The Australian government has outraged South Korea by awarding a $1 billion plus Defence supply ships contract to a Spanish company, despite the Asian nation believing it would be the preferred partner.

While officially the Republic of Korea is remaining calm, Fairfax Media understands its government and diplomats are fuming over the snub and believe it to be the latest instance in a long list of Australian double talking over defence materiel contracts.

South Korean army soldiers stand on their K-55 self-propelled howitzers during exercises near the North Korean border. Credit:Ahn Young-joon

A specially convened Senate estimates hearing on the Defence white paper will be conducted Thursday afternoon. The Blue House (Korea's White House) will be closely watching the proceedings.

Last week the Defence Capability and Acquisition Group notified the Korean embassy that Spanish Navantia had been selected as the preferred contractor for the SEA 1654 program for replenishment ships.