Australia will allocate A$3.9 billion ($2.8 billion) to move forward with the construction of a shipyard at Osborne in South Australia that is intended to support the delivery of conventionally armed, nuclear-powered submarines under the AUKUS pact with the United States and Britain.

Prime Minister Anthony Albanese said the A$3.9 billion represents an initial payment toward the Osborne facility. He added that official projections estimate the shipyard build at A$30 billion over the coming decades.

Osborne is planned as the location where ASC and BAE Systems will jointly build Australia’s fleet of AUKUS nuclear-powered submarines, described as the central element of the program. Before submarine construction begins later this decade, the site is where much of the maintenance is carried out on Australia’s Collins-class submarine fleet.

AUKUS, announced in 2021, is described as Australia’s largest defence investment. Under the plan, U.S.-commanded Virginia-class submarines are to be based in Australia from 2027, several Virginia-class submarines are to be sold to Australia from around 2030, and Britain and Australia are to build a new class of AUKUS nuclear-powered submarine.

South Australian Premier Peter Malinauskas said the initial funding would be used to build enabling infrastructure for the shipyard, adding that it was “just the beginning”.

A Pentagon review published in December identified opportunities to place the AUKUS project on a stronger footing, including ensuring Australia is moving quickly enough to develop its nuclear-submarine capacity.