The new submarines are part of Australia’s new defence strategy in the Asia-Pacific region.

Australia and France have inked an agreement for a French defence contractor to build 12 cutting-edge submarines. The submarines are part of Australia’s new defence strategy in the Asia-Pacific region.

The agreement, signed by the Prime Minister, Malcolm Turnbull, and the French Minister for Defence, Jean-Yves Le Drian, will underpin the largest capital project in Australia’s history.

Turnbull described the 56 billion Australian dollar ($41 billion) contract to build 12 subs as the largest capital project in Australia’s history. The contract is also DCNS’s largest outside France. The deal is the “last foundation stone needed to ensure Australia is able to develop a cutting-edge sovereign submarine capability” Australian PM said.

The agreement is a “critically important step in the development of our security, in the assurance of our government in delivering Australians the security and the prosperity that they need,” he added.

French Defence Minister Jean-Yves Le Drian inked the intergovernmental agreement (IGA) in Adelaide that will see French shipbuilder DCNS design and build the Shortfin Barracudas.

France's Defence Minister Jean-Yves Le Drian (L) and Australia's Prime Minister Malcolm Turnbull in Adelaide on December 20, 2016

France’s Defence Minister Jean-Yves Le Drian (L) and Australia’s Prime Minister Malcolm Turnbull in Adelaide on December 20, 2016

Australian Defence Minister Marise Payne said, “This historic agreement builds on the strength and depth of the Australia-France defence relationship and is another significant step forward for Australia’s Future Submarine programme.

“Australia’s 2016 Defence White Paper established the need for a highly sophisticated and regionally superior submarine fleet. This fleet will, with the assistance of France, be built in Australia.

French state-controlled defence contractor DCNS won out over Germany’s ThysennKrupp Marine Systems and Japan’s Mitsubishi Heavy Industries to build 12 conventional submarines that the Australian navy expects will cost at least 56 billion Australian dollars ($43 billion), a deal which French media hailed as the contract of the century.

A workforce of 2,800 people will begin building the first sub in an Adelaide shipyard in 2022.

The new fleet of 12 submarines will replace the Collins-class submarines, which are scheduled to retire from service in the mid-2020s.