Prime contractor and designer Luerssen Australia has committed to building the OPVs on time and on budget, with the first two to be constructed in Adelaide and the rest in Perth.

"This is a momentous day both for Luerssen Australia and Australia's naval shipbuilding sector that points to a bright future," Luerssen Australia chairman Tim Wagner said.

The new ships will be known as the Arafura Class with the first to enter service in 2022 to be called the HMAS Arafura.

Defence Minister Christopher Pyne revealed the names on Wednesday which he said reflected the connection with the waters off northern Australia.

"Named for the Arafura Sea, the name recognises the prominence of the navy's enduring operations in the northern approaches to Australia to protect our national interests, natural resources and maritime borders," Mr Pyne said.

"The name Arafura will imbue all navy members who sail in the OPVs with a sense of pride for the waters and country they protect."

With the start of construction in Adelaide, defence shipbuilder ASC said its workers had started a second surface shipbuilding project after 10 years building the navy's new air warfare destroyers.

"Today, the highly skilled ASC shipbuilders commence their second surface shipbuilding project and Australia embarks on continuous naval shipbuilding for decades to come," chief executive Stuart Whiley said.

Australian Associated Press