier statement by the group, posted on the same Islamist website, had claimed the attack after it happened.

Two militants were also killed during the rescue, after which most of the hostages and residents were evacuated to hospitals and hotels, security sources said.

After storming the Oasis, Saudi forces were combing it for explosives and fugitive militants, security sources said. Medics were tending some hostages inside the complex, its manager said.

The Saudi ambassador to Washington told Fox News seven Americans were among the freed hostages.

The Saudi Arabian Government said the kingdom's vast energy network was running as normal following the attack.

Senior Saudi oil officials met top Western oil executives in the nearby city of Dhahran late yesterday to reassure them about security.

One Western executive said he did not expect a mass exodus of expatriate oil workers.

Al-Qaida has vowed to destabilize the country. In 1996, the then little known group chose Khobar to mount one of its first major attacks, blowing up a compound and killing 19 US soldiers.

The latest attack came two days after a top al-Qaida leader, Abdulaziz al-Muqrin, issued plans for urban guerrilla warfare in the kingdom, designed to topple the royal family.

Saudi Arabia's de facto ruler, Crown Prince Abdullah, vowed to crush the militants. "(The militants) want to harm the economy and foreigners," he said. "We will continue to chase this deviant group until we eradicate them."

(China Daily 05/31/2004 page1)