Egyptian President Mohammed Morsi has warned that "all options are open" in confronting an Ethiopian project to build a dam on the Blue Nile, which may diminish Egypt's water supply.

"I confirm that all options are open to deal with this subject," the Islamist president told hundreds of his supporters late Monday at a conference on the issue.

"If a single drop of the Nile is lost, our blood will be the alternative," he said, in his strongest warning yet on the dam project.

"We are not warmongers, but we will never allow anyone to threaten our security," he added.

A Morsi adviser said last week that Egypt would demand Ethiopia halt construction of the dam.

Foreign Minister Mohammed Kamel Amr would travel to Ethiopia "in the coming days" to "present the Egyptian point of view," Prime Minister Hisham Qandil said on Monday.

"Water is a question of life and death for the Egyptian people. Water is a matter of national security," Qandil added.

Ethiopia has begun diverting the Blue Nile some 500 metres (yards) from its natural course to construct the dam.

Cairo said it opposed any project that affected the flow of the river downstream.

The Blue Nile joins the White Nile in the Sudanese capital Khartoum to form the Nile, which then flows through Egypt.

Egypt says its "historic rights" to the Nile are guaranteed by two treaties from 1929 and 1959 which allow it 87 percent of the Nile's flow and give it veto power over upstream projects.

But a new deal was signed in 2010 by other Nile Basin countries, including Ethiopia, allowing them to work on river projects without Cairo's prior agreement.