Tourism Waitaki general manager Jason Gaskill said the expansion of the visitor centre, and the new research facility at the colony, would allow one of the district's key tourist attractions to offer more to daytime visitors.
"The extension is relatively modest and more about refitting the inside - and making it fit for purpose - and establishing a research lab to better facilitate all the scientific work that we undertake,'' Mr Gaskill said.
"It's designed specifically to open up better experiences for visitors during the day.
"This is designed to elevate the day experience to be on par with the evening experience.''
The colony, which attracted more than 70,000 paying visitors last year, would not close to visitors as de Geest Construction carried out the work programme, expected to be completed before the new year, Mr Gaskill said.
Colony marine biologist Dr Philippa Agnew she was excited to be moving from the prefabricated temporary building on site to a new larger building, with an office and lab space.
She said the level of research at Oamaru's colony was comparable to the Australian Phillip Island Nature Park, "only they're on a much bigger scale''.
All of the birds were marked in some way.
The birds were previously all marked with a flipper band, but in recent years some of them had been micro-chipped.
Of the 240 breeding birds at the quarry last year, two-thirds wore flipper bands and a third were micro-chipped.
Basic monitoring of Oamaru's blue penguins began in 1993, and attaching data loggers began in 2009, but with upgraded research facilities the colony could begin to attract more researchers.
"We've had a few [visiting researchers], but we have had this problem of not having an adequate facility for them to work in, so this will help us to encourage more student research and visiting research,'' Dr Agnew said.
"This is something that we will be looking at increasing as we go forward.''
The first visiting researchers would be five university students - four from Massey University and one from Deakin University, in Melbourne - due to arrive in September.
"What will go with that is how we can feed our research into the visitor experience,'' Dr Agnew said.
"That will be a big part of the upgrade, improving the displays in such a way that it pulls that research in.''
Owned by the Waitaki District Council, the visitor centre at the colony is managed by Tourism Waitaki.
In September last year, the Otago Daily Times reported the expansion would cost $400,000, with the council spending $250,000 for the expansion of the visitor centre.
Council chief financial officer Paul Hope said the costs had changed during the tendering process, because the decision was made to re-roof the entire building and because of the accepted final tender price.
He said the decision to re-roof the entire building was seen as "more cost-effective and less disruptive to facility operations and penguin welfare than undertaking the development and roof replacement in two stages''.
The additional costs would be fully funded from depreciation reserves and a revised lease for the penguin colony.