12.3. Investments in jointly controlled entities

PROFESSIONAL JUDGEMENT

Based on its own judgment, taking into account its rights, obligations, considering the structure, legal form and the terms of the agreement agreed by the parties, the Group assessed that BOP, PPPT and Pieridae Production constitute a joint contractual arrangement whereby PKN ORLEN exercises joint control over them.

The agreements give all shareholders a joint control over the companies, decisions related to significant operations require the unanimous approval of all shareholders, and the legal form of separate entities does not give shareholders the right to their assets and obligations to repay liabilities. In relation to above, the Group classified BOP, PPPT and Pieridae Production as joint ventures that are accounted for under equity method in the consolidated financial statements.

The ORLEN Group in accordance with IFRS 11 classified Butadien Kralupy a.s. in as joint operations. Based on Statute of Butadien Kralupy a.s, the Group has the right to proportionate share of the income and bears a proportionate share in the costs of joint operations. As a result, the Group recognises its share (51%) in assets, liabilities, revenues and costs.

ORLEN Upstream Group has participated in the following joint operations:

• consortium (Blue Gas – Polish Shale Gas program) founded by ORLEN Upstream (OU), Polskie Górnictwo Naftowe i Gazownictwo (PGNIG), LOTOS Petrobaltic and University of Science and Technology (Akademia Górniczo-Hutnicza), Institue of Oil and Gas (Instytut Nafty i Gazu), Gdansk University of Technology, Warsaw University of Technology. Works under the Blue Gas program – Polish Shale Gas were completed, projects settled in both material and financial terms.The program aimed to manufacture and commercialize the technology and gain knowledge for the extraction of shale gas in Poland. The cooperation was summarized in all 6 of 10 notified projects. The total contribution of ORLEN Upstream in the implementation of the above projects amounted to PLN 24 million. Applications were collected that provides grounds for applying for patent rights for developed solutions, which have been submitted to the relevant authorities for an opinion;
• exploration – extraction projects carried out together with PGNiG (the search areas „Sieraków” – 49% share of ORLEN Upstream, “Bieszczady” – 49% share of ORLEN Upstream and the search areas “Płotki” – 49% share of ORLEN Upstream after incorporation of FX Energy Poland). The agreements provide the conduct of joint operations and activities in the field of exploration, prospection and extraction of crude oil and natural gas.

ORLEN Upstream Group has the right to proportionate share of the income and bears a proportionate share in the costs of joint operations.

Investments accounted for under equity method

Share in profit from investments accounted for under equity method

Condensed financial information of Basell ORLEN Polyolefines Group

In 2019 and 2018, there were no significant restrictions in associates and joint ventures resulting from loans agreements, regulatory requirements and other contractual agreements that would restrict access to assets and settlement of liabilities of the Group.