At a small waterfront facility just outside Palm Beach, Florida, engineers have developed a 10-foot unmanned submarine named Marlin that uses sonar and other technologies developed for the U.S. military to inspect off-shore oil rigs in far less time and at lower cost than current systems.

The bright yellow unmanned undersea vehicle was tested last summer in the Gulf of Mexico at a facility owned by Chevron (CVX.N), generating detailed three-dimensional data that have piqued a great deal of interest in the industry.

A Lockheed crew is back in the area off Louisiana this week, where Marlin is surveying a number of offshore platforms owned by a big oil firm, generating the first commercial revenues for this small arm of Lockheed. Lockheed did not name the oil firm.

The project, first initiated in mid-2009, reflects growing efforts by big weapons makers like Lockheed to find revenues in adjacent markets as they brace for weaker defense spending in the United States and Europe after a decade of strong growth.

Rich Holmberg, vice president of Lockheed's mission and unmanned systems unit in Florida, sees bright prospects for the Marlin vehicle, given the huge and growing number of offshore oil and gas platforms in the Gulf and elsewhere; growing calls for increase regulation after the 2010 BP (BP.L) oil spill; and increased investment in offshore wind energy.

"We're kind of bullish," Holmberg told Reuters in a glass-walled conference room overlooking the Intracoastal Waterway and several of the company's smaller research and support ships.

Holmberg, who previously headed Lockheed's naval helicopter programs, declined to estimate future possible sales or the per unit price, but said Lockheed believed it was the only company with the full set of capabilities offered by the Marlin vehicle at the moment.

The mission and unmanned systems unit has historically been more of a research house, like Lockheed's famous Skunk Works aeronautics development shop, which has earned it the nickname "Squid Works," but it is ramping up for a higher profile.

While other parts of Lockheed are laying off workers, Holmberg's unit has filled 130 positions over the past 18 months, bringing its workforce to 430 people to deal with demand for Marlin and complete work on several U.S. Navy programs, including a remote mine-hunting system for coastal warships.

It also just opened an office in Houston, home of the oil and gas industry, to step up marketing of the Marlin vehicle.

VEHICLE COULD REPLACE DIVERS, TETHERED UNMANNED SYSTEMS

Marillyn Hewson now heads the electronic systems division which oversees Holmberg's unit but is moving up to become Lockheed's president and chief operating officer in January.

She told Reuters in June that Lockheed saw great opportunities for company's unmanned capabilities in the air, at sea and on land, including the autonomous Marlin vehicle.

The new system can be programmed to autonomously survey an underwater object, and detect any changes. It then generates three-dimensional models that oil and gas companies can use to lower their high inspection costs.

Currently, oil and gas companies do inspections using divers and remotely operated, but tethered undersea vehicles that provide less detailed video images.

Marlin could simplify those efforts since it is able to complete inspections in far less time -- mapping a 135-foot platform in 27 minutes -- and can be launched from a smaller ship, reducing fuel costs.

"These systems enable those companies to do more inspections more efficiently so they get better inspections and more inspections for about the same cost as their current inspections," Holmberg said.

Industry data shows there are over 3,800 offshore platforms in the Gulf of Mexico, over 40,000 miles of underwater pipeline, and an estimated 12,000 capped wells -- all of which are subject to various government inspection requirements.

Holmberg said Lockheed is still developing its business model for the new venture, but plans to both sell the unmanned submarines, and to team up with service companies serving North America, the North Sea, Brazil and even the Arctic.

Marlin is currently able to dive to 1,000 feet below the surface, but Lockheed is working on a variant that would be able to service deep water platforms by diving to 12,000 feet, according to Dan McLeod, the creator of the Marlin program.

The company is also working with a subcontractor to integrate a three-dimensional laser that could improve the data gathered by Marlin. It is also exploring systems that would remain under the water but could be turned on when needed.

(Reporting By Andrea Shalal-Esa; Editing by Bob Burgdorfer)

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