(Recasts with more detail)
By Romeo Ranoco
SIBUYAN ISLAND, Philippines, June 24 (Reuters) - Divers found ghostly white bodies floating head up inside a sunken passenger ferry in the central Philippines on Tuesday raising fears of a mass grave below the waves.
The MV Princess of the Stars had over 800 people on board when it capsized and flipped over in huge swells off the cost of Sibuyan island during a typhoon on Saturday.
There are fears that hundreds more bodies may be trapped within the 23,824 tonne vessel.
Two bloated male corpses were cut free from a tangle of cables and brought to the surface. One, believed to be a crew member, had a radio.
"It will be a miracle if we find survivors," Lieutenant Commander Inocencio Rosario of the coast guard said.
Officials plan to bore a hole inside the vessel to retrieve more corpses.
Drilling will have to be done cautiously because the ship, which is resting upside down with only the tip of its bow above water, is estimated to have around 100,000 litres of bunker fuel still on board.
A slick of oil had formed around the ship, but local officials said it did not represent a leak.
Residents from nearby Sibuyan island gathered along the shoreline to watch the grim retrieval operation. The smell of diesel hung in the air.
Earlier, a helicopter from U.S. military ship, the USNS Stockham, spotted 12 bodies floating near Masbate island, at least 70 km east of Sibuyan, local radio reported. It was unclear if they were from the Princess of the Stars.
So far only around 33 people have been found alive out of 864 passengers and crew on board.
Sulpicio Lines, the owner of Princess of the Stars, offered to fly one family member per victim to Manila from Cebu, where the ship was meant to dock, to help identify recovered bodies.
But the distraught relatives did not want to be moved.
In Manila, family members also waited anxiously.
"We want to see our relatives, even if they are dead already," said Rey Gilbuena, who had 18 kin on board.
Families are irate at the company for proceeding with a sailing when Typhoon Fengsen, with gusts of upto 195 kph (120 mph), had already hit the archipelago on Friday.
The government has ordered a review of maritime regulations and suspended Sulpicio's passenger ferry operations pending inspection.
The company has been involved in three other major shipping disasters in the past 21 years, including the world's worst peacetime sea tragedy in 1987 when the Sulpicio-owned Dona Paz ferry collided with an oil tanker killing more than 4,000 people.
Shipping tragedies are a common event in the Philippines, an archipelago of over 7,000 islands where safety rules are poorly implemented and substandard vessels ply dangerous waters.
Aside from the ferry disaster, possibly the worst in the Philippines in over 20 years, at least 155 people were killed, largely by drowning, in a torrent of floods in the south and centre of the archipelago, according to the Red Cross.
The sixth typhoon to hit the archipelago this year badly damaged the country's already shoddy infrastructure, washing away thousands of homes as well as roads and bridges.
In Iloilo, the province worst hit by Fengshen, over 200,000 people were forced to evacuate and local officials said it could take a week for two metre high floodwaters to recede.
Fengshen was expected to bring more rain to already flood-ravaged southern and eastern China as it makes landfall near Shantou in Guangdong province on Wednesday, according to the tropical storm monitoring website Tropical Storm Risk (tsr.mssl.ucl.ac.uk).
Authorities in the coastal province of Guangdong have ordered local governments to prepare disaster relief work.
(Additional reporting by Manny Mogato in Cebu and Rosemarie Francisco and Karen Lema in Manila; Writing by Carmel Crimmins; Editing by David Fox)