MADRID, July 2 (Reuters) - Spanish oil and gas company

Cepsa has reached an agreement with PreZero Spain, part of the

environmental division of German supermarket group Lidl's owner

Schwarz Group, to develop biomethane plants using organic waste.

Owned by Abu Dhabi fund Mubadala and the Carlyle Group ( CG )

, Cepsa is investing up to 8 billion euros ($8.6 billion)

through 2030 to shift its business toward low-carbon fuels, such

as green hydrogen and biofuels.

The companies said on Tuesday they will together develop

plants to produce biomethane from organic waste. The first such

plant will have a capacity of up to 100 GWh and will feed

Cepsa's planned green hydrogen and biofuels facilities around

Huelva, in southern Spain.

Under the deal, PreZero will also supply biomethane to

Cepsa, and, among other initiatives, the companies will team up

to recover organic waste to produce biofuels.

"This alliance with PreZero will allow us to expand access

to circular raw materials to produce alternative energies that

will facilitate the energy transition, such as green

hydrogen and second-generation biofuels," Carlos Barrasa,

executive vice president of commercial & clean energies at

Cepsa, said.

Biofuels are seen as essential in decarbonising

transportation, such as aviation, which is hard to electrify.

Second-generation biofuels are made from non-food organic

materials such as wood and agriculture waste, as opposed to the

first-generation ones made from sugar-starch or oilseed crops.

($1 = 0.9333 euros)