Maritime New Zealand says there is a risk a container ship grounded off Tauranga will break up and spill more oil into the ocean.
The Rena, a 21-year-old vessel weighing 47,000 tonnes, struck the Astrolabe Reef about 12 nautical miles off the coast while heading towards Tauranga from Napier about 2.20am on Wednesday.
A 5km-long slick of oil has streamed in a northerly direction from vessel and fuel is leaking from it intermittently.
On Thursday, Maritime New Zealand declared the ship to be hazardous, giving the authority more control over the operation. Spokesperson Sophie Hazelhurst told Radio New Zealand's Checkpoint programme the ship has been extensively damaged.
Ms Hazelhurst says the Rena is in a vulnerable position, as part of it is wedged on the reef and part is hanging over deep water.
The ship is carrying about 1700 tonnes of fuel oil and four containers of the hazardous substance ferro-silicon.
However, Maritime New Zealand believes the fuel tanks are still intact and heavy fuel oil leaking from the vessel appears to be from pipes. It is not clear how much has leaked into the sea.
Maritime New Zealand's national on scene commander, Rob Service, says it is difficult to pinpoint the exact location of the leak.
Mr Service says the bulk of the fuel on board the vessel is likely to be secure in tanks and it is very unlikely the entire amount of fuel on the vessel would spill.
Listen to Checkpoint interview with Sophie Hazelhurst
Investigations into grounding
The Transport Accident Investigation Commission has begun an inquiry into the grounding and two inspectors were on board the vessel on Thursday.
The Rena will also be inspected by a team of divers from private company New Zealand Dive and Salvage, which says the salvage operation will be a massive job, involving large tug boats.
Transport Minister Steven Joyce says the ship's owners will have to meet the cost of the clean-up and salvage operation.
Dead birds found
Tourism companies, wildlife experts and Maori iwi say the fuel oil poses a great risk to the environment and its inhabitants.
An emergency wildlife response team is setting up in Tauranga after four oiled dead birds were found in the water near the stranded cargo ship. A monitoring plan is also being developed to establish more information about sealife that may be affected.
Maritime New Zealand environmental adviser Simon Coubrough says he is working with Tauranga's city and regional councils and the Department of Conservation on the plan.
Mr Coubrough says scallops, kina, paua and rock lobster are known to be present at Astrolabe Reef and monitoring will also be carried out along the mainland coast.
Kerri Morgan from Massey University says there are several species of bird and marine life which could be at risk, including the endangered New Zealand dotterel.
Ms Morgan says her team has set up a rehabilitation centre and as many as 40 people will be on site on Friday to search for and treat oiled wildlife.
The oil is toxic to any animal which ingests it, and can prevent birds from being able to swim or fly if it gets on their feathers, she says.
Sea bird researcher Chris Gaskin says a spill could harm flocks of birds including petrels and shearwaters that feed on fish around the reef.
The owner of a Tauranga dolphin watch company, Stuart Arnold, says an oil spill would devastate a unique marine environment teeming with sea life, and one of the region's most popular fishing spots.
The chairman of Tauranga's Ngai te Rangi runanga, Charlie Tawhiao, says the stranded vessel threatens the health of the ocean and of those who take food from it.