A Spanish shipbuilder has been chosen to build two new navy replenishment ships, the government has confirmed.

Defence Minister Marise Payne said on Thursday Navantia had been selected as the preferred tenderer to construct urgently needed replacements of replenishment vessels HMAS Success and HMAS Sirius.

The decision has sparked outrage from Labor who say Prime Minister Malcolm Turnbull is sending work offshore while Australian shipyards are on life support.

Australian industry won't miss out completely.

Senator Payne said there would still be Australian work worth more than $100 million.

The new defence Integrated Investment Plan costs the entire replacement supply ship program at $1-2 billion, including long-term operations and sustainment.

The actual ships, Navantia's 19,500-tonne Cantabria-class oiler replenishment vessel, each cost around $350 million.

Senator Payne said these were required as soon as possible.

"The previous government was advised that Australian shipyards do not have the capacity to complete the ships in the required time given the size of the ship and the limitations of the shiplift and yard capacity at Osborne," she said in a statement.

The new vessels will replace HMAS Success, constructed at Sydney's Cockatoo Island dockyard and launched in 1984, and HMAS Sirius, a Korean-built commercial tanker launched in 2004.

The government launched a limited tender for the new ships in June 2014, excluding Australian industry and inviting only Navantia and South Korea's Daewoo Shipbuilding and Marine Engineering to participate.

Thursday's announcement came as Prime Minister Malcolm Turnbull visited Adelaide, addressing Business SA on benefits that will flow to the state from construction of 12 new submarines and new frigates.

Labor defence spokesman Stephen Conroy said this was just another example of Malcolm Turnbull saying one thing and doing the opposite.

"As a result of this Government's actions, more than 1500 Australian shipyard workers have lost their jobs across Australia," he said in a statement.

Independent Senator Nick Xenophon said this was a disgrace.

"Whilst Spain is today celebrating the creation of 3000 jobs building Australian naval ships - workers are being laid off in SA and around the country. It is a kick in the guts for Australian workers and was completely avoidable," he said in a statement.