Fuel oil was pumped into the harbour from the Magdalene, a 21-year-old "flag of convenience" ship at Kooragang No 4 berth.

The German-owned, Liberian-flagged Cape-class vessel was taking coal from the Port Waratah Coal Services (PWCS) Kooragang terminal.

A spokesman for the ship said it seemed a fuel tank had ruptured or leaked internally, sending fuel oil into a saltwater ballast tank.

The oil and water mixture was pumped into the harbour as the ship was "deballasting" to take on coal.

Newcastle Port Corporation chief executive Gary Webb said the oil spill had been contained and booms had been put in place at the Kooragang Island berth and across the harbour from Dyke Point to the Newcastle foreshore to stop oil drifting up to Carrington.

Mr Webb said the alarm had been raised about 2.20pm on Wednesday and the booms had been put out about three hours later.

He defended the time taken, and said clean-up teams worked through the night to contain the spill.

The clean-up was made harder by strong westerly winds.

Oil left on the rocks would be removed in coming days with "cold-water blasting".

Mr Webb said oil and water samples were taken from every ship that entered the port to provide a "fingerprint" in the case of any spill, and further samples were taken yesterday from the Magdalene and the JP Citrus, which was in the K5 berth.

The International Transport Federation, which is investigating the incident, said the Magdalene, was one of the worst examples of the "ships of shame, flag-of-convenience" vessels it had encountered.

A "flag of convenience" title refers to the ship being registered in another country to reduce operating costs or avoid government regulations.

"This is a ship that records show has been spending most of its time in the Middle East, in Bahrain, where they don't have the sort of scrutiny and port-state control we do here," federation spokesman Dean Summers said.

"This spill shows the environmental dangers that flag-of-convenience ships pose."