Go to Junon and start traveling to the underwater reactor. Once you are on the long underwater path before you actually enter the reactor you will get in somewhat frequent battles with a large boat with a skeleton on the front and it performs an eject move with it's paddle. Morph it and you get a book of some sort can't remember the exact name.
Then you take that book to Kalm and in the, kinda top right corner there is a house. Go in that house then go up stairs and there will be a guy there. Give him the book, he gives you the underwater materia. (also give this guy the rose obtained from beating ruby weapon and you get a gold chocobo but by that time I definitely have one]
