"Every effort is now being made to limit the impact of this incident on the Great Barrier Reef."

The ship hit the reef at full speed, 15km outside the shipping lane, she said.

Authorities fear an oil spill will damage the world's largest coral reef, which is listed as a World Heritage site for its environmental value.

Oil patches

Patches of oil were seen near the stricken ship early Sunday, but Maritime Safety Queensland reported no major loss from the 1,000 tons (950 metric tons) of oil on board.

"We are now very worried we might see further oil discharged from this ship," Bligh said.

A police boat was standing by to remove the 23 crew if the ship broke apart and an evacuation was necessary, she said.

Patrick Quirk, the Maritime Safety Queensland general manager, said that the vessel was badly damaged on its port side.

"At one stage last night, we thought the ship was close to breaking up. We are still very concerned about the ship," he said.

"It is in danger of actually breaking a number of its main structures and breaking into a number of parts."

A salvage contract had been signed but the operation would be difficult and assessing the damage to the ship could take a week, Quirk said.

Bligh said she feared the salvage operation could spill more oil, which could reach the mainland coast within two days.

Emergency standby

Local emergency crews were on standby to clean any oil that reached mainland beaches, she said.

Aircraft on Sunday began spraying chemicals on the oil patches to disperse it.

Peter Garrett, the federal environment minister, said authorities had been working through the night to determine what risks the ship posed to the environment.

"The government is very conscious of the importance of the Great Barrier Reef environment and ensuring that impacts on its ecology are effectively managed," he said in a statement

The 230-metre bulk carrier was carrying about 65,000 metric tons of coal to China and ran aground within hours of leaving the Queensland port of Gladstone.

Conservationists have expressed outrage that bulk carriers can travel through the reef without a marine pilot with local expertise.

Larissa Waters, spokeswoman for the Queensland Greens, an environmentally focused political party, said: "The state government is being blinded by royalties and their shortsightedness will go down in history as killing the reef."