A Panamanian-registered oil tanker burned out of control for a second day off Sri Lanka on Friday as authorities confirmed a Filipino crew member was killed in an explosion and fears grew of a major new oil spill in the Indian Ocean.

Sri Lankan navy and Indian coastguard vessels fired water cannon at the blaze on the New Diamond, which issued a distress call Thursday after its engine room exploded.

A Sri Lankan helicopter was dropping water from the air on the blaze at the rear of the vessel. The fire had not spread to the 270,000 tonnes of crude and 1,700 tonnes of diesel the tanker is carrying, Sri Lanka's navy said.

"Preliminary information from the ship's crew confirmed that a Filipino seaman on board had died in a boiler explosion," the navy said in a statement. 

All but one of the 23-member crew -- 18 Filipinos and five Greek nationals -- were rescued on Thursday. The ship's third officer, also a Filipino, had suffered burn injuries and was taken to the Kalmunai hospital, 360 kilometres (225 miles) east of the capital Colombo. His condition was stable, the navy spokesman said. 

Neighbouring India has sent warships and coastguard vessels to help with the rescue, while Sri Lanka's air force deployed a helicopter to douse the flames.

The tanker was about 60 kilometres (38 miles) from Sri Lanka's east coast when it sounded the alert and during the night drifted 10 kilometres closer. 

Sri Lanka's navy said it believed there was no immediate danger to the coastline but remained concerned about the possibility of oil leaking.

The New Diamond is classified as a very large crude carrier (VLCC), and is about 330 metres (1,080 feet) long. 

The stricken vessel is a third larger than the Japanese bulk carrier MV Wakashio, which crashed into a reef in Mauritius last month leaking over 1,000 tonnes of oil into the island nation's picturesque waters. 

The New Diamond had been taking the crude from Kuwait to the Indian port of Paradip.