While it's true that water cannot smother a petrol fire, like a powder-type fire extinguisher, water will indeed put out a petrol or diesel fire.
It does so by removing the heat from the fire, not by smothering. The trick is to not apply so much water as to create a river for the fuel to float away and spread!
A water-based fire extinguisher is an option when a water hose is not. It's likely Sandpiper could have cooled down her diesel engine and suppressed the fire with just water.
Note, water is no good for electrical fires because it conducts electricity.