AL QUDS, Sept 6: An Israeli spy satellite meant to boost the Jewish state's surveillance over arch-enemy Iran met a watery end on Monday as a launch malfunction hurled it out to sea rather than space, officials and defence sources said.

The Defence Ministry blamed a failure in the third stage of the Shavit rocket for the loss of the $50 million Ofek-6 satellite. Witnesses saw a flash of light near the launch site, coastal Palmahim air base. There were no reports of casualties.

Ofek-6 - the latest in an Israeli line of spy satellites first put into orbit in 1988 - was destroyed when it crashed into the Mediterranean Sea. It was developed by a consortium led by state-owned Israel Aircraft Industries.

The loss of the satellite was seen as a major setback to Israel's attempts to upgrade means of tracking sworn enemies such as Iran, which it accuses of developing nuclear weapons.

Satellites are Israel's first bullwark against ballistic missiles, being designed to spot the incoming threats as they break through the atmosphere after launch and then alert defensive systems such as the Arrow II missile-killer.

"Such incidents are very expensive for all involved," a defence source said about Monday's botched launch. Work on a replacement satellite was expected to take up to two years.

The rocket malfunction could also have ramifications for Israel's offensive capabilities. According to independent analysts, the Shavit closely resembles Israel's ballistic missile Jericho-2, which can carry non-conventional warheads.

The ministry named Israel Military Industries, Rafael, Elbit Systems and the Elisra Group, which is 70 per cent owned by Koor Industries, as partners in the satellite's development.

Ofek - Hebrew for "horizon" - orbits 300 to 700 km (190 to 430 miles) above Earth, over a pre-set flight path. It weighs 300 kg (660 pounds) and has a life span of about five years.

The setback came days after Arrow II failed to shoot down a dummy missile in a test-firing off the California coast. -Reuters