Defence Minister Wayne Mapp says it is not known how sea water got into the fuel supply of one of the New Zealand Navy's newest ships.
HMNZS Otago, the Navy's second newest ship and part of the $500 million Project Protector fleet, suffered a crippling failure just 12 hours into its first international deployment.
The $110 million offshore patrol vessel left for Samoa on 29 October but returned to Devonport in Auckland the following day.
It was due to also sail to Tonga, Tokelau, the Cook Islands and Niue over three weeks to carry out diplomacy and surveillance tasks. The mission has been cancelled.
Dr Mapp says the problem with the Otago is bigger than first thought and it is unclear how long it will take to fix.
The ship's fuel is contaminated with sea water, which could either be a contaminated batch of fuel or a mechanical fault. Its tanks are being drained and the hull has been carefully inspected for leaks.
The delivery of the Otago was delayed in March this year due to a faulty gasket and it developed a gearbox fault sailing from Auckland to Dunedin in July.
The Navy is trying to fix the latest problem and is likely to begin testing the Otago at sea later this week. Its other new patrol ship, the HMNZS Wellington, also encountered problems recently.
A Waikato University defence researcher says the latest fault on the Otago shows there are broader defence issues that need debating.
Dr Ron Smith says the Defence Force is seeing the consequences of buying cheap equipment.