Bangladesh will allow a ship with allegedly hazardous substances to be dismantled on its shores, an official said Tuesday, a month after it was blacklisted.

The government last month banned the New Atlantia after a Bangladeshi ship breaker imported it under the name of MT Enterprise.

The New Atlantia was described by Greenpeace as hazardous in its global list of toxic ships.

Shipping official Musharraf Ashraf told AFP that decision had been reversed and permission had been given to break up the ship in the country.

"An inspection by the department did not find any excessive hazardous materials, as described by Greenpeace," Ashraf said.

"The ship does contain hazardous materials such as asbestos but the amount is like any other vessel being broken in our ship-breaking yards."

The tanker is moored off the port of Chittagong and will be taken to Sitakundu, on the country's southeastern coast, to be dismantled.

Abu Nasser Khan, chief of the local Save the Environment Movement, told AFP the group planned to appeal the decision through the country's supreme court.

"The government has set a bad precedent. It will encourage ship breakers to import more toxic ships into the country," Khan said.

Up to 130 large ships are dismantled each year on beaches at Sitakundu — home to the world's largest ship breaking yards — 30 kilometres (18 miles) north of Chittagong city.

Sitakundu's breaking yards have experienced a boom in recent years due to soaring demand for steel.