London speculation fuels doubt over Adelaide’s $45bn frigate project

High-level speculation about the future of Adelaide’s frigate program has swirled this week. Paul Starick explains what fuelled it, and why it’s such a big deal.

An ominous threat hangs over the $45bn Adelaide project to build nine frigates and its more than 1500 workers.

The project’s future will be clouded until Defence Minister Richard Marles releases his response to a review of the navy’s surface fleet, which he received in September but will not make public until early next year.

Mr Marles announced this surprise analysis in April, following a Defence Strategic Review which urged continuous naval shipbuilding in Australia to maintain sovereign manufacturing capability – a recommendation embraced by the federal government.

A rendering of a Hunter Class frigate design.

Given Adelaide is both the centre of naval shipbuilding and a future $368bn nuclear-powered submarine program, this means continuous construction at Osborne Naval Shipyard, in the city’s northwest.

The Advertiser on Wednesday revealed high-level speculation that shipbuilder BAE Systems would build the frigates at its Govan shipyard in Glasgow, rather than Osborne, and only four, rather than the planned nine, would be constructed in Scotland.

BAE Systems Australia managing director maritime Craig Lockhart said this was “baseless and dangerous” rumour, saying it was “nonsensical” and “absurd” to suggest “shifting production of a program the scale of Hunter to Scotland would ever be considered”.

Mr Lockhart is a respected industry leader who, rightly, is defending his program and workforce.

The context of the speculation is important, though. The Advertiser has been told by high-level sources that the Australian British Defence Catalyst, staged in London in September, heard from Australian High Commissioner Stephen Smith that the frigate program would likely be wound back to six ships, or even four. At six ships, the program would remain in Adelaide, Mr Smith was said to have observed.

But if it was wound back to four ships, this would mean an Adelaide build would be uneconomic and, therefore, the project would move to the Glasgow shipyard where BAE is building Type 26 frigates, from which the Hunter Class design is derived.

One source said Mr Smith’s comments, made on the event’s third day, shocked the 200 attendees.

The Defence Catalyst is a Chatham House rules event run by the Australian British Chamber of Commerce which, understandably, would not discuss speakers at a confidential event.

The Advertiser’s attempts to independently verify Mr Smith’s relayed comments have included inquiries to Foreign Affairs Minister Penny Wong’s office, which did not confirm them.

If his comments have been accurately relayed to The Advertiser, they are consequential and stunning.

Mr Smith, the Labor defence minister from 2010-13, was the co-author of the Defence Strategic Review, released in April, along with former Chief of the Defence Force Sir Angus Houston.

He is Australia’s top diplomat in UK and has had a key role in shaping defence policy. His assessments of the government’s intentions for the Hunter Class frigates are likely to be extremely well-informed.

Opposition Senate Leader Simon Birmingham on October 25 in Senate Estimates asked Defence Department deputy secretary capability acquisition and sustainment group Chris Deeble, who attended the Defence Catalyst, his recollections of Mr Smith’s remarks.

“I can’t recollect any detailed memory of any comments with respect to the Hunter specifically,” Mr Deeble said.

Equal to the size of two houses and taking 45,000 hours, the first steel prototype 'block' was constructed by shipbuilders working on the Hunter Class frigate program at Osborne Naval Shipyard. Picture: James Elsby/BAE Systems Australia

Defence Department secretary Greg Moriarty said he would take on notice Senator Birmingham’s question about whether Defence had a copy of Mr Smith’s remarks.

Premier Peter Malinauskas has repeatedly urged Mr Marles to quell speculation about the frigate project’s future by releasing the surface fleet review and backing the program. This view is supported by his Liberal rivals.

The Premier’s right. Only a federal government decision to release the review and proceed with an Adelaide frigate build can quash speculation and remove the threat to workers.