Portuguese oil company Galp said on Monday it had teamed up with Japan's Mitsui to invest 400 million euros ($426 million) in an industrial-scale plant to produce biodiesel and biojet fuel from waste at its Sines refinery.

The companies will create a joint venture for the project, which will be 75% controlled by Galp, it said in a statement.

Galp also said it had made a final decision to invest 250 million euros on its own in a 100 mega-watt (MW) electrolyser unit to produce green hydrogen to power the refinery.

It said that both plants would start operating in 2025.

The Hydrogenated Vegetable Oil (HVO) plant will have a production capacity of 270,000 metric tons per year.

It will transform waste materials, such as used cooking oils, into renewable biodiesel and biojet fuel -- also known as sustainable aviation fuel (SAF) -- using green hydrogen produced by the electrolyser, which will have a capacity of 15,000 metric tons of green hydrogen a year.

SAFs are an alternative to traditional jet fuel aimed at being more environmentally-friendly as they help replace dirtier petroleum products while providing new uses for waste.

The Sines refinery south of Lisbon is Portugal's biggest consumer of hydrogen from natural gas, although Galp wants to gradually produce zero-carbon fuel there through a process of electrolysis using renewable energy.

Galp Chairwoman Paula Amorim said in a statement that the two projects are among the largest of their kind.

"These decisions are based on the expectation that the tax and regulatory developments in Portugal will not hinder the success of such large-scale investments," she added.

Galp is trying to speed up the decarbonisation of its processes and products and plans to allocate around 50% of its capital expenditure to low-carbon activities through 2025.

(Reporting by Sergio Goncalves; editing by Inti Landauro and Alexander Smith)