Recent satellite images show North Korea is digging a new underground tunnel in what appears to be preparation for a third nuclear test, according to South Korean intelligence officials.

The excavation at North Korea's northeast Punggye-ri site, where nuclear tests were conducted in 2006 and 2009, is in its final stages, according to a report by intelligence officials that was shared Monday with The Associated Press.

Its release comes as North Korea prepares to launch a long-range rocket that Washington and others say is a cover for testing missile technology that could be used to fire on the United States.

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North Korean soldiers and citizens take part in an anti-South Korea rally in Pyongyang in this still image taken from video broadcast by North Korean state TV on March 4. (KRT via Reuters TV/Reuters)

Observers fear a repeat of 2009, when international criticism of the North's last long-range rocket launch prompted Pyongyang to walk away from nuclear disarmament negotiations and, weeks later, conduct its second nuclear test. A year later, 50 South Koreans were killed in attacks blamed on the North.

"North Korea is covertly preparing for a third nuclear test, which would be another grave provocation," said the report, which cited U.S. commercial satellite photos taken April 1. "North Korea is digging up a new underground tunnel at the Punggye-ri nuclear test site, in addition to its existing two underground tunnels, and it has been confirmed that the excavation works are in the final stages."

Dirt believed to have been brought from other areas is piled at the tunnel entrance, the report said, something experts say is needed to fill up underground tunnels before a nuclear test. The dirt indicates a "high possibility" North Korea will stage a nuclear test, the report said, as plugging tunnels was the final step taken during its two previous nuclear tests.

U.S. State Department spokeswoman Victoria Nuland told reporters she was not in a position to confirm whether North Korea was preparing for a nuclear test after the rocket launch, but she said such actions would only isolate its communist government further.

She said a launch would be "highly provocative" and a nuclear test "would be equally bad, if not worse."

"They should not be doing either," she told a news briefing in Washington. "Any of these types of action are just going to isolate them and make it harder for them to be part of the world community and to give their people a better quality of life."

Nuland said the U.S. was urging China to use its influence with North Korea to dissuade it from going ahead with the launch.

Asked about Japanese and South Korean preparations to shoot down any parts of the rocket that threaten to fall on their territory, Nuland said that countries in the region have the right to "self-defence."

Planned rocket launch

North Korea announced plans last month to launch an observation satellite using a three-stage rocket during mid-April celebrations of the 100th anniversary of the birth of North Korean founder Kim Il-sung.

The U.S., Japan, Britain and other nations have urged North Korea to cancel the launch, warning that firing the long-range rocket would violate UN resolutions and North Korea's promise to refrain from engaging in nuclear and missile activity.

North Korea says the satellite will observe crops and natural resources and denies suspicions that the launch is intended to test long-range missile technology.

Some Asian airlines have said they plan to change flight paths for several routes to avoid the rocket launch.

Philippine Airlines said Monday that a dozen of its flights from the United States, Japan and South Korea will fly safely away from the rocket's possible path.

Japan Airlines and All Nippon Airways are changing flight paths on routes connecting Tokyo to Manila, Jakarta and Singapore. Domestic flights will not be affected.