SYDNEY (Reuters) – A stranded Chinese coal ship leaking oil onto Australia's Great Barrier Reef is an environmental time bomb with the potential to devastate large protected areas of the reef, activists said on Monday.

The ship was a "ticking environmental time bomb," Gilly Llewellyn, director of conservation for the World Wide Fund for Nature (WWF) in Australia, told Reuters.

She said this was the third major international incident involving its owners in four years.

Australian government officials say the stricken Shen Neng I belongs to the Shenzhen Energy Group, a subsidiary of China's state-owned China Ocean Shipping (Group) Company, better known by its acronym COSCO.

In 2007, COSCO was linked to a major oil spill in San Francisco bay, while last year it was tied to another in Norway, both of which damaged environmentally sensitive areas.

"We are seeing a concerning pattern potentially associated with this company," Llewellyn told Reuters.

COSCO officials in Australia could not be contacted for comment on Monday.

The Great Barrier Reef stretches along Australia's northeastern coast and is the only living structure on Earth visible from space. It is the world's largest coral reef and a major tourist draw.

As salvagers struggled on Monday to stop the ship breaking up and spilling hundreds of tons of oil and thousands of tons of coal, environmentalists told Reuters tighter controls on shipping were needed to protect the reef as Australia's energy industry expands.

SHIP NEEDS HELP

Although only a small amount of the 975 tons of fuel oil on board has so far leaked, Australian officials have warned the ship is unable to move off the shoal unaided, as its engine and rudder were damaged.

International salvage firm Svitzer has been engaged and has attempted to use tugs to stabilize the vessel, but the head of the government agency overseeing the operation said on Monday the ship was still moving on the reef.

The 230-meter (754-ft) ship was carrying 65,000 tons of coal to China when it ran aground on Saturday with 975 tons of heavy fuel oil on board, a type of oil environmentalists say is particularly sticky and damaging to marine organisms.

The ship was off-course and traveling at full speed when it hit, Australian officials have said. If it broke up as feared, environmentalists said the effects could be devastating.

"We would potentially be looking at an environmental disaster," Llewellyn said." It would be an extremely large spill."

Among the animals affected would be protected species of turtles, dugongs, and marine birds, as well as the sensitive corals, she said.

Chris Smyth, an ocean campaigner with the Australian Conservation Foundation, said with Australia planning to expand its energy industry, its government needs to consider whether ships should be traveling through the reef at all.

"It is going to actually increase shipping traffic substantially and the likelihood of these kinds of incidents occurring in the future," he told Reuters.

This is Australia's third such recent disaster, he said, following two last year, another oil spill off the Queensland coast and a major oil well blowout in the Timor Sea.

It should be clearer within the next few days what the likely scale of this disaster may be, Smyth said. In a worst case scenario, the spilled oil could reach protected areas on the Australian mainland, he said.

On Monday, Queensland state premier Anna Bligh called for tough legal action against the shipowners, saying they could face fines of up to A$1 million ($920,000), with the captain facing a further fine of up to A$220,000.

Investigations are underway by the Australian Maritime Safety Authority (AMSA) and the Australian Transport Safety Bureau.

A spokeswoman for AMSA told Reuters its investigation would be "exploring breaches and possible offences" under Australian law. Some 23 crew who were on board the vessel when it ran aground so far appeared to be safe, she said.

Rescue officials have said the ship will require a long and careful salvage operation, expected to take weeks.

(A$1=$0.92)

(Editing by Jerry Norton)

(Sydney Newsroom +612 6273 2730)

$1m(A) seems like a small amount. Surely they should have to cover the entire cost to clear it up and then pay an additional fine.

I never cared much for the reef anyway.

Yeah, I agree. This is just tragic...