Bad news: you gotta work with 16 colors OVERALL: 15 for elements, one for background (color 0) - for the first level and the second that would be the water - some colors need to stay the same like the two for the plane -_-
I did compute from all the arcade assets a palette enhancement of the current graphics waiting to have the time to port assets so you can give it a look - assets are the same but now at least water is murky green in stage 1 as it should be.
Let's be honest: aiming for a 100% perfect port is unfeasible, aiming for something that resemble the arcade closely is doable - AND assets WILL need to be retouched by hand, mere color porting is not sufficient to give the right feeling.
(those are not all the blocks, there are four screens for just level 1 - 32x32 size)
I also included the personal paint .col palette file
Did start to port the player plane but i realized that how Marcus prepared the file is different from how i do - he does it vertically while i do it on a horizontal grid so that part need to be redone.
flying_shark_level1_16C_palette.zip