Work is underway to contain an oil leak into Milford Sound after a fire on a fishing boat early this morning.
Fire and Emergency were alerted to the blaze in Deep Water Basin just after 4am, which has since been extinguished.
The Milford Sound Fire Brigade fought the blaze with Te Anau firefighters, who were sent in by helicopter, and with the help of local fishermen.
Fire and Emergency spokesperson Lyn Crosson said the fire caused several gas bottles on board the ship to explode.
Southland Regional Council said harbour booms were in place to contain small amounts of diesel, oil or other contaminants leaking into the water after the boat partially sank.
Its harbourmaster, Lyndon Cleaver, said a team was working with insurers to raise and remove the boat from the water.
He said there were minimal amounts of oil onboard and only a very small amount was visible.
The former fishing boat was being used for accommodation, but no-one was injured.
Shane Nyhon and his crew had been out fishing for cray and were near to the boat when it caught fire. His wife Amber Nyhon said he alerted Fire and Emergency, then worked to save another boat close by from catching alight by cutting the rope tied to the dock.
There was no-one on board the boat and no injuries, a Fire and Emergency spokesperson said.
The blaze is not being treated as suspicious.
Southland Harbourmaster Lyndon Cleaver said it was lucky the boat was steel-hulled otherwise the fire may have burned to the water line and released contaminants into the water.
They are working to make the boat water tight as soon as possible.
Southland Regional Council said there was no immediate evidence diesel or other contaminants were leaking into the water, though an environmental risk will remain until the boat can be made watertight.