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| **SECURITIES        AND EXCHANGE COMMISSION**Washington, DC        20549 |
|--------------------------------------------------------------------------|
|                                                                     | **FORM 20-F** |   |

|   | (Mark One) |   |
|--------|------------|--------|

|        | REGISTRATION        STATEMENT PURSUANT TO SECTION 12(b) or (g)         OF THE SECURITIES EXCHANGE ACT OF 1934                                                                         |       |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|   | OR                                                                                                                                                                                    |       |
| ****   | **ANNUAL REPORT        PURSUANT TO SECTION 13 OR 15(d) OF         THE SECURITIES EXCHANGE ACT OF 1934         For the fiscal year ended December 31, 200****4**                       | ** ** |
|   | OR                                                                                                                                                                                    |       |
|        | TRANSITION REPORT        PURSUANT TO SECTION 13 OR 15(d)         OF THE SECURITIES EXCHANGE ACT OF 1934         For the transition period from to **Commission file number: 1-14090** |       |

**EniSpA***(Exact Name ofRegistrant as Specified in Its Charter)*

**Republicof Italy***(Jurisdiction ofIncorporation of Organization)*

**PiazzaleEnrico Mattei 1, 00144 Rome, Italy***(Address of principalexecutive offices)*

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Securitiesregistered or to be registered pursuant to Section 12(b) of theAct:

Shares,nominal value euro 1 each, listed on the New York Stock Exchangenot for trading, but only in connection with the registration ofAmerican Depositary Shares, pursuant to the requirements of theNew York Stock Exchange.

AmericanDepositary Shares, each representing the right to receive fiveShares, listed on the New York Stock Exchange.

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Securitiesregistered or to be registered pursuant to Section 12(g) of theAct:**None.**

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Securitiesfor which there is a reporting obligation pursuant to Section15(d) of the Act:**None.**

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Indicatethe number of outstanding shares of each of the issuer’sclasses of capital or common stock as of the close of the periodcovered by the annual report.

| **Ordinary shares        of euro 1 each** | **4,004,424,476** |
|-------------------------------------------|-------------------|

Indicateby check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file suchreports) and (2) has been subject to such filing requirements forthe past 90 days. 

| Yes  |  |   |  No  |  |
|-----------|--|--------|----------------|--|

Indicateby check mark which financial statement item the registrant haselected to follow:

| Item 17 |  |   |  Item 18 |  |
|---------|--|--------|---------------|--|

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##### **TABLE OF CONTENTS**

Certain Defined Terms

Presentation of Financial and OtherInformation

Statements Regarding Competitive Position

Glossary

Conversion Table

 

| **PART I**      |   |                                                                                 |
|-----------------|--------|--------------------------------------------------------------------------------------|
| Item 1.         |   | IDENTITY OF DIRECTORS,        SENIOR MANAGEMENT AND ADVISORS (*)                     |
| Item 2.         |   | OFFER STATISTICS AND        EXPECTED TIMETABLE (*)                                   |
| Item 3.         |   | KEY INFORMATION                                                                      |
|            |   | Selected        Financial Information                                                |
|            |   | Selected        Operating Information                                                |
|            |   | Exchange        Rates                                                                |
|            |   | Risk        Factors                                                                  |
| Item 4.         |   | INFORMATION ON THE COMPANY                                                           |
|            |   | History        and Development of the Company                                        |
|            |   | Business        Overview                                                             |
|            |   | Exploration        & Production                                                  |
|            |   | Gas &        Power                                                               |
|            |   | Refining        & Marketing                                                      |
|            |   | Petrochemicals                                                                       |
|            |   | Oilfield        Services Construction and Engineering                                |
|            |   | Other        Activities                                                              |
|            |   | Research        and Development                                                      |
|            |   | Insurance                                                                            |
|            |   | Environmental        Matters                                                         |
|            |   | Regulation        of Eni's Businesses                                                |
|            |   | Property, Plant and        Equipment                                                 |
|            |   | Organizational        Structure                                                      |
| Item 5.         |   | OPERATING AND FINANCIAL        REVIEW AND PROSPECTS                                  |
|            |   | Executive        Summary                                                             |
|            |   | Critical        Accounting Estimates                                                 |
|            |   | Results        of Operations                                                         |
|            |   | Liquidity        and Capital Resources                                               |
|            |   | Financial        Condition                                                           |
|            |   | Recent        Developments                                                           |
|            |   | Management        Expectations of Operations                                         |
|            |   | Summary        of Significant Differences Between Italian GAAP and U.S.        GAAP  |
| Item 6.         |   | DIRECTORS, SENIOR MANAGEMENT        AND EMPLOYEES                                    |
|            |   | Directors        and Senior Management                                               |
|            |   | Compensation                                                                         |
|            |   | Board        Practices                                                               |
|            |   | Employees                                                                            |
|            |   | Share        Ownership                                                               |
| Item 7.         |   | MAJOR SHAREHOLDERS AND        RELATED PARTY TRANSACTIONS                             |
|            |   | Major        Shareholders                                                            |
|            |   | Related        Party Transactions                                                    |
| Item 8.         |   | FINANCIAL INFORMATION                                                                |
|            |   | Consolidated        Statements and Other Financial Information                       |
|            |   | Significant Changes                                                                  |
| Item 9.         |   | THE OFFER AND THE LISTING                                                            |
|            |   | Offer and        Listing Details                                                     |
|            |   | Markets                                                                              |
| Item 10.        |   | ADDITIONAL INFORMATION                                                               |
|            |   | Memorandum        and Articles of Association                                        |
|            |   | Material Contracts                                                                   |
|            |   | Exchange        Controls                                                             |
|            |   | Taxation                                                                             |
|            |   | Documents        on Display                                                          |
| Item 11.        |   | QUALITATIVE AND QUANTITATIVE        DISCLOSURES ABOUT MARKET RISK                    |
| Item 12.        |   | DESCRIPTION OF SECURITIES        OTHER THAN EQUITY SECURITIES                        |
|            |   |                                                                                 |
| **PART II**     |   |                                                                                 |
| Item        13. |   | DEFAULTS, DIVIDEND        ARREARAGES AND DELINQUENCIES                               |
| Item        14. |   | MATERIAL MODIFICATIONS TO        THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS  |
| Item        15. |   | CONTROLS AND PROCEDURES                                                              |
| Item 16.        |   |                                                                                 |
| 16 A            |   | Board of        Statutory Auditors Financial Expert                                  |
| 16 B            |   | Code of        Ethics                                                                |
| 16 C            |   | Principal        Accountant Fees and Services                                        |
| 16 D            |   | Exemptions        from the Listing Standards for Audit Committees                    |
| 16 E            |   | Purchases        of Equity Securities by the Issuer and Affiliated        Purchasers |
|            |   |                                                                                 |
| **PART III**    |   |                                                                                 |
| Item        17. |   | FINANCIAL STATEMENTS (*)                                                             |
| Item        18. |   | FINANCIAL STATEMENTS (**)                                                            |
| Item 19.        |   | EXHIBITS                                                                             |

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| (*)  |   | Omitted        pursuant to General Instructions for Form 20-F.                           |
|------|--------|------------------------------------------------------------------------------------------|
| (**) |   | The        Registrant has responded to Item 18 in lieu of responding        to Item 17.A |

 

*Certain disclosures contained herein including, withoutlimitation, information appearing in "Item 4 –Information on the Company", and in particular "Item 4– Exploration & Production", "Item 5 –Operating and Financial Review and Prospects" and "Item11 – Qualitative and Quantitative Disclosures about MarketRisk" contain forward-looking statements regarding futureevents and the future results of Eni that are based on currentexpectations, estimates, forecasts, and projections about theindustries in which Eni operates and the beliefs and assumptionsof the management of Eni. Eni may also make forward-lookingstatements in other written materials, including other documentsfiled with or furnished to the U.S. Securities and ExchangeCommission (the "SEC"). In addition, Eni's seniormanagement may make forward-looking statements orally toanalysts, investors, representatives of the media and others. Inparticular, among other statements, certain statements withregard to management objectives, trends in results of operations,margins, costs, return on capital, risk management andcompetition are forward looking in nature. Words such as‘expects', ‘anticipates', ‘targets', ‘goals',‘projects', ‘intends', ‘plans', ‘believes',‘seeks', ‘estimates', variations of such words, andsimilar expressions are intended to identify such forward-lookingstatements. These forward-looking statements are only predictionsand are subject to risks, uncertainties, and assumptions that aredifficult to predict because they relate to events and depend oncircumstances that will occur in the future. Therefore, Eni'sactual results may differ materially and adversely from thoseexpressed or implied in any forward-looking statements. Factorsthat might cause or contribute to such differences include, butare not limited to, those discussed in this Report under thesection entitled "Risk Factors" and elsewhere. Anyforward-looking statements made by or on behalf of Eni speak onlyas of the date they are made. Eni does not undertake to updateforward-looking statements to reflect any changes in Eni'sexpectations with regard thereto or any changes in events,conditions or circumstances on which any such statement is based.The reader should, however, consult any further disclosures Enimay make in documents it files with the SEC.*

 

  

##### Table of Contents

**CERTAIN DEFINED TERMS**

In this Form 20-F, the term "Eni" refers to Eni SpAand its consolidated subsidiaries and, unless the contextotherwise requires, their respective predecessor companies. Allreferences to "Italy" or the "State" arereferences to the Republic of Italy, all references to the"Government" are references to the government of theRepublic of Italy. For definitions of certain oil and gas termsused herein and certain conversions, see "Certain Oil andGas Terms" and "Conversion Table".

 

##### Table of Contents

**PRESENTATION OF FINANCIAL ANDOTHER INFORMATION**

Unless otherwise indicated, the financial informationcontained herein has been prepared in accordance with Eni Groupaccounting policies which are in accordance with principlesprescribed by Italian law and supplemented by the accountingprinciples issued by the Consiglio Nazionale dei DottoriCommercialisti e dei Ragionieri or, in the absence thereof and ifapplicable, the International Accounting Standards Board(collectively, "Italian GAAP"). For further details seeNote 2 to the Consolidated Financial Statements. As described inNote 27 to the Consolidated Financial Statements, Italian GAAPdiffers in certain significant respects from accountingprinciples generally accepted in the United States ("U.S.GAAP"). Unless otherwise indicated, any reference herein to"Consolidated Financial Statements" is to theConsolidated Financial Statements of Eni (including the Notesthereto) included herein.

Unless otherwise specified or the context otherwise requires,references herein to "dollars", "$", "USdollars" and "US $" are to the currency of theUnited States and references to "euro" and"€" are to the currency of the European MonetaryUnion.

 

##### Table of Contents

**STATEMENTS REGARDINGCOMPETITIVE POSITION**

Statements made in "Item 4 – Information on theCompany", referring to Eni's competitive position are basedon the company's belief, and in some cases rely on a range ofsources, including investment analysts' reports, independentmarket studies and Eni's internal assessment of market sharebased on publicly available information about the financialresults and performance of market participants. Market shareestimates contained in this document are based on managementestimates unless otherwise indicated.

 

##### Table of Contents

****GLOSSARY****

A glossary of oil and gas terms is available on Eni's web pageat the address www.eni.it. Below is a selection of the mostfrequently used terms.

| ***Financial        Terms***                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Leverage*                                              |   | It is a non-GAAP measure of        a company's financial condition, calculated as the ratio        between net borrowings and shareholders' equity,        including minority interests. For a discussion of        management’s view of the usefulness of this measure        and its reconciliation with the most directly comparable        GAAP measure, see "Item 5 – Financial        condition".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Net borrowings*                                        |   | Eni evaluates its financial        condition by reference to "net borrowings",        which is a non-GAAP measure. Eni calculates net        borrowings as total finance debt less: cash, cash        equivalents and certain very liquid investments not        related to operations, including among others        non-operating financing receivables and securities not        related to operations. Non-operating financing        receivables consist of amounts due to Eni's financing        subsidiaries from banks and other financing institutions        and amounts due to other subsidiaries from banks for        investing purposes and deposits in escrow. Securities not        related to operations consist primarily of government and        corporate securities. For a discussion of        management’s view of the usefulness of this measure        and its reconciliation with the most directly comparable        GAAP measure, see "Item 5 – Financial        condition".                                                                                                                                                                                                                                       |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ***Business        terms***                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Associated gas*                                        |   | Natural gas, occurring in        the form of a gas cap, overlying an oil zone, contained        in the reservoir’s crude oil gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Barrel/BBL*                                            |   | Volume unit corresponding to        159 liters. A barrel of oil corresponds to about 0.137        metric tons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *BOE*                                                   |   | Barrel of Oil Equivalent. It        is used as a standard unit measure for oil and natural        gas. The latter is converted from standard cubic meters        into barrels of oil equivalent using a certain        coefficient (see "Conversion Table").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Concession contracts*                                  |   | Contracts currently applied        mainly in Western countries regulating relationships        between states and oil companies with regards to        hydrocarbon exploration and production. The company        holding the mining concession has an exclusive on        exploration, development and production activities and        for this reason it acquires a right to hydrocarbons        extracted against the payment of royalties on production        and taxes on oil revenues to the state.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Condensates*                                           |   | These are light hydrocarbons        produced along with gas that condense to a liquid state        at surface temperature and pressure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Conversion capacity*                                   |   | Maximum amount of heavy        fractions that can be processed in certain dedicated        facilities of a refinery to obtain finished products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Deep waters*                                           |   | Waters deeper than 200        meters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Development*                                           |   | Drilling and other        post-exploration activities aimed at the production of        oil and gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *EPC*                                                   |   | Engineering, Procurement and        Construction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *EPIC*                                                  |   | Engineering, Procurement,        Installation and Construction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Exploration*                                           |   | Oil and natural gas        exploration that includes land surveys, geological and        geophysical studies, seismic data gathering and analysis        and well drilling.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Infilling wells*                                       |   | Infilling wells are wells        drilled in a producing area in order to improve the        recovery of hydrocarbons from the field and to maintain        and/or increase production levels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *FPSO*                                                  |   | Floating Production Storage        and Offloading System.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *LNG*                                                   |   | Liquefied Natural Gas        obtained through the cooling of natural gas to minus 160        °C at normal pressure. The gas is liquefied to allow        transportation from the place of extraction to the sites        at which it is transformed back into its natural gaseous        state and consumed. One tonne of LNG corresponds to 1,400        cubic meters of gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *LPG*                                                   |   | Liquefied Petroleum Gas, a        mix of light petroleum fractions, gaseous at normal        pressure and easily liquefied at room temperature through        limited compression.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Margin*                                                |   | The difference between the        average selling price and direct acquisition cost of a        finished product or raw material excluding other        production costs (e.g. refining margin, margin on        distribution of natural gas and petroleum products or        margin of petrochemicals products). Margin trends reflect        the trading environment and are, to a certain extent, a        gauge of industry profitability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Mineral Storage*                                       |   | According to Legislative        Decree No. 164/2000, these are volumes required for        allowing optimal operation of natural gas fields in Italy        for technical and economic reasons. The purpose is to        ensure production flexibility as required by long-term        purchase contracts as well as to cover technical risks        associated with production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Modulation Storage*                                    |   | According to Legislative        Decree No. 164/2000, these are volumes required for        meeting hourly, daily and seasonal swings in demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Natural gas liquids (NGL)*                             |   | Liquid or liquefied        hydrocarbons recovered from natural gas through        separation equipment or natural gas treatment plants.        Propane, normal-butane and isobutane, isopentane and        pentane plus, that were previously defined as natural        gasoline, are natural gas liquids.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Network Code*                                          |   | A code containing norms and        regulations for access to, management and operation of        natural gas pipelines.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Over/Under lifting*                                    |   | Agreements stipulated        between partners which regulate the right of each to its        share in the production for a set period of time. Amounts        lifted by a partner different from the agreed amounts        determine temporary Over/Under lifting situations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Primary balanced refining        capacity*             |   | Maximum amount of feedstock        that can be processed in a refinery to obtain finished        products measured in BBL/d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Production Sharing        Agreement ("PSA")* |   | Contract in use in African,        Middle Eastern, Far Eastern and Latin American countries,        regulating relationships between states and oil companies        with regard to the exploration and production of        hydrocarbons. The mining concession is assigned to the        national oil company jointly with the foreign oil company        who has exclusive right to perform exploration,        development and production activities and can enter into        agreements with other local or international entities. In        this type of contract the national oil company assigns to        the international contractor the task of performing        exploration and production with the contractor's        equipment and financial resources. Exploration risks are        borne by the contractor and production is divided into        two portions: "cost oil" is used to recover        costs borne by the contractor and "profit oil"        is divided between the contractor and the national        company according to variable schemes and represents the        profit deriving from exploration and production. Further        terms and conditions of these contracts may vary from        country to country. |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Proved reserves*                                       |   | Proved oil and gas reserves        are the estimated quantities of crude oil, natural gas,        and natural gas liquids which geological and engineering        data demonstrate with reasonable certainty to be        recoverable in future years from known reservoirs under        existing economic and operating conditions, i.e., prices        and costs as of the date the estimate is made. Prices        include consideration of changes in existing prices        provided only by existing contractual arrangements, but        not on escalations based upon future conditions. Proved        reserves include: (i) proved developed reserves: amounts        of hydrocarbons that are expected to be retrieved through        existing wells, facilities and operating methods; and        (ii) non-developed proved reserves: amounts of        hydrocarbons that are expected to be retrieved following        new drilling, facilities and operating methods. Based on        these amounts the company has already defined a clear        development expenditure program which is an expression of        the company's determination to develop existing reserves.                                                                                    |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Reserve life index*                                    |   | Ratio between the amount of        reserves at the end of the year and total production for        the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Ship-or-pay*                                           |   | Clause included in natural        gas transportation contracts according to which the        customer is requested to pay for the transportation of        gas whether or not the gas is actually transported.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Strategic Storage*                                     |   | According to Legislative        Decree No. 164/2000, these are volumes required for        covering lack or reduction of supplies from        extra-European sources or crises in the natural gas        system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Take-or-pay*                                           |   | Clause included in natural        gas supply contracts according to which the purchaser is        bound to pay the contractual price or a fraction of such        price for a minimum quantity of gas set in the contract        whether or not the gas is collected by the purchaser. The        purchaser has the option of collecting the gas paid for        and not delivered at a price equal to the residual        fraction of the price set in the contract in subsequent        contract years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Upstream/Downstream*                                   |   | The term upstream refers to        all hydrocarbon exploration and production activities.        The term downstream includes all activities inherent to        the oil sector that are downstream of exploration and        production activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

**ABBREVIATIONS**

| mmCF   | =      | million cubic feet                       |
|--------|--------|------------------------------------------|
|   |   |                                     |
| BCF    | =      | billion cubic feet                       |
|   |   |                                     |
| BOE    | =      | barrel of oil equivalent                 |
|   |   |                                     |
| KBOE   | =      | thousand barrel of oil        equivalent |
|   |   |                                     |
| mmBOE  | =      | million barrel of oil        equivalent  |
|   |   |                                     |
| BBOE   | =      | billion barrel of oil        equivalent  |
|   |   |                                     |
| BBL    | =      | barrels                                  |
|   |   |                                     |
| KBBL   | =      | thousand barrels                         |
|   |   |                                     |
| mmBBL  | =      | million barrels                          |
|   |   |                                     |
| BBBL   | =      | billion barrels                          |
|   |   |                                     |
| /d     | =      | per day                                  |

 

##### Table of Contents

**CONVERSION TABLE**

| 1 acre                               | =      | 0.405 hectares                                            |   |                                                                                  |
|--------------------------------------|--------|-----------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
|                                 |   |                                                      |   |                                                                                  |
| 1 barrel                             | =      | 42 U.S. gallons                                           |   |                                                                                  |
|                                 |   |                                                      |   |                                                                                  |
| 1 BOE                                | =      | 1 barrel of crude oil                                     | =      | 5,742 cubic feet of natural        gas(1)                                             |
|                                 |   |                                                      |   |                                                                                  |
| 1 barrel of crude oil per        day | =      | approximately 50 tonnes of        crude oil per year      |   |                                                                                  |
|                                 |   |                                                      |   |                                                                                  |
| 1 cubic meter of natural gas         | =      | 35.3147 cubic feet of        natural gas                  |   |                                                                                  |
|                                 |   |                                                      |   |                                                                                  |
| 1 cubic meter of natural gas         | =      | approximately 0.00615        barrels of oil equivalent(1) |   |                                                                                  |
|                                 |   |                                                      |   |                                                                                  |
| 1 kilometer                          | =      | approximately 0.62 miles                                  |   |                                                                                  |
|                                 |   |                                                      |   |                                                                                  |
| 1 short ton                          | =      | 0.907 tonnes                                              | =      | 2,000 pounds                                                                          |
|                                 |   |                                                      |   |                                                                                  |
| 1 long ton                           | =      | 1.016 tonnes                                              | =      | 2,240 pounds                                                                          |
|                                 |   |                                                      |   |                                                                                  |
| 1 tonne                              | =      | 1 metric ton                                              | =      | 1,000 kilograms                                                                       |
|                                 |   |                                                      | =      | approximately 2,205 pounds                                                            |
|                                 |   |                                                      |   |                                                                                  |
| 1 tonne of crude oil                 | =      | 1 metric ton of crude oil                                 | =      | approximately 7.3 barrels of        crude oil (assuming an API gravity of 34 degrees) |

----

| (1) |   | From January        1, 2004 in order to conform to the practice of other        international oil companies, Eni unified the conversion        rate of natural gas from cubic meters to BOE. The new        rate adopted is 1 barrel of oil equals 5,742 cubic feet        of natural gas. This conversion rate has been determined        by management based on a number of factors. Other oil        companies may use a different conversion rate. The change        introduced has not affected the amount of proved reserves        recorded at December 31, 2003 and has had a negligible        impact on production expressed in BOE in 2004. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

##### Table of Contents

**PART I**

**Item 1. IDENTITY OF DIRECTORS, SENIORMANAGEMENT AND ADVISORS**

NOT APPLICABLE

**Item 2. OFFER STATISTICS AND EXPECTEDTIMETABLE**

NOT APPLICABLE

**Item 3. KEY INFORMATION**

**Selected Financial Information**

The following tables show Eni selected historical financialdata as of and for the years ended December 31, 2000 through2004. The selected historical financial data are derived from EniConsolidated Financial Statements which have been prepared inaccordance with Italian GAAP, which differs in certainsignificant respects from U.S. GAAP. For further information onthe differences between Italian GAAP and U.S. GAAP as they relateto Eni, please refer to Note 27 to Eni Consolidated FinancialStatements.

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(million euro except data per share and per        ADS)** |
|--------|-------------------------------------------------------------|

| **CONSOLIDATED INCOME STATEMENT DATA**                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Amounts in accordance with Italian GAAP:**                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales from operations                                                                 | 47,938 |   |   | 48,925 |   |   | 47,922 |   |   | 51,487 |   |   | 58,382 |   |
| Operating        income (1):                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Exploration &        Production                         | 6,603  |   |   | 5,984  |   |   | 5,175  |   |   | 5,746  |   |   | 8,017  |   |
|      Gas        & Power (2)                                  | 3,178  |   |   | 3,672  |   |   | 3,244  |   |   | 3,627  |   |   | 3,463  |   |
|      Refining &        Marketing                             | 986    |   |   | 985    |   |   | 321    |   |   | 583    |   |   | 965    |   |
|      Petrochemicals                                              | 4      |   |   | (332   | )      |   | (126   | )      |   | (176   | )      |   | 271    |   |
|      Oilfield Services        Construction and Engineering       | 144    |   |   | 255    |   |   | 298    |   |   | 311    |   |   | 260    |   |
|      Other        activities                                     | -      |   |   | -      |   |   | (214   | )      |   | (293   | )      |   | (244   | )      |
|      Corporate and        financial companies                    | (143   | )      |   | (168   | )      |   | (196   | )      |   | (281   | )      |   | (269   | )      |
| Operating        income                                                                   | 10,772 |   |   | 10,396 |   |   | 8,502  |   |   | 9,517  |   |   | 12,463 |   |
| Income before extraordinary items and income        taxes (3)                             | 10,869 |   |   | 9,921  |   |   | 8,378  |   |   | 9,346  |   |   | 12,597 |   |
| Net income        (2)                                                                     | 5,771  |   |   | 7,751  |   |   | 4,593  |   |   | 5,585  |   |   | 7,274  |   |
| **Data per ordinary share** (euro) (4):                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net        income: basic and diluted                                                      | 1.44   |   |   | 1.98   |   |   | 1.20   |   |   | 1.48   |   |   | 1.93   |   |
| **Data per ADS** ($)(4) (5):                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net        income: basic and diluted                                                      | 6.79   |   |   | 8.82   |   |   | 6.29   |   |   | 9.31   |   |   | 13.05  |   |
| **Amounts in accordance with U.S. GAAP**(euro):                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales        from operations                                                          | 45,488 |   |   | 45,848 |   |   | 43,632 |   |   | 48,018 |   |   | 54,698 |   |
| Operating income (6)                                                                      | 9,819  |   |   | 8,853  |   |   | 7,861  |   |   | 9,215  |   |   | 11,739 |   |
| Income before cumulative effect of change in        accounting principle and income taxes | 10,067 |   |   | 10,330 |   |   | 8,350  |   |   | 9,274  |   |   | 12,324 |   |
| Net income before cumulative effect of change in        accounting principle              |   |   |   |   |   |   |   |   |   | 6,098  |   |   |   |   |
| Effect of        adoption of SFAS No. 143                                                 |   |   |   |   |   |   |   |   |   | 198    |   |   |   |   |
| Net income                                                                                | 5,758  |   |   | 6,317  |   |   | 5,292  |   |   | 6,296  |   |   | 6,401  |   |
| **Data        per ordinary share** (euro)(4):                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income: basic and diluted                                                             | 1.44   |   |   | 1.62   |   |   | 1.38   |   |   | 1.67   |   |   | 1.70   |   |
| **Data        per ADS** ($) (4) (5):                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income: basic and diluted                                                             | 6.77   |   |   | 7.19   |   |   | 7.25   |   |   | 10.50  |   |   | 11.49  |   |

|   |  |   |  |   |  |   |  |   |  |
|--------|--|--------|--|--------|--|--------|--|--------|--|

 

|   | **As of December 31,** |
|--------|------------------------|
|   |                        |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(million euro except number of shares and        dividend information)** |
|--------|----------------------------------------------------------------------------|

| **CONSOLIDATED BALANCE SHEET DATA**                                            |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   |   |   |   |   |   |   |   |   |
| **Amounts in accordance with Italian GAAP:**                                   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |
| Total assets                                                                   | 56,363 |   | 62,736 |   | 65,808 |   | 67,336 |   | 69,112 |
| Short-term        and long-term debt                                           | 11,044 |   | 12,819 |   | 15,420 |   | 16,254 |   | 12,725 |
| Capital stock issued                                                           | 4,133  |   | 4,001  |   | 4,002  |   | 4,003  |   | 4,004  |
| **Amounts        in accordance with U.S. GAAP:**                               |   |   |   |   |   |   |   |   |   |
| Total assets                                                                   | 57,257 |   | 64,976 |   | 66,122 |   | 71,995 |   | 72,354 |
| Short-term        and long-term debt                                           | 10,810 |   | 12,379 |   | 15,320 |   | 16,144 |   | 12,697 |
| Capital stock issued                                                           | 4,133  |   | 4,001  |   | 4,002  |   | 4,003  |   | 4,004  |
| **Other        Financial Information in accordance with Italian GAAP**         |   |   |   |   |   |   |   |   |   |
| Capital expenditure                                                            | 5,431  |   | 6,577  |   | 8,048  |   | 8,802  |   | 7,503  |
| Investments        (including net borrowings of acquired companies) (7)        | 4,384  |   | 4,664  |   | 1,366  |   | 4,255  |   | 316    |
| Weighted average number of ordinary shares        outstanding (shares million) | 3,994  |   | 3,912  |   | 3,827  |   | 3,778  |   | 3,772  |
| Dividend        per share (euro)                                               | 0.424  |   | 0.750  |   | 0.750  |   | 0.750  |   | 0.900  |
| Dividend per ADS ($)                                                           | 1.81   |   | 3.71   |   | 4.29   |   | 4.56   |   | 6.09   |
|                                                                           |        |   |        |   |        |   |        |   |        |

----

|   |   |                                                                 |
|--------|--------|----------------------------------------------------------------------|
| (1)    |   | In 2003,        Eni’s activities have been grouped differently: |

|   |   | - |   | Syndial        (former EniChem) was included in the "Other        activities" segment, which includes all Eni        companies not included in specific segments (such as,        among others, EniData, Sieco, Tecnomare, EniTecnologie,        Eni Corporate University and AGI); |
|--------|--------|---|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | - |   | the new        "Corporate and financial companies" segment was        created, which includes Eni Corporate, Sofid and the        financial companies formerly included in the "Other        activities" segment.                                                         |

|   |   | In addition,        following its merger into Eni in 2004, EniData SpA, which        managed Eni’s IT activities, and was formerly        included in "Other activities", is now included        in "Corporate and financial companies".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| .      |   | Data for 2002        and 2003 have been reclassified accordingly for        comparability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (2)    |   | Legislative        Decree No. 164 dated May 23, 2000 requires Eni to        unbundle its transmission and distribution activities        from other businesses in the Natural Gas segment. In        connection with the decree, Eni arranged for an        independent appraisal of its transmission and        distribution assets which resulted in estimates of the        useful lives of such assets (40 years for pipelines and        50 for distribution networks). Such useful lives have        also been confirmed by various reports issued by the        Italian Authority for Electricity and Gas. Effective        January 1, 2000, assets related to transmission and        distribution activities are now depreciated based on the        useful lives established by the aforementioned appraisal        and no longer on the basis of useful lives established by        the Ministry of Economy and Finance based on technical        studies conducted for homogeneous industries (10% and 8%        for pipelines and distribution networks, respectively).        In 2001, this lower rate of depreciation resulted in an        increase in operating income amounting to euro 663        million, an increase in income before minority interest        amounting to euro 396 million and an increase in net        income amounting to euro 312 million. Also note that        effective from January 2002, the new Gas & Power        segment is responsible for Eni's natural gas and        electricity generation activities. For comparability,        results of operations and financial data of the Natural        Gas and Electricity Generation segments, which were        reported separately through December 31, 2001, have been        aggregated in the new Gas & Power segment. |
| (3)    |   | Extraordinary        income (expense) is as defined under Italian GAAP. These        items would not qualify as extraordinary under U.S. GAAP.        See Notes 27 and 28 to the Consolidated Financial        Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (4)    |   | Euro per        Share or dollars per American Depositary Share (ADS), as        the case may be. The Eni Shareholders Meeting held on        June 1, 2001 resolved to convert the nominal value of Eni        Shares into euro by applying the fixed exchange rate of        1,936.27 lire per euro; reduce the resulting nominal        value of each share from euro 0.516 to euro 0.5; and        group two shares of nominal value euro 0.5 into one share        with nominal value of 1 euro. The conversion, due to EU        requirements, was effective from June 18, 2001. Starting        from the same date, each ADS represents five Eni Shares.        Consequently, all earnings per Share and earnings per ADS        amounts in this selected financial data corresponding to        prior periods have been restated to reflect the 2 for 1        reverse stock split. Earnings per share is calculated by        dividing net income by the weighted-average number of        shares issued and outstanding during the year, excluding        treasury shares. The dilutive effect of potential        ordinary shares, in terms of the number of ordinary        shares underlying outstanding stock grants and stock        options on earnings per share or ADS is immaterial.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (5)    |   | The financial        statements are stated in euro. The translations of        certain euro amounts into US dollars are included solely        for the convenience of the reader. The convenience        translations should not be construed as representations        that the euro amounts have been, could have been, or        could in the future be, converted into US dollars at this        or any other rate of exchange. Data per ADS, with the        exception of dividend per ADS in the years 2000 to 2003,        were translated at the Noon Buying Rate of December 31        for each year presented (US dollar 0.9388, 0.8901,        1.0485, 1.2597 and 1.3538 = euro 1.00 as of December 31,        2000, 2001, 2002, 2003 and 2004, respectively). Dividend        per ADS for the years 2000 through 2004 has been        translated into US dollars using for each year presented        the Noon Buying Rate of the payment date. On June 17,        2005, the Noon Buying Rate was US dollars 1.2240 = euro        1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (6)    |   | See Note 28        to the Consolidated Financial Statements for details of        operating income under U.S. GAAP by business segment for        the last three years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (7)    |   | This item        refers mainly to the acquisition cost of net equity of        investees and also includes the net borrowings of        companies acquired. In 2003, it also includes the outlay        for the tender offer for Italgas shares (euro 2,569        million). For a discussion of net borrowings, see        "Item 5 – Financial Conditions".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

##### Table of Contents

**Selected Operating Information**

The table below sets forth selected operating information withrespect to Eni's proved reserves, developed and undeveloped, ofcrude oil (including condensates and natural gas liquids) andnatural gas, as well as other data as of and for the years endedDecember 31, 2000, 2001, 2002, 2003 and 2004. Such estimates ofproved reserves have been prepared in accordance with Statementof Financial Accounting Standards No. 69 ("SFAS 69").See the unaudited supplemental oil and gas information in Note 29to the Consolidated Financial Statements.

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

| Proved reserves at period end of oil (mmBBL)                                                  | 3,422  |   | 3,948  |   | 3,783  |   | 4,138  |   | 4,008  |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Proved        reserves at period end of natural gas (BCF)                                     | 14,772 |   | 17,072 |   | 18,629 |   | 18,008 |   | 18,435 |
| Proved reserves of hydrocarbons in mmBOE at        period end (1)                             | 6,008  |   | 6,929  |   | 7,030  |   | 7,272  |   | 7,218  |
| Reserve        replacement ratio (2) (three-year average)                                     | 173    |   | 226    |   | 202    |   | 179    |   | 117    |
| Reserve life index (3)                                                                        | 14.0   |   | 13.7   |   | 13.2   |   | 12.7   |   | 12.1   |
| Average        daily production of oil (KBBL/d)                                               | 748    |   | 857    |   | 921    |   | 981    |   | 1,034  |
| Average daily production of natural gas        available for sale (mmCF/d)(4)                 | 2,493  |   | 2,827  |   | 3,015  |   | 3,174  |   | 3,171  |
| Average        daily production of hydrocarbons available for sale        (KBOE/d)(4)         | 1,187  |   | 1,353  |   | 1,449  |   | 1,536  |   | 1,586  |
| Oil and gas production costs per BOE (5)                                                      | 3.61   |   | 3.85   |   | 3.83   |   | 4.16   |   | 4.92   |
| Profit per        barrel of oil equivalent (6)                                                | 7.86   |   | 5.48   |   | 5.08   |   | 5.95   |   | 8.87   |
| Sales of natural gas to third parties (7)                                                     | 62.63  |   | 63.72  |   | 64.12  |   | 69.49  |   | 73.43  |
| Natural        gas consumed by Eni (7)                                                        | 2.00   |   | 2.00   |   | 2.02   |   | 1.90   |   | 3.70   |
| Sales of natural gas of affiliates and relevant        companies (Eni’s share) (7)       | 0.87   |   | 1.38   |   | 2.40   |   | 6.94   |   | 7.32   |
| Total        sales and own consumption of natural gas (7)                                     | 65.50  |   | 67.10  |   | 68.54  |   | 78.33  |   | 84.45  |
| Transport of natural gas for third parties in        Italy (7)                                | 9.45   |   | 11.41  |   | 19.11  |   | 24.63  |   | 28.26  |
| Length of        natural gas transport network in Italy at period end        (8)              | 29.1   |   | 29.6   |   | 29.8   |   | 30.1   |   | 30.2   |
| Electricity production sold (9)                                                               | 4,77   |   | 4,99   |   | 5,00   |   | 5.55   |   | 13.85  |
| Refined        products production (10)                                                       | 38.89  |   | 37.78  |   | 35.55  |   | 33.52  |   | 35.75  |
| Balanced capacity of wholly-owned refineries        (11)                                      | 664    |   | 664    |   | 504    |   | 504    |   | 504    |
| Capacity        utilization of wholly-owned refineries (12)                                   | 99     |   | 97     |   | 99     |   | 100    |   | 100    |
| Number of service stations at period end (in        Italy and outside Italy)                  | 12,085 |   | 11,707 |   | 10,762 |   | 10,647 |   | 9,140  |
| Average        throughput per service station (in Italy and outside        Italy)(13)         | 1,555  |   | 1,621  |   | 1,674  |   | 1,771  |   | 1,967  |
| Petrochemicals production (14)                                                                | 8.53   |   | 7.83   |   | 7.12   |   | 6.91   |   | 7.12   |
| Oilfield        Services Construction and Engineering order backlog at        period end (15) | 6,638  |   | 6,937  |   | 10,065 |   | 9,405  |   | 8,521  |
| Employees at period end (units)                                                               | 69,969 |   | 70,948 |   | 80,655 |   | 76,521 |   | 71,497 |
|                                                                                          |        |   |        |   |        |   |        |   |        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Includes        approximately 783, 728, 779, 747 and 737 BCF of natural        gas held in storage in Italy at December 31, 2000, 2001,        2002, 2003 and 2004, respectively. See "Item 4        – Information on the Company – Exploration and        Production – Storage".                                                                                                                                                                                                                                                                    |
| (2)    |   | Consists of:        (i) the increase in proved reserves attributable to: (a)        purchases of minerals in place; (b) revisions of previous        estimates; (c) improved recovery; and (d) extensions and        discoveries, less sales of minerals in place; divided by        (ii) production during the year as set forth in the        reserve tables, in each case prepared in accordance with        SFAS 69. See the unaudited supplemental oil and gas        information in Note 29 to the Consolidated Financial        Statements. Expressed as a percentage. |
| (3)    |   | Consists of        proved reserves at year-end divided by production during        the year as set forth in the reserve tables, in each case        presented in accordance with SFAS 69. See the unaudited        supplemental oil and gas information in Note 29 to the        Consolidated Financial Statements. Expressed on a yearly        basis.                                                                                                                                                                                                                       |
| (4)    |   | Natural gas        production volumes exclude gas consumed in operations        (94, 132, 151 and 220 mmCF/d in 2001, 2002, 2003 and        2004, respectively).                                                                                                                                                                                                                                                                                                                                                                                                              |
| (5)    |   | Consists of        production costs (costs incurred to operate and maintain        wells and field equipment including also royalties)        prepared in accordance with SFAS 69 divided by actual        production net of production volumes of natural gas        consumed in operations. See the unaudited supplemental        oil and gas information in Note 29 to the Consolidated        Financial Statements. Expressed in dollars.                                                                                                                                 |
| (6)    |   | Results of        operations from oil and gas producing activities, divided        by actual sold production, in each case prepared in        accordance with SFAS 69. See the unaudited supplemental        oil and gas information in Note 29 to the Consolidated        Financial Statements for a calculation of results of        operations from oil and gas producing activities.        Expressed in dollars.                                                                                                                                                         |
| (7)    |   | Expressed in        billions of cubic meters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (8)    |   | Expressed in        thousands of kilometers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (9)    |   | Expressed in        gigawatthour.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (10)   |   | Expressed in        millions of tonnes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (11)   |   | Expressed in        KBBL/d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (12)   |   | Expressed in        production as a percentage of capacity taking into        account scheduled plant shutdowns.                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (13)   |   | Expressed in        thousands of liters per day.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (14)   |   | Expressed in        millions of tonnes. For year 2004, 2003 and 2002 data see        Note 1 on the preceding page.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (15)   |   | The sum of        the order backlog of Saipem SpA and Snamprogetti SpA,        expressed in millions of euro.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

##### Table of Contents

**Exchange Rates**

Italy is one of the eleven member states of the EuropeanMonetary Union that entered the single European currency whichbecame effective on January 1, 1999. The official fixing rate ofthe lira versus the euro is 1,936.27 lire per euro.

The following table sets forth, for the periods indicated,certain information regarding the Noon Buying Rate in US dollarsper euro, rounded to the second decimal (Source: The FederalReserve Board).

 

|   | **High** |   | **Low** |   | **Average**(1) |   | **At Period End** |
|--------|----------|--------|---------|--------|----------------|--------|-------------------|
|   |          |   |         |   |                |   |                   |

|   | **US        dollars per euro** |
|--------|--------------------------------|

| Year ended December 31, |   |   |   |   |   |   |   |
|-------------------------|--------|--------|--------|--------|--------|--------|--------|
| 2000                    | 1.03   |   | 0.83   |   | 0.92   |   | 0.94   |
| 2001                    | 0.95   |   | 0.84   |   | 0.90   |   | 0.89   |
| 2002                    | 1.05   |   | 0.86   |   | 0.95   |   | 1.05   |
| 2003                    | 1.26   |   | 1.04   |   | 1.13   |   | 1.26   |
| 2004                    | 1.36   |   | 1.18   |   | 1.24   |   | 1.35   |
|                    |        |   |        |   |        |   |        |
|                    |   |   |   |   |   |   |   |

----

|   |   |                                                                                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------|
| (1)    |   | Average of        the Noon Buying Rates for the last business day of each        month in the period. |

 

|   | **High** |   | **Low** |   | **At Period End** |
|--------|----------|--------|---------|--------|-------------------|
|   |          |   |         |   |                   |

|   | **US        dollars per euro** |
|--------|--------------------------------|

| December 2004                     | 1.3625 |   | 1.3224 |   | 1.3538 |
|-----------------------------------|--------|--------|--------|--------|--------|
| January        2005               | 1.3476 |   | 1.2954 |   | 1.3049 |
| February 2005                     | 1.3274 |   | 1.2773 |   | 1.3274 |
| March 2005                        | 1.3465 |   | 1.2877 |   | 1.2969 |
| April 2005                        | 1.3093 |   | 1.2819 |   | 1.2919 |
| May 2005                          | 1.2936 |   | 1.2349 |   | 1.2349 |
| June 2005 (through June 17, 2005) | 1.2320 |   | 1.2035 |   | 1.2240 |
|                              |        |   |        |   |        |

Fluctuations in the exchange rate between the euro and thedollar affect the dollar equivalent of the euro price of theShares on Telematico and the dollar price of the ADSs on theNYSE. Cash dividends related to fiscal year 2004 has been paid byEni SpA in euro as of June 23, 2005 and exchange ratefluctuations will also affect the dollar amounts received byowners of ADSs upon conversion by the Depository of cashdividends paid in euro on the underlying Shares. The Noon BuyingRate on June 17, 2005 was US dollars 1.2240 = euro 1.00.

 

##### Table of Contents

**Risk Factors**

> 
***Competition***

There is strong competition worldwide, both within the oilindustry and with other industries, in supplying energy to theindustrial, commercial and residential energy markets. A numberof Eni's competitors have merged or may have the intention tomerge and so lead to possibly stronger competition fromcompetitors with greater financial resources. In its Exploration& Production business, particularly outside Italy, Eniencounters competition from other major international oilcompanies for obtaining exploration and development rights. Inits natural gas business, Eni encounters increasingly strongcompetition from both national and international natural gassuppliers, also following the impact of the liberalization of theItalian natural gas market introduced by Legislative Decree No.164/2000 which provides for, among other things, the opening ofthe entire Italian market to competition, which was completed in2003, limits to the size of gas companies relative to the marketand third parties access to transport infrastructure. In itselectricity business, Eni competes with other producers fromItaly or outside Italy which sell electricity on the Italianmarket. Eni faces competition from several major internationaloil companies in its refinery and refined product marketingbusinesses. In the retail market, Eni competes with third partiesboth in Italy and outside Italy (including major internationaloil companies, companies owned by oil producing nations and localoperators) to obtain concessions to establish and operate servicestations. Once established, Eni's service stations competeprimarily on the basis of services and availability ofnon-petroleum products. In Italy plans for the upgrading andefficiency improvement of the national service station networkcan advance only in accordance with the evolution of theregulatory framework, which lags behind that of other majorEuropean countries. Eni also faces significant competition fromcertain international operators in the oilfield services,construction and engineering industries. Such competition isprimarily on the basis of technical expertise, quality and numberof services and availability of technologically advancedfacilities (for example vessels for offshore construction).

> 
***Risks associated with the exploration and production of    oil and natural gas***

The exploration and production of oil and natural gas requireshigh levels of capital expenditure and entails particulareconomic risks and opportunities. It is subject to naturalhazards and other uncertainties including those relating to thephysical characteristics of oil or natural gas fields. Theproduction of oil and natural gas is highly regulated and issubject to intervention by governments throughout the world inmatters such as the award of exploration and productioninterests, the imposition of specific drilling and other workobligations, environmental protection measures, control over thedevelopment and abandonment of fields and installations, andrestrictions on production. In addition, the oil and gas industryis subject to the payment of royalties and excise duties, whichtend to be higher than those payable in respect of many othercommercial activities.

> 
*Exploratory drilling efforts may not be successful*

Drilling for oil and gas involves numerous risks including therisk of dry holes or failure to find commercial quantities ofhydrocarbons. The costs of drilling, completing and operatingwells are often uncertain, and drilling operations may beunsuccessful as a result of a variety of factors, including,among others, unexpected drilling conditions, pressure orirregularities in formations, equipment failures or fires,blow-outs and various forms of accidents, marine risks such ascollisions and other adverse weather conditions and shortages ordelays in the delivery of equipment. 

Failure in the activity of exploration of oil and natural gascould have an adverse impact on Eni’s future results ofoperations and financial condition. Because of the percentage ofEni’s capital plans devoted to higher risk exploratoryprojects, it is likely that Eni will continue to experiencesignificant exploration and dry hole expenses. In particular Eniplans to explore for oil and gas offshore, often in deep water orat deep drilling depths, where operations are more difficult andcostly than on land or at shallower depths and in shallowerwaters. Deepwater operations generally require a significantamount of time between a discovery and the time that Eni canproduce and market the oil or gas, increasing both theoperational and financial risks associated with these activities.

In addition, failure in finding additional commercial reservescould dampen future production of oil and natural gas which ishighly dependent on the rate of success of exploratory activity.

> 
*Development projects bear significant operational risks    which may adversely affect actual returns on such projects*

Eni is involved in numerous development projects for theproduction of hydrocarbon reserves, principally offshore. Keyfactors that may affect the timing and outcome of those projectsinclude, among others, project approvals by joint venturepartners, timely issuance of permits and licenses by governmentalagencies; manufacturing and delivery schedules of criticalequipment, such as offshore platforms and floating productionunits, mechanical and technical difficulties, risks associatedwith the use of new technologies, and commercial arrangements forpipelines and related equipment to transport and markethydrocarbons. Furthermore, deepwater and other hostileenvironments, where the majority of Eni’s planned andexisting development projects are located, can exacerbate theseproblems. Delays and differences between estimated and actualtiming of critical events may adversely affect the completion ofand start-up of production from such projects and, consequently,the actual returns on such projects. 

> 
*Changes in crude oil and natural gas prices may    adversely affect Eni’s results of operations*

Crude oil prices are subject to international supply anddemand and other factors that are beyond Eni's control. OPECmember countries control production of a significant portion ofthe worldwide supply of oil and can exercise substantialinfluence over its price levels. International geopoliticaltensions and political developments, including sanctions imposedon certain oil-producing countries on the basis of resolutions ofthe United Nations, can also affect world supply and prices ofoil. Such factors can also affect the prices of natural gasbecause natural gas prices are typically tied to the prices ofcertain crudes and refined petroleum products. Lower crude oilprices have an adverse impact on Eni's results of operations.

 

> 
***Uncertainties in Estimates of Oil and Natural Gas    Reserves***

Numerous uncertainties are inherent in estimating quantitiesof proved reserves and in projecting future rates of productionand timing of development expenditures. The accuracy of provedreserve estimates depends on a number of factors, assumptions andvariables, among which the most important are the following:

| • |   | the quality of available        geological, technical and economic data and their        interpretation and judgement;                                                                                                                                                                                                                                                                                                                     |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | whether the prevailing tax        rules, other government regulations and contractual        conditions will remain the same as on the date estimates        are made;                                                                                                                                                                                                                                                                     |
| • |   | results of drilling, testing        and production after the date of the estimates may        require substantial upward or downward revisions;                                                                                                                                                                                                                                                                                            |
| • |   | changes in oil and natural        gas prices could have an effect on the quantities of        Eni's proved reserves because the estimates of reserves        are based on prices and costs at the date when such        estimates are made. In particular the reserves estimates        are subject to revision as prices fluctuate due to the        cost recovery feature under certain Production Sharing        Agreements (PSAs); and |
| • |   | the production performance        of Eni reservoirs.                                                                                                                                                                                                                                                                                                                                                                                       |

Many of these factors, assumptions and variables involved inestimating proved reserves are beyond Eni's control and may proveto be incorrect over time. Accordingly, the estimated reservescould be materially different from the quantities of oil andnatural gas that ultimately will be recovered. Additionally, anydownward revision in Eni’s estimated quantities of provedreserves could have adverse consequences on Eni’s financialresults, such as increased depreciation, depletion andamortization charges and/or impairment charges, which wouldreduce earnings and shareholders' equity.

 

> 
***Political Considerations***

Substantial portions of Eni's hydrocarbons reserves arelocated in countries outside the EU and North America, certain ofwhich may be politically or economically less stable than EU orNorth American countries. At December 31, 2004, approximately 73%of Eni's proved hydrocarbons reserves were located in suchcountries. See "Item 4 – Exploration & Production– Oil and Natural Gas Reserves". Similarly, asubstantial portion of Eni's natural gas supply comes fromcountries outside the EU and North America. In 2004,approximately 38% of Eni's domestic supply of natural gas camefrom such countries. See "Item 4 – Gas & Power– Natural Gas Supplies". Adverse political and economicdevelopments in any such producing country may affect Eni’sability to continue operating in that country, either temporarilyor permanently, and affect Eni’s ability to access oil andgas reserves. In August 1996, the United States adopted the Iranand Libya Sanctions Act (the "Sanctions Act"). On April23, 2004 the President of the United States terminated theapplication of the Sanctions Act to Libya, with the remainingeconomic sanctions against Libya lifted on September 23, 2004.The Sanctions Act still applies to Iran and authorizes thePresident of the United States to impose sanctions from asix–sanction menu under certain circumstances against anyperson, including any foreign company, making investments inIran, thus contributing directly and significantly to theenhancement of Iran’s ability to develop its hydrocarbonsresources. The Sanctions Act is scheduled to expire on August 5,2006. Eni does not believe that enforcement of the Sanctions Actagainst it would have a material adverse effect on its financialcondition or results of operations. Iran and Libya continue to bedesignated by the U.S. Office of Global Security Risks as Statessponsoring terrorism. For a description of Eni's operations inIran and Libya see "Item 4 – Information on the Company– Exploration and Production – North Africa and Rest ofthe World."

 

> 
***Cyclicality of the Petrochemical Industry***

The petrochemical industry is subject to cyclical fluctuationsin demand, with consequent effects on prices and profitabilityexacerbated by the highly competitive environment of theindustry. Eni's petrochemicals operations, which are locatedmainly in Italy, have been in the past and may in the future beadversely affected by worldwide excess installed productioncapacity, as well as by economic slowdowns in many industrializedcountries. The dislocation of petrochemical activities togeographic areas like the Far East and oil producing countrieswhich provide long-term competitive advantages has weakened thecompetitiveness of petrochemicals operations in industrializedcountries, including Eni's petrochemical operations.Petrochemical operations in industrialized countries are alsoless competitive than those located in the above-mentioned areasdue to stricter regulatory frameworks and growing environmentalconcerns which prevail in industrialized countries.

 

> 
***Liberalization of the Italian Natural Gas Market***

Legislative Decree No. 164 dated May 23, 2000 opened theItalian natural gas starting on January 1, 2003. This means thatall customers in Italy are free to choose their supplier ofnatural gas. The decree, among other things, introduced ruleswhich have a significant impact on Eni's activity, as the companyis present in all the phases of the natural gas chain, inparticular:

| • |   | until December 31, 2010        antitrust thresholds for operators calculated as a        percentage share of national consumption set as follows:        (i) effective January 1, 2002, 75% for imported or        domestically produced natural gas volumes input into the        national transport network and destined to sales; this        percentage is to decrease by 2 percentage points per year        until it reaches 61% in 2009; (ii) effective January 1,        2003, 50% for sales to final customers. These ceilings        are calculated on a three-year base net of losses (in the        case of sales) and volumes of natural gas consumed in own        operations. In accordance with Article 19, paragraph 4 of        Legislative Decree No. 164/2000 the volumes of natural        gas consumed in own operations by a company or its        subsidiaries are excluded from the calculation of        ceilings for sales to end customers and for volumes input        into the Italian network to be sold in Italy; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | transport of natural gas by        means of high pressure trunklines, storage of natural gas        and distribution of natural gas in urban centers by means        of low pressure networks are activities of public        relevance and criteria for determining tariffs of those        activities are set by the Authority for Electricity and        Gas (the "Authority for Electricity and Gas"),        and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| • |   | third parties are allowed to        access natural gas infrastructure – which comprises,        among other things, high pressure trunklines, low        pressure networks and storage sites – according to        set conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

The new regulatory regime has the effect of limiting the sizeand profitability of Eni’s natural gas business in Italy.

> 
*Eni's natural gas margin*1*in Italy may decrease permanently compared to historical    levels*

In order to meet the expected growth of the Italian naturalgas market over the medium and long-term, Eni entered intolong-term purchase contracts with producing countries thatcurrently have a residual average term of approximately 16 years.Existing contracts, which in general contain take-or-pay clauses,will ensure total delivery of approximately 67.3 billion cubicmeters of natural gas per year (Russia 28.5, Algeria 21.5, theNetherlands 10, Norway 6 and Nigeria 1.5) by 2008. The abovequantities are based on the annual contract quantity of therelevant contract. The average annual minimum quantity that Eniis committed to purchase under its take-or-pay obligations isapproximately 85% of said quantities. In order to comply with theabove mentioned regulatory thresholds relating to volumes inputinto the national transport network, Eni signed multi-yearcontracts with third party importers to sell natural gas volumesexceeding the thresholds outside of the Italian territory; inprior years those volumes were imported into Italy and sold toItalian consumers by Eni. This change in the sale mix isstructural and is adversely affecting Eni's results ofoperations. Further, management expects Eni's margins on naturalgas in Italy to come under pressure in future years due to theentry into the market of new competitors, including the abovementioned third parties which purchase natural gas from Enioutside the Italian territory and resell it to Italian customers.

> 
*Eni growth prospects in Italy are limited by regulation*

Due to the antitrust threshold on direct sales in Italy,management expects Eni's natural gas sales in Italy to increaseat a rate that cannot exceed the growth rate of natural gasdemand in Italy. Management believes this development might havea material adverse impact on Eni's results of operations.

> 
*Due to the regulated access to natural gas transport    infrastructure in Italy, Eni may not be able to sell in Italy    all the natural gas volumes it planned to import and, as a    consequence, it may be unable to sell all natural gas volumes    which Eni is committed to purchase under take-or-pay contract    obligations*

Natural gas imports for the next few years were planned by Enibased on the highest flexibility allowed by long-term supplycontracts, assuming the availability of the transport capacity onthe Italian transport infrastructure. However, the currentNetwork Code as set by the Authority for Electricity and Gas withDecision No. 137 of July 17, 2002, in implementation of Article24, paragraph 5 of Legislative Decree No. 164/2000, establishedpriority criteria for the allocation of transport capacity ofnatural gas at points where international transportinfrastructure connects with Italian transport infrastructure(the so-called entry points to the Italian transport system)which are not consistent with Eni’s own planningassumptions. Under the current Network Code, entitlement periodscan last no longer than five years. In particular the allocationrules establish that take-or-pay contracts entered into before1998 are entitled to priority in the assignment of availabletransport capacity to the extent of average daily contractualvolumes. There is therefore no guaranteed access priority forEni’s contracted volumes exceeding average daily contractualvolumes. In fact, take-or-pay contracts entered into by Enibefore 1998 envisage Eni's right to withdraw daily volumes largerthan the average daily contractual volume; this contractualflexibility provided by the difference between the maximum dailyvolume Eni is entitled to and the average daily contractualvolume is used when demand peaks, usually during the winter. Inthe event of congestion at entry points, natural gas volumes notreceiving priority are assigned available transport capacity on apro rata basis. Eni considers Decision No. 137/2002 to beinconsistent with the overall rationale of the European naturalgas legislative framework, especially with reference to Directive98/30/CE and Legislative Decree No. 164/2000, and is challengingDecision No. 137/2002 before the competent administrative courts.See "Item 4 – Regulation of the Italian HydrocarbonsIndustry – Gas & Power". However, Eni cannot ruleout a negative outcome in this matter. Accordingly, managementbelieves that Eni's results of operations could be negativelyaffected should market conditions or regulatory constraintsprevent Eni from selling its whole availability of natural gasunder take-or pay contract obligations (i.e., in case congestionoccurs at the entry points of the Italian transportinfrastructure which would force Eni to withdraw a smaller volumeof gas than the contractual minimum take). See "Item 5– Management Expectations of Operations".

> 
*The Italian Government, Parliament and regulatory    authorities may take further steps to improve competition in    the Italian natural gas market and such regulatory    developments may adversely affect Eni's results of operations*

Eni cannot predict future developments in the institutionaldebate ongoing in Italy regarding the liberalization of thenatural gas market. One important development in this area wasLaw No. 290/2003, which prohibits Eni from holding an interesthigher than 20% in undertakings owning natural gas transportinfrastructure in Italy (Eni currently holds a 50.07% interest inSnam Rete Gas, which owns and manages approximately 97% of theItalian natural gas transport infrastructure). On the basis ofthe findings of a joint inquiry conducted in 2003 through June2004 on the Italian natural gas market, the Authority forElectricity and Gas and the Italian Antitrust Authority (the"Antitrust Authority") acknowledged that the overalllevel of competition of the Italian natural gas market isunsatisfactory due to the dominant position held by Eni in manyphases of the natural gas chain. According to both the Authorityfor Electricity and Gas and the Antitrust Authority, the verticalintegration of Eni in the supply and transport of gas hasrestricted the development of competition in Italynotwithstanding the antitrust ceilings introduced by LegislativeDecree 164/2000. It was further stated that the price of naturalgas in Italy (in particular for the industrial sector) is higherthan in other European countries. Accordingly, both the Authorityfor Electricity and Gas and the Antitrust Authority identifiedpossible measures which in their opinion could enhance the levelof competition in the natural gas market, among which the mostimportant are: (i) the construction of new infrastructure for theimport of natural gas; (ii) the creation of an independenttransmission system operator (TSO) that owns and operates boththe national high pressure transport grid and the storage of gas;and (iii) a framework for the assignment to third parties ofnatural gas volumes or natural gas contracts relating toEni’s long-term take-or-pay natural gas supply contracts.

In January 2005 the Antitrust Authority commenced an inquiryconcerning Eni’s alleged abuse of dominant position inviolation of the competition rule as per Article 82 of the Treatyof Rome with the effect of preventing the entrance of Eni'scompetitors into the Italian gas sales market. See "Item 4– Regulation of the Italian Hydrocarbons Industry – Gas& Power – Procedures against the AntitrustAuthority".

Management believes the institutional debate on the degree ofcompetition in the Italian natural gas market and the regulatoryactivity to be areas of attention for management and cannotexclude negative impacts on Eni’s financial condition orresults of operations in future years deriving from thedevelopment of these matters.

> 
*Should third parties’ plans for the construction    of LNG terminals be implemented as announced, Eni believes an    oversupply of natural gas is likely to occur in the long-term    (beyond 2007)*

In the long-term Eni plans to upgrade its natural gas importinfrastructure from Russia and Algeria in order to meet theexpected growth of natural gas demand in Italy and to renegotiateits purchase contracts from those suppliers on a more favorableand flexible basis. Those plans are to be evaluated taking intoaccount the developments of third parties’ plans for theconstruction of a new LNG terminal in Italy. Two operators in theItalian natural gas market have publicly announced plans todevelop LNG terminals in Italy. Should these LNG plans beimplemented according to scheduled times, Eni believes a naturalgas oversupply is likely to occur in the Italian natural gasmarket, based on current plans in 2008-2012, when the additionalimport capacity from Eni and third parties should come onstream.This scenario, if it occurs, is likely to cause a decrease innatural gas margins.

> 
*Decisions of the Authority for Electricity and Gas in    the matter of natural gas tariffs may diminish Eni’s    ability to determine the price at which it sells natural gas    to customers*

On the basis of certain legislative provisions, the Authorityfor Electricity and Gas holds a general surveillance power onpricing in the natural gas market in Italy and the power toestablish selling tariffs in the natural gas residential andcommercial segments taking into account, among other things, thepublic interest goal of containing the inflationary pressure dueto a rise in energy costs. The decisions of the Authority forElectricity and Gas on these matters may limit the ability of Enito pass an increase in the cost of fuels on to the finalconsumers of natural gas. For example, Decision No. 248/2004 ofthe Authority for Electricity and Gas establishes, among otherthings: (i) that an increase in the international price of Brentcrude oil is only partially transferred on to residential andcommercial users of natural gas in the case where theinternational price of Brent crude oil exceeds the 35 dollar perbarrel threshold; and (ii) that Italian natural gas importers– including Eni – must renegotiate supply contracts towholesalers in order to take into account the reduction of theprice of natural gas sold to residential and commercial users.Eni appealed this decision against an administrative court whichtemporarily suspended the decision of the Authority forElectricity and Gas.

However, Eni’s management believes that should thisdecision be implemented in its original form, a material negativeimpact on the operating income of Eni’s natural gas segmentwould occur in 2005. See "Item 4 – Regulation of theItalian Hydrocarbons Industry – Gas & Power".

 

> 
***Environmental Regulation***

> 
*Eni may incur material operating costs and liabilities    in relation to compliance with applicable environmental    regulations and environmental developments*

Eni is subject to numerous EU, national, regional and localenvironmental laws and regulations concerning its oil and gasoperations, products and other activities, including legislationthat implements international conventions or protocols. Inparticular, these laws and regulations require the acquisition ofa permit before drilling for hydrocarbons may commence, restrictthe types, quantities and concentration of various substancesthat can be released into the environment in connection withexploration, drilling and production activities, limit orprohibit drilling activities on certain protected areas, andimpose criminal or civil liabilities for pollution resulting fromoil, natural gas, refining and petrochemical operations. Theselaws and regulations may also restrict emissions and dischargesto surface and subsurface water resulting from the operation ofnatural gas processing plants, petrochemicals plants, refineries,pipeline systems and other facilities that Eni owns. In addition,Eni’s operations are subject to laws and regulationsrelating to the generation, handling, transportation, storage,disposal and treatment of waste materials. Environmental laws andregulations have a substantial impact on Eni’s operations.Some risk of environmental costs and liabilities is inherent inparticular operations and products of Eni, as it is with othercompanies engaged in similar businesses, and there can be noassurance that material costs and liabilities will not beincurred. 

Although management, considering the actions already takenwith the insurance policies to cover environmental risks and theprovision for risks accrued, does not currently expect anymaterial adverse effect upon Eni’s consolidated financialstatements as a result of its compliance with such laws andregulations, there can be no assurance that there will not be amaterial adverse impact on Eni’s consolidated financialstatements due to: (i) the possibility of as yet unknowncontamination; (ii) the results of the on-going surveys and theother possible effects of statements required by Decree No.471/1999 of the Ministry of Environment; (iii) the possibleeffects of future environmental regulation, such as the onesderiving from Decree No. 367 of the Ministry of Environmentpublished in January 8, 2004, regarding the fixing of new qualitystandards for aquatic environment in relation to dangeroussubstances, and those that may derive from the legislative decreethat the Italian Government will have to enact in order toimplement Directive 2000/60/CE creating a framework for jointEuropean action in the area of water; (iv) the effect of possibletechnological changes relating to future remediation; and (v) thepossibility of litigation and the difficulty of determiningEni’s liability, if any, as against other potentiallyresponsible parties with respect to such litigation and thepossible insurance recoveries.

 

> 
***Legal Proceedings***

Eni is a party to a number of civil actions and administrativeproceedings arising in the ordinary course of business. AlthoughEni’s management does not currently expect a materialadverse effect on Eni’s financial position and profitabilityon the basis of information available to date and taking accountof the existing provisions, Eni’s management cannot rule outthat in future years Eni may incur material losses in connectionwith pending legal proceedings due to: (i) uncertainty; (ii) theoccurrence of new developments that management could not takeinto consideration when evaluating the likely outcome of eachproceeding in order to accrue the risk provisions as of the dateof the latest financial statements; (iii) the emergence of newevidence and information; and (iv) errors in the estimate ofprobable future losses. 

 

> 
***Risks deriving from changes in oil prices and in    natural gas, refined and petrochemical products prices and    margins***

Operating results in certain of Eni’s businesses,particularly the Exploration & Production, Refining &Marketing, Gas & Power and Petrochemical segments areaffected by changes in the price of oil and by their impact onprices and margins of natural gas and refined and petrochemicalproducts. 

> 
*Eni’s results of operations are affected by    changes in international oil prices*

Overall, lower oil prices have a net adverse impact onEni’s results of operations. The effect of lower oil priceson Eni’s average realizations of oil prices is generallyimmediate. However Eni’s average realization for oil differsfrom the price of marker crude Brent due primarily to thecircumstance that Eni’s production slate, which alsoincludes heavy crudes, has a lower API gravity compared withBrent crude (when processed the latter allows for higher yieldsof valuable products compared to heavy crudes, hence highermarket price).

> 
*The favorable impact of higher oil prices on Eni’s    results of operations may be offset by the different trends    of margins in Eni’s downstream businesses*

A time lag exists between movements in oil prices andmovements in the prices and margins of natural gas and refinedand petrochemical products. In particular, trends of natural gasmargins in Eni’s natural gas business tend to mitigate theimpact of changes in oil prices on Eni’s operating resultsdue to different movements in prices of certain energy parametersto which natural gas purchase and sale prices are contractuallyindexed in different proportions and as measured over differentreference periods.

> 
*Eni’s results of operations are affected by    changes in European refining margins*

The results of operations of Eni’s Refining &Marketing segment are substantially affected by changes inEuropean refining margins which reflect changes in relativeprices of crude oil and refined products. Generally, a time lagexists between changes in oil prices and movements in refinedproducts prices.

> 
*Eni’s results of operations are affected by    changes in petrochemical margins*

Eni’s petrochemical products margins are affected bytrends in demand and changes in oil prices which influencechanges in cost of petroleum-based feedstock. Generally, anincrease in oil price determines a decrease in petrochemicalproducts margins in the short-term. Prolonged weakness of theEuropean economy as well as Eni’s own structural weaknesseshave prevented Eni’s Petrochemical segment from returning toprofitability in recent years due to the inability to transferincreases of oil-based feedstocks into selling prices. Due toindustry conditions and weak economic growth in Europe,management does not expect any significant and durableimprovement in Petrochemicals segment profitability over theforeseeable future.

 

> 
***Exchange Rates***

Movements in the exchange rate of the euro against the USdollar can have a material impact on Eni’s results ofoperations. Prices of oil, natural gas and refined productsgenerally are denominated in, or linked to, US dollars, while asignificant portion of Eni’s expenses is denominated ineuro. Similarly, prices of Eni’s petrochemical productsgenerally are denominated in, or linked to, euro, whereasexpenses in the Petrochemicals segment are denominated both ineuro and US dollars. Accordingly a depreciation of the US dollarversus the euro generally has an adverse impact on Eni results ofoperations.

 

> 
***Weather in Italy and Seasonality***

Significant changes in weather conditions in Italy from yearto year may cause variations in demand for natural gas and somerefined products; in colder years, demand is higher. Accordingly,the results of operations of the Gas & Power segment and, toa lesser extent, the Refining & Marketing segment, may beaffected by such variations in weather conditions. In addition,Eni’s results of operations reflect the seasonality indemand for natural gas and certain refined products used inresidential space heating, the demand for which is typicallyhighest in the first quarter of the year, which includes thecoldest months, and lowest in the third quarter, which includesthe warmest months.

 

> 
***Interest Rates***

Interest on Eni’s financial debt is primarily indexed ata spread to benchmark rates such as the Europe Interbank OfferedRate, "EURIBOR" and the London Interbank Offered Rate,"LIBOR". As a consequence, movements in interest ratescan have a material impact on Eni’s financial expense inrespect of its financial debt.

 

> 
***Critical Accounting Estimates***

The preparation of financial statements entails accountingestimates that are characterized by a high degree of uncertainty,complexity and judgement. Although these critical accountingestimates are thoroughly applied and underlying amounts arefairly determined, management cannot rule out that actualoutcomes may differ from such estimates, due to, among otherthings, the following factors: uncertainty, lack or limitedavailability of information; the availability of new informativeelements, variations in economic conditions such as prices,significant factors (e.g., removal technologies and costs) andthe final outcome of legal, environmental or regulatoryproceedings. See "Item 5 – Critical AccountingEstimates".

 

> 
***Eni shall adopt new accounting standards in 2005    that may affect the methods used by the financial community    to evaluate Eni's performance and the value of Eni stock***

Beginning in 2005 Eni, whose shares are listed on a regulatedmarket of a Member State of the European Union, is required toprepare its financial statements in accordance with InternationalFinancial Reporting Standards (IFRS) issued by the InternationalAccounting Standard Board (IASB) and adopted by the EuropeanCommission according to the procedure set forth in Article 6 ofthe European Regulation (CE) No. 1606/2002 of the EuropeanParliament and European Council of July 19, 2002.

For a detailed description of the principle effects expectedon Eni's financial statements due to the adoption of IFRS, see"Item 5. Operating and Financial Review and Prospects –Qualitative discussion of the impact of IFRS on Eni's financialstatements".

Because Eni's financial statements prepared in accordance withIFRS will differ from Eni's financial statements prepared inaccordance with Italian GAAP, the methods used by the financialcommunity to assess our financial performance and value of ourpublicly traded securities, such as price-to-earnings ratios anddebt-to-equity ratios, could be affected.

 

##### Table of Contents

**Item 4. INFORMATION ON THE COMPANY**

**History and Development of the Company**

Eni SpA with its consolidated subsidiaries is engaged in theoil and gas, electricity generation, petrochemicals, oilfieldservices and engineering industries. Eni has operations in about70 countries and 71,497 employees as of December 31, 2004.

Eni, the former Ente Nazionale Idrocarburi, a public lawagency, established by Law 136 of February 10, 1953, wastransformed into a joint stock company by Law Decree 333published in the Official Gazette of the Republic of Italy No.162 of July 11, 1992 (converted into law on August 8, 1992, byLaw 359, published in the Official Gazette of the Republic ofItaly No. 190 of August 13, 1992). The shareholders’ meetingof August 7, 1992 resolved that the company be called Eni SpA.Eni is registered at the Companies Register of Rome, register taxidentification number 00484960588, VAT number 00905811006, R.E.A.Rome No. 756453. Eni is expected to remain in existence untilDecember 31, 2100; its duration can however be extended byresolution of the shareholders.

Eni’s registered head office is located at PiazzaleEnrico Mattei 1, Rome, Italy (telephone number: +39-0659821). Enibranches are located in:

| • |   | San Donato Milanese (Milan),        Via Emilia, 1;         |
|--------|--------|------------------------------------------------------------|
|   |   |                                                       |
| • |   | San Donato Milanese (Milan),        Piazza Ezio Vanoni, 1. |

Internet address: www.eni.it.

The name of the agent of Eni in the United States is ViscusiEnzo, 666 Fifth Ave., New York, NY 10103

Eni’s principal segments of operations and subsidiariesare described below.

Agip SpA was merged into Eni SpA effective as of January 1,1997 to become Eni’s Exploration & Production Division.Eni conducts its exploration and production activities throughits Exploration & Production Division and certain operatingsubsidiaries. Eni’s exploration, development and productionactivities commenced in 1926, when Agip was formed by theGovernment with a mandate to explore for and develop oil andnatural gas. Exploration and production operations are conductedin Italy, North Africa, West Africa, the North Sea, the Gulf ofMexico, South America, the Middle and Far East, the Caspian Seaand Australia. In 2004, Eni’s hydrocarbon productionaveraged 1,586 KBOE/d and, at December 31, 2004, Eni’sestimated proved reserves totalled 7,218 mmBOE with a life indexof 12.1 years. In 2004, Eni’s Exploration & Productionsegment had net sales from operations (including intersegmentsales) of euro 15,349 million and operating income of euro 8,017million.

Snam SpA was merged into Eni SpA effective as of February 1,2002 to become Eni’s Gas & Power Division. Eni conductsits natural gas and electricity generation activities through itsGas & Power Division and certain operating subsidiaries.Eni’s natural gas supply, transmission and distributionactivities commenced in the 1940s with the commercial sale ofnatural gas to industrial users in Northern Italy. In 2004,Eni’s sales of natural gas to third parties totalled 50.39billion cubic meters in Italy and 21.87 billion cubic meters inthe rest of Europe; Eni's share of natural gas volumes sold byits affiliates totalled 7.32 billion cubic meters (of which 6.6billion in the rest of Europe). Natural gas volumes consumed inoperations by Eni and Eni’s subsidiaries – mainly inelectricity generation, refining and petrochemicals operations– totalled 3.70 billion cubic meters. Natural gas sales inItaly include: (i) sales to wholesalers, mainly localdistribution companies, and to large industrial andthermoelectric customers which are supplied by a high and mediumpressure pipeline network; (ii) sales to residential andcommercial customers which are supplied by a low pressurepipeline network. Eni’s high and medium pressure gaspipeline network for natural gas transport is about30,000-kilometers long in Italy, while outside Italy Eni holdstransmission rights on approximately 5,000 kilometers of highpressure pipelines. Eni’s natural gas transport network inItaly is owned and managed by Snam Rete Gas SpA. Snam Rete Gas islisted on the Italian Stock Exchange, Eni’s share being50.07%. Snam Rete Gas transports natural gas on behalf of Eni andthird parties ("shippers"); in 2004, its transportedvolumes were 80.41 billion cubic meters, of which 28.26 billionwere on behalf of third parties. Eni, through its 100% subsidiaryItalgas and other subsidiaries, is engaged in natural gasdistribution activity in Italy serving 1,236 municipalitiesthrough a low pressure network consisting of over 47,000kilometers of pipelines as of December 31, 2004.

Eni conducts its electricity generation activities through itswholly-owned subsidiary EniPower SpA, which owns and managesEni’s power stations of Livorno, Taranto, Mantova, Ravenna,Brindisi and Ferrera Erbognone with a total installed capacity ofapproximately 3.3 gigawatts as of December 31, 2004. In 2004,sold production of electricity totalled 13.85 terawatthour. Eniowns other minor power stations located in Eni’spetrochemical plants and refineries whose production is mainlyfor internal consumption. The accounts of these power stationsare reported within Eni’s Refining & Marketing andPetrochemicals segments.

In 2004, Eni’s Gas & Power segment had net sales fromoperations (including intersegment sales) of euro 17,258 millionand operating income of euro 3,463 million.

AgipPetroli SpA was merged into Eni SpA effective December 31,2002 to become Eni’s Refining & Marketing Division. Eniconducts its refining and marketing activities through theRefining & Marketing Division and certain operatingsubsidiaries. Activities commenced in the 1930s, when Eniinitiated the development of the industrial and retail marketsfor refined products in Italy. Eni’s refining and marketingactivities are located primarily in Italy and Europe. In 2004,Eni's market share in the retail market of refined products inItaly was 36.3%. In 2004, sales of refined products totalled53.54 million tonnes, of which 30.69 million were in Italy. Thebalanced refining capacity of Eni’s wholly-owned refineriestotalled 504 KBBL/d as of December 31, 2004. In 2004, Eni’sRefining & Marketing segment had net sales from operations(including intersegment sales) of euro 26,094 million andoperating income of euro 965 million.

Eni’s petrochemical activities commenced in the 1950s,when it began production of basic petrochemicals at its Ravennaindustrial complex. Through Polimeri Europa SpA and itssubsidiaries, Eni operates in olefins and aromatics, basicintermediate products, chlorine derivatives, polyethylene,polystyrenes, and elastomers. Eni’s petrochemical operationsare concentrated in Italy and in Western Europe. In 2004, Enisold 5.3 million tonnes of petrochemical products. In 2004,Eni’s Petrochemicals segment had net sales from operations(including intersegment sales) of euro 5,417 million and anoperating income of euro 271 million.

Eni’s oilfield services, construction and engineeringactivities commenced in the late 1950s. Through Saipem SpA (a 43%owned subsidiary) and its subsidiaries, Eni operates in offshoreconstruction, in particular fixed platform installation, subseapipe laying and floating production systems. Through SnamprogettiSpA (a wholly owned subsidiary) and its subsidiaries Eni is aprovider of engineering and project management services to theoil and gas, refining and petrochemical industries. In 2004,Eni’s Oilfield Services, Construction and Engineeringsegment had net sales from operations (including intersegmentsales) of euro 6,494 million and operating income of euro 260million.

A list of subsidiaries of Eni is included as an exhibit tothis Form 20-F.

 

> 
***Strategy***

Eni intends to maintain strong hydrocarbon production growthby leveraging in particular on the contribution of large projectsin the development phase and increasing efficiency both inexploration and in development/production through the selectionof exploration projects, the geographic concentration ofproduction, the rationalization of marginal assets and assetswith low development prospects, and strengthening its role asoperator. Management intends to devote special attention toreserve replacement in order to support the sustainability oflong-term growth. In natural gas activities Eni intends to expandsales in European markets and implement a break-through strategyin the LNG business with the objective of attaining a worldwidepresence and exploiting its natural gas reserves. Eni intends tomaintain the leadership in the Italian natural gas market througha proactive approach towards the ongoing liberalization process,a higher degree of flexibility and the diversification of itsimport system, the gradual reduction of its presence in regulatedbusinesses and the completion over time of the plan of expansionof power generation capacity. In downstream oil Eni intends tocontinue the process of upgrading its distribution network inItaly in order to reach European standards in terms of averagethroughput and services to customers, to increase its offer ofdiversified fuels with low environmental impact and develop nonoil activities, while developing/consolidating its presence intarget European markets where it can leverage on operatingsynergies and a well established brand. In refining Eni intendsto increase the conversion rate and flexibility of refineries inorder to produce high quality fuels anticipating theenvironmental requirements of new European regulations. Inoilfield services, construction, and engineering activities Eniintends to concentrate its presence in the strategic segment oflarge projects for the development of offshore hydrocarbonreserves and construction of industrial plants and infrastructurebased on the application of technologies for hydrocarbonproduction, treatment and transmission and natural gas and heavycrudes upgrading.

Eni intends to reduce the capital employed in non-corebusinesses and to improve operational efficiency and efficacy.

Management intends to devote strong attention to research anddevelopment of new technologies, which management believes to bethe key factor for the future development of the oil industry.Eni intends to invest over euro 1 billion in such R&Dactivities in the next four years. Expenditure will be focused onthose strategic projects through which Eni can achievecompetitive advantages in the medium to long-term, in particularin the areas of exploration and recovery of hydrocarbons and ofupgrading of heavy crudes and natural gas.

Eni intends to support its growth strategy by implementing afour year capital expenditure plan of euro 26.9 billion,approximately 90% of which will be concentrated in theExploration & Production, Gas & Power and Refining &Marketing segments.

 

> 
***Key Developments***

The most significant events that occurred during 2004 and todate in 2005 were the following:

| • |   | in 2004, hydrocarbon        production available for sale averaged 1.586 mmBOE/d, a        3.3% increase compared to year 2003. Eni’s proved        reserves of hydrocarbons at December 31, 2004 totalled        7,218 mmBOE, decreasing by 0.7% compared to 2003.        Increases in proved reserves allowed Eni to replace 91%        of production; the average reserve life index was 12.1        years (12.7 in 2003);                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | within the North Caspian Sea        PSA, in March 2005 Eni increased its interest in the        operated project from 16.67% to 18.52% following the        pre-emptive right exercised in May 2003 for the purchase        of the share of British Gas which left the project. The        development plan of the Kashagan field was approved by        the Kazakh authorities on February 25, 2004, entailing a        total expenditure amounting to dollars 29 billion        (dollars 5.4 billion being Eni’s share). At March        2005 contracts for the development of this field had been        awarded for a total of dollars 6.7 billion. Production        plateau is targeted at 1.2 million barrels/day. Appraisal        activities performed in 2004, confirmed the mineral        potential of the discoveries made in the area under        contract; |
| • |   | in March 2004, in Saudi        Arabia, an exploration license for the extraction of        natural gas in the so called C area covering about 52,000        square kilometers in the Rub al Khali basin at the border        with Qatar and the United Arab Emirates was awarded to a        consortium formed by Eni with an international oil        company and Saudi Aramco (Eni operator with a 50%        interest);                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| • |   | the Western Libyan Gas        integrated project was started-up. This project concerns        the development of two hydrocarbon fields in Libya and        the marketing of natural gas produced on European        markets. When fully operational in 2006, volumes produced        and transported via the underwater Greenstream gasline        which started operations in October 2004 are planned to        total 8 billion cubic meters/year (4 of which net to Eni,        equivalent to 141.3 BCF/year) already booked by operators        under long-term contracts;                                                                                                                                                                                                                                                                                                 |
| • |   | sales of natural gas,        including own consumption and Eni’s share of sales        of affiliates, reached 84.5 billion cubic meters (up 7.8%        over 2003). Growth was achieved in markets of the rest of        Europe in line with Eni’s strategy of international        expansion in natural gas in markets with interesting        growth and profitability prospects;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| • |   | Eni sold a 9.054% interest        in Snam Rete Gas in accordance with Law No. 290/2003        which prohibits companies operating in the natural gas        sector to hold interests higher than 20% in companies        owning national gas transmission networks, beginning July        1, 2007. The sale entailed proceeds of euro 650 million        and a gain of euro 519 million recognized in the 2004        consolidated financial statements                                                                                                                                                                                                                                                                                                                                                                                                                         |
| • |   | Eni continued its plan for        expanding its power generation capacity targeting 5.3        gigawatt of installed capacity in 2007. In 2004, a total        of 1.3 gigawatts were installed, thus increasing        Eni’s installed capacity to 3.3 gigawatts at year        end. According to management plans, when fully        operational the new combined cycle gas fired plants will        allow consumption of over 6 billion cubic meters per year        of natural gas produced or purchased by Eni;                                                                                                                                                                                                                                                                                                                                                        |
| • |   | in the downstream oil        business Eni sold its activities in the distribution of        refined products and LPG in Brazil, and continued the        rationalization of its Agip branded retail network in        Italy, which led average throughput to reach over 2.5        million liters (up 4.5% over 2003). In Italy Eni sold        approximately 13.8 billion liters. With over 4.4 billion        liters, sales in the rest of Europe increased by over 15%        compared to year 2003 due to the selective growth        strategy pursued. In April 2005 Eni signed a preliminary        agreement for the sale of its wholly-owned subsidiary        Italiana Petroli which sells petroleum products in Italy        under the IP brand.                                                                                                                      |

 

In 2004, Eni invested approximately euro 7.8 billion in newcapital expenditure and investments. Capital expenditure amountedto 7.5 billion (of which 94% related to the Exploration &Production, Gas & Power and Refining & Marketingsegments) and concerned: (i) development of hydrocarbon fields(euro 4,369 million) in particular in Libya, Iran, Angola, Italy,Kazakhstan, Egypt, Nigeria and Norway, and exploration (euro 499million); (ii) development and maintenance of Eni’s naturalgas transmission and distribution network in Italy (euro 721million); (iii) the construction of the tar gasification plant atthe Sannazzaro refinery, actions on refineries for the adjustmentof automotive fuel characteristics to new European specificationsand the upgrade of the refined product distribution network inItaly and in the rest of Europe (for a total of euro 669million); and (iv) the continuation of the construction ofelectricity generation plants (euro 451 million). In 2004,capital expenditure decreased by approximately euro 1.3 billionover 2003, or 15%, due to a euro 0.77 billion reduction, or 13%,in the Exploration and Production business principally due to theimpact of the 10% appreciation of the euro over the US dollar anda euro 0.3 billion reduction, or 18%, in the Gas & Powerbusiness principally due to the completion of the Greenstreamunderwater pipeline project.

In 2003, Eni invested approximately euro 13.1 billion in newcapital expenditure and investments. Capital expenditure amountedto 8.8 billion, of which 93% related to the Exploration &Production, Gas & Power and Refining & Marketingsegments, and concerned in particular: (i) the development ofhydrocarbon fields (euro 5,016 million) in Libya, Iran, Angola,Nigeria, Italy, Egypt and Kazakhstan; (ii) exploration (euro 635million); (iii) upgrade and maintenance of Eni’s natural gastransport and distribution networks in Italy (euro 726 million);(iv) the construction of power stations (euro 542 million); (v)the construction of the Greenstream gasline (euro 460 million)that will carry natural gas from Libyan fields to Sicily; and(vi) refinery upgrade, upgrade of the fuel distribution networkin Italy and outside Italy, and the purchase of service stationsin Europe (for a total of euro 730 million). Investments(including net borrowings acquired) amounted to euro 4.3 billionand concerned primarily the Italgas tender offer (euro 2,569million), the purchase of 100% of Fortum Petroleum (euro 909million), of 50% of Unión Fenosa Gas (euro 442 million) and thepurchase of majority stakes in natural gas distribution companiesin Hungary (euro 68 million). In 2003, new capital expenditureand investments increased by approximately euro 3.7 billion withrespect to year 2002, or 39%, due mainly to a euro 2.9 billionincrease in investments and to a euro 0.6 billion increase incapital expenditure for the development of hydrocarbon reserves.

 

 

##### Table of Contents

**BUSINESS OVERVIEW**

**Exploration & Production**

Eni is engaged in exploration and production of hydrocarbonsin Italy, North Africa, West Africa, the North Sea, the Gulf ofMexico, South America, the Caspian Sea, the Middle and Far Eastand Australia.

Eni is pursuing a growth strategy aimed at achieving aproduction target of approximately 2 mmBOE/d by 2008, whichcorresponds to a compound average growth rate of more than 5%over the next four years.

Management plans to achieve this production target throughorganic growth, leveraging in particular on the contribution ofsignificant projects started up in 2004, as well as projects inthe development phase in Libya, Angola, Nigeria, Iran andKazakhstan. Eni intends to focus on reserve replacement in orderto maintain the medium to long-term sustainability of itsbusiness. Management will also continue to evaluate opportunitiesto increase production through acquisition of corporations andindividual assets. Management intends to evaluate theseopportunities on the basis of Eni’s internal criteria ofcapital and financial discipline.

Eni will continue to improve its performance by searching foroperating solutions with lower operating costs and synergies.

 

> 
***Oil and Natural Gas Reserves***

Eni continues to exercise rigorous control over the booking ofproved reserves. The Reserve Department of the Exploration &Production segment, reporting directly to the General Manager forthe Exploration & Production Division, is entrusted with thetask of keeping reserve classification criteria("criteria") constantly updated and of monitoring theperiodic process of reviewing estimates. The criteria follow therules issued by the Financial Accounting Standard Board and theSecurities and Exchange Commission ("SEC"), as well as,on specific issues not regulated by rules, the consolidatedpractice recognized by qualified reference institutions. Thecurrent criteria applied by Eni have been examined by DeGolyerand MacNaughton ("D&M"), an independent petroleumengineering company, which confirmed that they are compliant withthe SEC principles. D&M also stated that the criteria used byEni regulate situations for which the SEC rules are less preciseand provide a reasonable interpretation in line with thegenerally accepted practices in international markets. Eniestimates its proved reserves on the basis of the above mentionedcriteria also when it participates in exploration and productionactivities operated by other entities.

Beginning in 1991 Eni has requested qualified independentpetroleum engineering companies to carry out an independentevaluation2of itsproved reserves on a rotation basis. In particular in 2004, atotal of 2.2 billion BOE of proved reserves, or about 30% ofEni’s total proved reserves at December 31, 2004, have beenevaluated. The results of this independent evaluation confirmedEni’s evaluations, as they did in past years. In the2003-2004 two-year period independent evaluations concerned 63%of Eni’s total proved reserves; in particular evaluationsconcerned all the new development projects, including Kashagan,and most large-sized mature fields.

Eni’s proved reserves of hydrocarbons at December 31,2004 totalled 7,218 mmBOE (oil and condensates 4,008 mmBBL;natural gas 18,435 BCF) slightly decreasing (down 0.7%) overDecember 31, 2003. The reserve replacement ratio was 91% in 2004;the average reserve replacement ratio for the last three yearswas 117%. The average reserve life index is 12.1 years (12.7 atDecember 31, 2003). The reserve replacement ratio was calculateddividing additions to proved reserves for year 2004 by totalproduction, each as derived from the tables of changes in provedreserves prepared in accordance with SFAS No. 69 presented inNote 29 to the Consolidated Financial Statements. Managementconsiders the reserve replacement ratio to be a key measure ofthe ability of the company to sustain its growth prospects.However, the ratio measures past performance and cannot be usedto forecast the ability of management to replace produced reservein future years.

Additions to proved reserves booked in 2004 (621 mmBOE) werederived from: (i) extensions and discoveries (329 mmBOE), inparticular in Kazakhstan, Egypt, Libya, Australia, Angola and theUnited Kingdom; (ii) revisions of previous estimates (227 mmBOE),in particular in Egypt, Libya, Iran, Congo, Pakistan, Angola andNorway, offset in part by decreasing revisions in Kazakhstan andAlgeria related to lower entitlements in PSAs3due to higher oil prices, and the United States; (iii) improvedrecovery (65 mmBOE), in particular in Angola and Algeria. Theseincreases offset in part the decline related to production forthe year (594 mmBOE) and sales of minerals in place in theBritish section of the North Sea, Italy, Gabon, Azerbaijan, theNetherlands and Egypt (81 mmBOE). Due to risks inherent in theexploration and production business, a degree of uncertaintystill exists as to whether these additions will actually beproduced. See "Item 3 – Risks associated with theexploration and production of oil and natural gas andUncertainties in estimates of oil and natural gas reserves".

Proved developed reserves at December 31, 2004 amounted to4,300 mmBOE (2,471 mmBBL of oil and condensates and 10,501 BCF ofnatural gas), representing 60% of total estimated proved reserves(58% and 53% at December 31, 2003 and 2002, respectively).

Proved reserves of hydrocarbons applicable to long-term supplyagreements with foreign governments in mineral assets where Eniis operator represented approximately 10% of all proved reservesat December 31, 2004 (8% at December 31, 2003).

The table below sets forth ageographical breakdown of Eni’s proved reserves ofhydrocarbons, on a barrel of oil equivalent basis, for theperiods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(mmBOE)** |
|--------|-------------|

| Italy                               | 1,389 |   | 1,315 |   | 1,199 |   | 996   |   | 890   |
|-------------------------------------|-------|--------|-------|--------|-------|--------|-------|--------|-------|
| North Africa                        | 1,929 |   | 2,122 |   | 2,033 |   | 2,024 |   | 2,117 |
| West Africa                         | 1,093 |   | 1,136 |   | 1,287 |   | 1,324 |   | 1,357 |
| North Sea                           | 700   |   | 879   |   | 825   |   | 912   |   | 807   |
| Rest of World                       | 897   |   | 1,477 |   | 1,686 |   | 2,016 |   | 2,047 |
|                                |       |   |       |   |       |   |       |   |       |
|      Total | 6,008 |   | 6,929 |   | 7,030 |   | 7,272 |   | 7,218 |
|                                |       |   |       |   |       |   |       |   |       |

> 
***Mineral Right Portfolio and Exploration Activity***

As of December 31, 2004, Eni’s portfolio of mineralrights consisted of 9194 exclusiveor shared rights for exploration and development in 34 countrieson five continents, for a total net acreage of 234,1805 square kilometers (242,635 atDecember 31, 2003). Of these, 41,997 square kilometers concernedproduction and development (43,879 at December 31, 2003). OutsideItaly net acreage decreased by 1,881 square kilometers due to thedivestment of assets in Gabon, Mauritania, Senegal, the Britishsection of the North Sea, the Netherlands and Egypt, andreleases, in particular in Australia and Congo. Increases wereregistered in Saudi Arabia, Indonesia, Norway and Russia. InItaly net acreage declined by 6,575 square kilometers due to thedivestment of assets, whose effects were offset in part by theawarding of 4 new concessions.

A total of 66 new exploratory wells were drilled (29.5 ofwhich represented Eni’s share on the basis of its workinginterest in relevant properties), as compared to 105 exploratorywells completed in 2003 (43 of which represented Eni’sshare). Overall success rate was 52.1% in 2004, as compared to46.7% in 2003; the success rate of Eni’s share ofexploratory wells was 57.3% in 2004, as compared to 45.7% in2003.

 

> 
***Production***

*The matters regarding future production, additions toreserves and related production costs and estimated reservesdiscussed below and elsewhere herein are forward-lookingstatements that involve risks and uncertainties that could causethe actual results to differ materially from those in suchforward-looking statements. Such risks and uncertainties relatingto future production and additions to reserves include politicaldevelopments affecting the award of exploration or productioninterests or world supply and prices for oil and natural gas, orchanges in the underlying economics of certain of Eni’simportant hydrocarbons projects. Such risks and uncertaintiesrelating to future production costs include delays or unexpectedcosts incurred in Eni’s production operations.*

In 2004, hydrocarbon production available for sale averaged1,586 KBOE/d (oil and condensates 1,034 KBBL/d; natural gas 3,171mmCF/d) increasing by 50 KBOE/d compared to 2003, up 3.3%, dueto: (i) production increases registered mainly in Nigeria,Angola, Kazakhstan, Pakistan, Libya and Egypt; and (ii) thestart-up of fields in Angola, Australia, Algeria and Libya. Theseincreases were partly offset by: (i) declines in mature fieldsmainly in Italy and the United Kingdom; (ii) lower productionentitlements (38 KBOE) in PSAs related to higher internationaloil prices; and (iii) the effect of the divestment of assets (13KBOE). The share of production outside Italy was 82.6% (80.1% in2003).

Production of oil and condensates (1,034 KBBL/d) increased by53 KBBL/d compared to 2003, up 5.4%, due to increases registeredin: (i) Nigeria, due to the start-up of the Okpoho field(Eni’s interest 100%) and the reaching of full production ofthe Abo (Eni operator with a 50.19% interest) and the Nase-EA(Eni’s interest 12.86%) fields; (ii) Angola, due to thereaching of full production at the Xicomba field and the start-upof the fields of the Kizomba A area in Block 15 (Eni’sinterest 20%); (iii) Kazakhstan, in the Karachaganak field (Enico-operator with a 32.5% interest) due to the beginning ofexports from the Novorossiysk terminal on the Russian coast ofthe Black Sea; (iv) Venezuela, due to the fact that in early 2003production had been interrupted during a general strike; (v)Australia, due to the reaching of full production at theWoollybutt field (Eni operator with a 65% interest) and thestart-up of the Bayu Undan field (Eni’s interest 12.04%);(vi) Libya, due to the start-up of the Wafa (Eni’s interest50%) and Elephant fields (Eni’s interest 33.33%); and (vii)Algeria, due to the start-up of the Rod and satellite fields (Enioperator with a 63.96% interest). These increases were partlyoffset by declines of mature fields, in particular in the UnitedKingdom, and by the effect of the divestment of assets. In Italythe production decline of mature fields (in particularVillafortuna/Trecate, Ragusa and Aquila) was offset in part byhigher production in Val d’Agri notwithstanding thestandstills related to the connection of the fourth treatmenttrain of the oil center.

Production of natural gas available for sale (3,171 mmCF/d)decreased by 3 mmCF/d compared to 2003, down 0.09%, principallydue to declines of mature fields, in particular in Italy and theUnited Kingdom and the effects of divestments. These decreaseswere offset in part by increases registered in: (i) Pakistan, dueto the reaching of full production at the Sawan (Eni’sinterest 23.68%) and Bhit (Eni operator with a 40% interest)fields; (ii) Egypt, due to an increase in local demand; (iii)Libya, due to the start-up of the Wafa field (Eni’s interest50%); and (iv) Kazakhstan, Norway (reaching of full production ofthe Mikkel field, Eni’s interest 14.9%) and Nigeria.

Hydrocarbon production sold totalled 576.5 mmBOE. About 70% ofoil and condensate production sold (374.3 mmBBL) was delivered toEni’s Refining & Marketing segment (70% in 2003). About40% of natural gas production sold (1,162 BCF) was delivered toEni’s Gas & Power segment (43% in 2003).

The tables below set forthEni’s production of oil and condensates and natural gas forthe periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(KBBL/d)** |
|--------|--------------|

| **Production of oil and condensates**(1) |   |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Italy                                    | 76     |   | 69     |   | 86     |   | 84     |   | 80     |
| North Africa                             | 227    |   | 228    |   | 252    |   | 250    |   | 261    |
| West        Africa                       | 213    |   | 219    |   | 222    |   | 236    |   | 285    |
| North Sea                                | 124    |   | 204    |   | 213    |   | 235    |   | 203    |
| Rest of        the World                 | 108    |   | 137    |   | 148    |   | 176    |   | 205    |
|                                     |        |   |        |   |        |   |        |   |        |
|      Total      | 748    |   | 857    |   | 921    |   | 981    |   | 1,034  |
|                                     |        |   |        |   |        |   |        |   |        |

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(mmCF/d)** |
|--------|--------------|

| **Natural gas production available for sale**(1)(2) |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Italy                                               | 1,438  |   | 1,313  |   | 1,260  |   | 1,181  |   | 1,067  |
| North Africa                                        | 454    |   | 497    |   | 560    |   | 559    |   | 619    |
| West        Africa                                  | 67     |   | 82     |   | 87     |   | 128    |   | 143    |
| North Sea                                           | 258    |   | 450    |   | 516    |   | 596    |   | 560    |
| Rest of        the World                            | 276    |   | 485    |   | 592    |   | 710    |   | 782    |
|                                                |        |   |        |   |        |   |        |   |        |
|      Total                 | 2,493  |   | 2,827  |   | 3,015  |   | 3,174  |   | 3,171  |
|                                                |        |   |        |   |        |   |        |   |        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Production        information set forth above differs from production as        reported in the reserve tables in Note 29 to the        Consolidated Financial Statements – Supplemental oil        and gas information (unaudited), because yearly        production presented in such reserve tables is based on        estimates taken in November of each year and the        information above sets forth actual production during the        year. Furthermore, Eni’s production of natural gas        reported in such reserve tables includes, in addition to        sold production, production volumes of natural gas        consumed in operations. Natural gas produced and        reinjected into storage fields in Italy remains part of        Eni’s reserves for each period. |
| (2)    |   | Natural gas        production volumes consumed in operations are excluded.        The effect was 94, 132, 151 and 220 mmCF/d in 2001, 2002,        2003 and 2004, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

The table below sets forthcertain information and operating data regarding Eni’sprincipal oil and natural gas interests for the year endedDecember 31, 2004.

**Principal oil and natural gas interests at December 31,2004**

|                                                  |   | **Commencement of operations** |   | **Number of interests** |   | **Net exploration and development acreage**(1) |   | **Net development acreage**(1) |   | **Type of fields** |   | **Number of producing fields** |   | **Number of other fields** |
|-------------------------------------------------------|--------|--------------------------------|--------|-------------------------|--------|------------------------------------------------|--------|--------------------------------|--------|--------------------|--------|--------------------------------|--------|----------------------------|
|                                                  |   |                                |   |                         |   |                                                |   |                                |   |                    |   |                                |   |                            |
| **Italy**                                             |   | 1926                           |   | 214                     |   | 33,635                                         |   | 13,184                         |   | Onshore/Offshore   |   | 81                             |   | 85                         |
|                                                  |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |
| **North        Africa**                               |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |
| Algeria                                               |   | 1981                           |   | 29                      |   | 3,225                                          |   | 760                            |   | Onshore            |   | 20                             |   | 12                         |
| Egypt                                                 |   | 1954                           |   | 40                      |   | 12,429                                         |   | 1,881                          |   | Onshore/Offshore   |   | 34                             |   | 27                         |
| Libya                                                 |   | 1959                           |   | 7                       |   | 21,268                                         |   | 8,053                          |   | Onshore/Offshore   |   | 11                             |   | 7                          |
| Tunisia                                               |   | 1961                           |   | 11                      |   | 3,784                                          |   | 1,888                          |   | Onshore/Offshore   |   | 8                              |   | 5                          |
|                                                  |   |                           |   | **87**                  |   | **40,706**                                     |   | **12,582**                     |   |               |   | **73**                         |   | **51**                     |
| **West        Africa**                                |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |
| Angola                                                |   | 1980                           |   | 52                      |   | 1,651                                          |   | 715                            |   | Offshore           |   | 32                             |   | 37                         |
| Congo                                                 |   | 1968                           |   | 17                      |   | 6,240                                          |   | 741                            |   | Offshore           |   | 16                             |   | 8                          |
| Nigeria                                               |   | 1962                           |   | 55                      |   | 7,771                                          |   | 4,878                          |   | Onshore/Offshore   |   | 119                            |   | 128                        |
|                                                  |   |                           |   | **124**                 |   | **15,662**                                     |   | **6,334**                      |   |               |   | **167**                        |   | **173**                    |
| **North Sea**                                         |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |
| Norway                                                |   | 1965                           |   | 50                      |   | 7,086                                          |   | 316                            |   | Offshore           |   | 12                             |   | 13                         |
| the        United Kingdom                             |   | 1964                           |   | 55                      |   | 1,518                                          |   | 665                            |   | Offshore           |   | 28                             |   | 16                         |
|                                                  |   |                           |   | **105**                 |   | **8,604**                                      |   | **981**                        |   |               |   | **40**                         |   | **29**                     |
| **Rest of        World**                              |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |
| Australia                                             |   | 2001                           |   | 13                      |   | 16,968                                         |   | 1,643                          |   | Offshore           |   | 2                              |   | 1                          |
| China                                                 |   | 1983                           |   | 4                       |   | 218                                            |   | 106                            |   | Offshore           |   | 8                              |   | 4                          |
| Croatia                                               |   | 1996                           |   | 3                       |   | 3,028                                          |   | 988                            |   | Offshore           |   | 2                              |   | 6                          |
| Ecuador                                               |   | 1988                           |   | 1                       |   | 2,000                                          |   | 2,000                          |   | Onshore            |   | 1                              |   | 1                          |
| Indonesia                                             |   | 2001                           |   | 11                      |   | 16,408                                         |   | 984                            |   | Onshore/Offshore   |   | 7                              |   | 8                          |
| Iran                                                  |   | 1957                           |   | 4                       |   | 423                                            |   | 423                            |   | Onshore/Offshore   |   | 4                              |   |                       |
| Kazakhstan                                            |   | 1995                           |   | 6                       |   | 879                                            |   | 455                            |   | Onshore/Offshore   |   | 1                              |   | 2                          |
| Pakistan                                              |   | 2000                           |   | 13                      |   | 8,050                                          |   | 635                            |   | Onshore            |   | 5                              |   | 2                          |
| Trinidad & Tobago                                 |   | 1970                           |   | 1                       |   | 66                                             |   | 66                             |   | Offshore           |   | 3                              |   | 2                          |
| United        States                                  |   | 1968                           |   | 299                     |   | 2,240                                          |   | 373                            |   | Onshore/Offshore   |   | 14                             |   | 5                          |
| Venezuela                                             |   | 1998                           |   | 3                       |   | 713                                            |   | 131                            |   | Onshore/Offshore   |   | 5                              |   | 2                          |
|                                                  |   |                           |   | **358**                 |   | **50,993**                                     |   | **7,804**                      |   |               |   | **52**                         |   | **33**                     |
| Other                                                 |   |                           |   | 9                       |   | 1,280                                          |   | 1,112                          |   |               |   |                           |   | 1                          |
| Other        countries with only exploration activity |   |                           |   | 22                      |   | 83,299                                         |   |                           |   |               |   |                           |   |                       |
| Outside Italy                                         |   |                           |   | 705                     |   | 200,544                                        |   | 28,813                         |   |               |   | 332                            |   | 287                        |
| **Total**                                             |   |                           |   | **919**                 |   | **234,180**                                    |   | **41,997**                     |   |               |   | **413**                        |   | **372**                    |
|                                                  |   |                           |   |                    |   |                                           |   |                           |   |               |   |                           |   |                       |

----

|   |   |                      |
|--------|--------|---------------------------|
| (1)    |   | Square        kilometers. |

 

> 
***Divestment of proved and unproved property***

As part of the rationalization strategy relating to its assetportfolio, aimed at increasing value by focusing on strategicareas with good growth potential and divesting marginal assets,Eni carried out the following agreements:

| • |   | the sale of Eni’s        interests in Blocks T (Eni operator with an 88.74%        interest) and B (Eni operator with an average 70.2%        interest) located in the British section of the North Sea        off the Scottish coast to Canadian Natural Resources Ltd,        for euro 158 million. The T Block includes the Tiffany,        Tony and Thelma producing fields, while the B Block        includes the Balmoral, Stirling and Glamis fields;                                                                     |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the sale of the entire share        capital of Stargas SpA (Eni’s interest 100%) to Gas        Plus for euro 139 million. Stargas assets include: (i) 42        natural gas and condensate production concessions and 3        exploration permits, located mainly in the production        areas of Fornovo Taro, Montecorsaro, Lucera and Policoro        in Central-Southern Italy; (ii) gas transmission and        treatment infrastructure; (iii) real estate; and (iv)        Eni’s 81.63% interest in Reggente SpA; |
| • |   | the sale to the Russian        company Lukoil for euro 114 million of Eni’s stake        (50%) in the joint venture LukAgip, holder of a 10%        interest in the Shakh Deniz field under development in        the Azeri Caspian Sea and some minority stakes in        companies operating in the transport and sale of gas in        Azerbaijan, as well as a 24% interest in the onshore        Meleiha field, in Egypt, operated by Eni. LukAgip is now        100% owned by Lukoil;                                      |
| • |   | the sale of Eni’s        interest in the Markham and JC3 gas fields located in the        Southern section of the North Sea to CH4 Energy Ltd for        euro 39 million;                                                                                                                                                                                                                                                                                                                                                        |
| • |   | the sale of Eni’s        proved and unproved property in Gabon consisting of its        interests in the offshore Limande oil field (Eni operator        with an 80% interest) and in three offshore exploration        permits M’Polo, Chaillu and Meboun (Eni operator        with a 50% interest) to the independent oil company        Perenco for euro 23 million;                                                                                                                                                     |
| • |   | the sale of exploration        permits in Mauritania and marginal interests located        offshore in the Gulf of Mexico.                                                                                                                                                                                                                                                                                                                                                                                                            |

 

The transactions described above entailed proceeds of euro 548million.

Eni’s principal regions of operations are describedbelow. In the discussion that follows references to hydrocarbonproduction are to be intended to be hydrocarbon productionavailable for sale.

> 
*Italy*

In 2004, Eni’s hydrocarbon production in Italy totalled266 KBOE/d and represented 17% of Eni’s total production.Eni’s exploration and development interests in Italy areconcentrated in the Adriatic Sea, the Central Southern Apennines,Sicily and the Sicilian offshore and the Po Valley. Natural gasproduction available for sale averaged 1,067 mmCF/d andrepresented approximately 70% of Eni’s hydrocarbonproduction in Italy. Eni’s principal natural gas fields arelocated in the Adriatic Sea (Barbara, Angela/Angelina, PortoGaribaldi/Agostino, Cervia/Arianna, Porto Corsini, Regina andBonaccia, which collectively accounted for 54% of Eni’snatural gas production in Italy in 2004) and in the Ionian Sea(Luna, which accounted for 9%).

Production of oil in Italy averaged 80 KBBL/d. Eni’sthree major oil fields, Val d’Agri in Southern Italy,Villafortuna in the Po Valley and Gela in Sicily, represented 75%of Eni’s total oil production in Italy in 2004. Other oilfields are Aquila in the Adriatic offshore of Southern Italy,Rospo in the Adriatic Sea, Prezioso and Vega offshore SouthernSicily, and Giaurone and Ragusa in Sicily.

Exploration activities onshore yielded positive results withthe following wells operated by Eni: (i) Civita 1 Dir (Eni’sinterest 70%), a gas bearing well located in the Civitaconcession in Central Italy; (ii) Tresauro 1 Dir (Eni’sinterest 45%) in the Tresauro concession in Sicily containingoil; (iii) Monte dell’Aquila 1 Dir (Eni’s interest100%) in the Bronte S. Nicola concession in Sicily containing gasand condensates; and (iv) the non-operated Monte Guzzo 1 Dirwell, in the Montegranaro concession (Eni’s interest 25%)containing gas in Central Italy.

Two significant seismic acquisitions were made in the SicilyChannel in the area of the Panda field for a total area of 800square kilometers and in North-Western Sicily in theCasteltermini permit for a total area of 200 square kilometers.

In the Val d’Agri the fourth treatment train of the oilcenter was started-up and three new wells are being drilled,bringing the number of existing wells to 33 (19 of these are inproduction). Production is expected to peak at 73 KBOE/d net toEni in 2006.

The Ministry of Productive Activities awarded to Eni the CasaSchillaci concession (Eni’s interest 100%) where the PizzoTamburino gas and liquids field was discovered. An EPC contractis being awarded for the development of the field, with start-upexpected in 2005 and an estimated peak production of 1.2 KBOE/din 2006.

In the Villafortuna/Trecate field (Eni’s interest 100%)the Villafortuna 1 bis Dir well was drilled for the recovery ofresidual reserves. 

Production maintenance actions were performed on the offshoreBarbara E-G, Emilio and Agostino (Eni’s interest 100%) andRegina (Eni operator with a 75% interest) fields through thedrilling of infilling wells and sidetrack activities, increasingproduction by about 141 mmCF/d.

During 2004 development resumed at the Naide field with theinstallation of a platform, the laying of pipe linking it withCervia and the drilling of a development well.

As part of the portfolio rationalization process, in May 2004Eni sold its subsidiary Stargas SpA which owned proved andunproved property and whose production in 2003 averaged about 5KBOE/d, consisting mainly of natural gas.

> 
*North Africa*

Eni’s operations in North Africa are conducted inAlgeria, Egypt, Libya and Tunisia. In 2004, North Africaaccounted for 23% of Eni’s total worldwide production ofhydrocarbons.

*Algeria* Eni has been present in Algeria since 1981. In2004, Eni’s oil production averaged 66 KBBL/d.

The principal oil producing fields operated by Eni are locatedin the Bir Rebaa area in the South-Eastern desert and include:(i) BRN, BRW, BRSW, HBN, ROM, ZEK, ZEA and ROME (Eni’s sharebetween 50%-100%), which accounted for approximately 48% ofEni’s production in 2004 in Algeria; and (ii) ROD andsatellites (Eni operator of the production phase with a 63.96%interest). Other interests held by Eni are HBNS (Eni’sinterest 12.25%) and Ourhoud (Eni’s interest 4.59%), whichin 2004 accounted for approximately 39% of Eni’s productionin Algeria.

In 2004, in Block P 404 area B (Eni’s interest 25%) inthe Berkine North East area, near the Ourhoud field, the BKNE-B-2appraisal well confirmed the presence of hydrocarbons at a depthof about 3,000 meters.

In October 2004 production of the ROD and satellites oilfieldsin early production in the Bir Rebaa oil center started with aflow of 8 KBBL/d. These fields are located in Blocks 401a/402aand 403a/403d. Production was initially treated at existingfacilities. In December 2004 a dedicated treatment plant startedoperations. When completed, this facility is expected to have acapacity of 80 KBBL/d and production net to Eni is expected toreach a 28 KBBL/d peak in 2005.

In December 2004 the REC field located near the Bir Rebaa oilcenter started production at an initial level of over 2 KBBL/dnet to Eni.

*Egypt* Eni has been present in Egypt since 1954. In2004, fields operated by Eni with a production level of 472KBOE/d (194 KBOE/d net to Eni) accounted for 40% of Egypt’stotal annual hydrocarbon production.

In 2004, oil and condensate production averaged 94 KBBL/d netto Eni and came mainly from the Eni operated Belayim and Ashrafifields in the Gulf of Suez, which covered 83% of Eni’s crudeoil production in Egypt.

In 2004, natural gas production available for sale averaged579 mmCF/d net to Eni. The main natural gas producing interestsoperated by Eni are concentrated in the Nile Delta – onshorethe Abu Madi and el Qar’a interests and in the Mediterraneanoffshore, the North Port Said (former Port Fouad), Baltim, Ras elBarr and el Temsah interests. Production from these concessionscovered over 95% of Eni’s natural gas production in Egypt.

In 2004, exploration produced positive results in thefollowing concessions: (i) Sinai 12 leases (Eni’s interest50%) located offshore in the Gulf of Suez, where the BMW-1exploration well found four oil mineralized levels and was linkedto existing production facilities; (ii) Ras el Barr (Eni’sinterest 25%) located offshore in the Nile Delta, where theTaurt-1 and Taurt-2 exploration wells found gas mineralizedlevels; and (iii) Ashrafi (Eni’s interest 50%) located inthe Gulf of Suez where the Ashrafi H 1X Dir and Ashrafi J-1X Dirshowed oil mineralized levels. The first well was linked toexisting production facilities. In the Port Fouad concession(Eni’s interest 50%) two gas discoveries were made with theAnshuga 1 and Gambari 1 wells.

In 2004, Eni was assigned three new areas in the Delta (Blocks32, 24 and 26) and one in the Western Desert (Block 10).

Development activities are ongoing in the natural gas fieldslocated in the following concessions in the Nile Delta offshore:(i) North Port Said (Eni’s interest 50%) where the Nouras Aand Nouras B fields started production. Construction workcontinued at the Barboni development platform and for theextension of the El Gamil terminal. In 2004, production of gasincreased from 247 to 350 mmCF/d net to Eni; (ii) Baltim(Eni’s interest 25%) where work continued for theinstallation of the Baltim North platform and relevant onshorefacilities at Abu Madi, whose completion is expected by the endof 2005 in order to reach the contract production level of 212mmCF/d (64 mmCF/d net to Eni); and (iii) El Temsah (Eni operatorwith a 25% interest) where production is expected to start in thefirst quarter of 2005 from the recently installed Temsah 4platform, which will offset the production decline related to anaccident that occurred in August 2004 on the Temsah NW platform.Further development activity is planned in this concession withthe objective to reach a peak production of 184 mmCF/d in 2007.

In December 2004, the LNG production plant at Damietta wasstarted-up. The plant (Eni’s interest 40%) has a treatmentcapacity of 268 BCF/year. Eni plans to supply 106 BCF/year of itsnatural gas production volumes to this plant in the next 20years. A second liquefaction train is planned to be installed atthe plant with the same capacity of the first train. Eni willsupply its production gas to this line as agreed in an intentprotocol signed with the Egyptian Government in March 2005.

In January 2005, the NGL plant in Port Said was started-up.The plant (owned by UGDC – Eni’s interest 33%) has atreatment capacity of 1,095 mmCF/d of natural gas and annualproduction of 330,000 tonnes of propane, 432,000 tonnes of LPGand 1.2 mmBBL of condensates.

*Libya* Eni started operations in Libya in 1959 with oilfields operated by Eni accounting for approximately 19% ofLibya’s annual oil production.

In 2004, Eni’s hydrocarbon production averaged 94 KBOE/d,of these 95% was oil. The main oil fields operated by Eni areBu-Attifel (Eni’s interest 50%) onshore in theCentral-Eastern desert and Bouri (Eni’s interest 30%) in theMediterranean offshore facing Tripoli, which accounted for 73% ofEni’s production in Libya.

Joint development of the gas, oil and condensate fields ofWafa, located in NC-169 A permit, 520 kilometers South-West ofTripoli, and Bahr Essalam in the NC-41 permit, located in theMediterranean offshore, 110 kilometers North of Tripoli, isunderway. Eni is partner of the development with a 50% interest.Within the development of the Wafa field 24 of the 30 plannedproducing wells have been completed, as well as the condensatetreatment plant and the laying of the pipeline for thetransmission of liquids and gas to the Mellitah treatment plant.In September 2004 the first gas shipments were made for theGreenstream gasline and the first shipments of liquids for theMellitah plant. Within the development of the Bahr Essalamoffshore field, 17 producing wells of the 27 planned werecompleted and, the Sabratha platform is nearing completion alongwith the laying of the underwater pipeline for the transmissionof liquids and gas to the Mellitah treatment plant. Production isexpected to start in the second half of 2005. Peak productionfrom the two fields at 240 KBOE/d (124 KBOE/d net to Eni) isexpected in 2006. Eni expects its share of capital expenditurefor this project to amount to approximately euro 3.1 billion forthe upstream phase alone.

Supply in Italy of natural gas through the underwaterGreenstream gasline linking Mellitah to Gela in Sicily started onOctober 1, 2004. When fully operational the gasline will allowthe export and sale to third parties 283 of 353 BCF/year ofnatural gas produced from these two fields (see "Gas &Power").

Early production was started in January 2004 at the Elephant(el Feel) oil field in the NC-174 onshore permit (Eni operatorwith a 33.33% interest) at 6 KBBL/d net to Eni. The developmentof this field aims at reaching peak production of 150 KBBL/d (27KBBL/d net to Eni) in 2007. Production will be delivered to theMellitah terminal through a 725-kilometer long pipeline with a30-inch diameter, currently under construction.

In the medium term, according to management’s plans, thereaching of full production of fields under development will leadto a significant increase in Eni’s hydrocarbon production inLibya from current levels.

> 
*West Africa*

Eni’s operations in West Africa are conducted in Angola,Congo and Nigeria. In 2004, West Africa accounted for 20% ofEni’s total worldwide production of hydrocarbons.

*Angola*Eni has been present in Angola since 1980. In2004, Eni’s oil production averaged 78 KBBL/d. Eni’smain oil producing fields are located in Block 0 in Cabinda(Eni’s interest 9.8%), Block 14 (Eni’s interest 20%)and Block 15 (Eni’s interest 20%). The main oil fields inBlock 0 are Takula, Nemba and Malongo, which in 2004 accountedfor approximately 50% of Eni’s production in Angola.

The national oil company Sonangol renewed the explorationlicense for Block 14 until March 1, 2007, based on a newexploration program. The exploration license for offshore Block0-former Cabinda (Eni’s interest 9.8%) was renewed untilDecember 31, 2030.

In Block 14K/A-IMI (Eni’s interest 10%), deriving fromthe unitization of areas formerly belonging to Block 14 and toBlock Haute Mer (Congo), the Lianzi 1 well yielded 12 KBBL/d ofhigh quality oil in test production.

In area B of Block 0 in January 2005 production started at theBomboco oil field, while development is underway at the NorthSanha field, which will produce condensates and LPG, and isexpected to start-up in the second quarter of 2005. Peakproduction is expected at 100 KBBL/d (11 KBBL/d net to Eni) in2007.

The main field in the deep waters of Block 14 is Kuito, whichin 2004 produced approximately 57 KBBL/d (10 KBBL/d net to Eni).In this block development is underway of the Benguela/Belize andLobito/Tomboco oil fields. The project provides for two phases;the first one between 2005 and 2006 for the development of theBenguela/Belize fields by means of the installation of aCompliant Piled Tower (CPT) at a depth of 400 meters and thesecond one between 2006 and 2007 for the development of theLobito/Tomboco fields through the drilling of underwater wellsand their linkage to the production facilities of the CPT. Atotal of 52 development wells will be drilled (31 producing and21 water injection wells). Production is scheduled to start in2006 by means of the Kuito FPSO vessel, reaching a peak of 34KBBL/d net to Eni in 2008. Eni expects its share of capitalexpenditure for this project to amount approximately to dollar440 million.

In August 2004 the Hungo and Chocalho oil fields startedproduction as part of Phase A of the development project offields discovered in the area called Kizomba in Block 15(Eni’s interest 20%) in the Angolan offshore at a waterdepth of about 1,500 meters. A total of 59 wells will be drilledand completed by an underwater system connected to a Tension LegPlatform linked to an FPSO vessel with a treatment capacity of250 KBBL/d. Production is expected to peak at 43 KBBL/d net toEni by 2006.

In this same area Phase B is underway under a project schemesimilar to that of Phase A, aimed at the development of theKissanje and Dikanza oil fields. Production is expected to startin the fourth quarter of 2005 and to peak at 250 KBBL/d (43KBBL/d net to Eni) by 2007. Eni expects its share of capitalexpenditure for this project to amount to approximately dollar700 million.

In Block 15 in 2004, the Mondo project was approved as part ofPhase C of the development of the Kizomba area fields. Productionis expected to start in 2007 and to peak at 125 KBBL/d (18 KBBL/dnet to Eni) by 2008. Eni expects its share of capital expenditurefor this project to amount to approximately dollar 300 million.

In the medium term, according to management’s plans, thereaching of full production of fields started-up in 2004 and thecontribution of new development projects will allow Eni’sproduction in Angola to increase significantly from currentlevels.

*Congo* Eni has been present in Congo since 1968 and isthe second largest international oil producer, with oil fieldsoperated by Eni accounting for 34% of Congo’s total oilproduction in 2004 (72 KBBL/d net to Eni). Eni’s principaloil producing interests operated in Congo are located in theoffshore facing Pointe Noire and include: the Zatchi, Foukanda,Mwafi and Djambala fields (Eni’s interest 65%), the Loangofield (Eni’s interest 50%) and the Kitina field (Eni’sinterest 35.75%), which together accounted for approximately 60%of Eni’s production in Congo in 2004. Other fields arePointe Noire Grand Fond and Pex (Eni’s interest 35%,) whichaccounted for approximately 40% of Eni’s production in Congoin 2004.

In February 2004 an oil discovery was made in the Mer TrèsProfonde Sud permit (Eni’s interest 30%) with the PegaseNord Marine 1 exploration well, which yielded 14 KBBL/d in testproduction from four mineralized levels.

*Nigeria* Eni has been present in Nigeria since 1962. In2004, Eni’s hydrocarbon production averaged 158 KBOE/d andaccounted for approximately 10% of Nigeria’s hydrocarbonproduction.

In 2004, exploration gave positive results, four discoverieswere made in onshore production areas in the OML 60/61/62/63permits (Eni operator with a 20% interest) with the Osiama CreekSouth 1 Dir and 2 Dir, Obutoru Creek 1 Dir ST1 and Obiafu 34wells all containing mainly oil. Two discoveries were made inconventional offshore areas: (i) in the OML 74 permit (Eni’sinterest 12.86%) with the JKG1-X well containing oil and gas;(ii) in the OML 116 permit with the Agbara Deep 1 Dir ST1 Appr. Awell which found deep levels mineralized with gas andcondensates.

Eni’s principal producing fields in Nigeria are locatedin: (i) four onshore Blocks (OML 60/61/62/63) in the Niger Delta(Eni’s interest 20%), which in 2004 accounted for 22% ofEni’s production in Nigeria; (ii) the offshore OML 125 Block(Eni’s interest 50.19%), where the Abo field is located,which produced over 13 KBBL/d net to Eni in 2004. The developmentof other levels of the Abo field is expected to allow Eni toachieve a production peak of 45 KBBL/d (18 KBBL/d net to Eni) in2007; and (iii) the offshore OML 119 Block (former OPL 91),operated through a service contract, where the Okono and Okpohooil fields are located.

Eni also holds a 5% interest in NASE, the largest oil jointventure in the country relating to 36 onshore blocks. The majordevelopment projects underway are Cawthorne Channel andForcados/Yokri, which involve drilling infilling wells inproducing fields and expanding existing production facilities.Natural gas production commenced at Cawthorne Channel in March2005 (134 mmCF/d), at Forcados/Yokri in October 2004 (81 mmCF/d).Natural gas from the two fields is destined for the Bonnyliquefaction plant. Oil production from the two fields isexpected to peak at 90 KBBL/d of oil (5 KBBL/d net to Eni) in2006.

Development initiatives are ongoing in the OML 60 and 61permits (Eni operator with a 20% interest) for guaranteeingnatural gas supplies to the six trains of the Bonny liquefactionplant (three already operating, two with start-up expected in2005), which will bring the completed plant to a productioncapacity of 936 BCF/year of LNG in 2007 (Eni’s interest10.4%, see "Gas & Power - Development Projects").When the plant is in full operation, Eni will supply 254 mmCF/dof its production volumes of natural gas.

The Kwale-Okpai combined cycle power station (Eni’sinterest 20%) started operations in April 2005, with a generationcapacity of 480 megawatts on two turbogenerators. The powerstation is fed with gas from the Kwale fields in Block OML 60(Eni operator with a 20% interest) which will supply up to 71mmCF/d of natural gas when the power station is fullyoperational.

Eni holds a 12.5% interest in the Bonga oil field located inoffshore Block OML 118 at a water depth between 950 and 1,150meters, where development is underway. Exploration, stillunderway, was successful with the Bonga West well that foundvarious mineralized levels and with the Bonga N 1X well.Production is expected to start in late 2005, with a peak flow of190 KBBL/d (21 KBBL/d net to Eni) in 2007. Eni expects its shareof capital expenditure for this project to amount toapproximately dollar 300 million.

In the offshore OML 119 permit (Eni operator of the servicecontract), in January 2004 the FPSO Mystras started operations.Drilling, connection and production start-up of the Okpohoplatform was completed. Production from the Okono and Okpoho oilfields amounted to about 55 KBBL/d (27 KBBL/d net to Eni) in2004.

According to management's plants, in the medium term, thedevelopment initiatives underway will lead to a significantincrease over current levels in Eni’s production in Nigeria.

> 
*North Sea*

Eni’s operations in the North Sea area are conducted inNorway and the United Kingdom. In 2004, the North Sea accountedfor 19% of Eni’s total worldwide production of hydrocarbons.

*Norway* Eni has been operating in Norway since 1964. In2004 Eni’s hydrocarbon production averaged 141 KBOE/d.Eni’s principal producing interests are the Ekofisk field(Eni's interest 12.39%) in the North Sea, and the Aasgard (Eni'sinterest 14.9%) and Norne (Eni's interest 6.9%) fields in theNorwegian Sea which together accounted for 85% of Eni’sproduction in Norway in 2004.

Eni is operator with interests ranging from 20% to 70% in 9licenses. In the Barents Sea Eni holds interests in 30 licenseswith interests varying from 5 to 50% and is operator of the PL201 and PL 229 permits (with Eni's interests of 67% and 65%,respectively), where the Goliath field was discovered in 2000.

In 2004 in the PL 128 permit (Eni’s interest 11.5%),exploration activities led to the drilling of the Linerle wellcontaining oil.

In June 2004 Eni was awarded four exploration licenses (PL324,PL329, PL325 and PL323) in the Norwegian Sea, the latter two asoperator with a 40% interest. In Eni’s view, these licenseshave great mineral potential and represent a new opportunity tostrengthen its strategic position in Norway.

Development of the Kristin gas and oil field (Eni’sinterest 9%) located in the PL134 permit in the Haltenbanken areain the Norwegian Sea continued in 2004. The development planforesees the drilling of 12 underwater wells, the installation ofa semi-submersible platform with treatment facilities and thelaying of a gas pipeline connecting it with the Aasgard TransportPipeline, 10 kilometers from Kristin, and of a 20-kilometer longoil pipeline to carry condensates to the Aasgard C storagevessel. Production from Kristin is expected to start in October2005 and to peak at 211 KBOE/d (19 KBOE/d net to Eni) in 2006.Eni expects its share of capital expenditure for this project toamount to approximately dollar 256 million.

In the PL128 permit (Eni’s interest 11.5%) development isunderway of the (mainly oil) Svale and Staer fields. Theirproximity to the Norne production and transport infrastructure(Eni’s interest 6.9%) allows for synergies. Production isexpected to start in late 2005 and to peak at 6 KBBL/d net to Eniin 2006.

*The United Kingdom* Eni has been present in the UnitedKingdom since 1964. In 2004 Eni’s production of hydrocarbonsaveraged 159 KBOE/d.

Eni’s principal producing interests in the United Kingdomare Elgin/Franklin (Eni’s interest 21.87%), MacCulloch(Eni’s interest 40%), fields located in the Liverpool Bay(Eni’s interest 53.9%) and J-Block (Eni’s interest33%). In 2004 these fields accounted for 71% of Eni’sproduction in the United Kingdom.

Eni holds interests in various exploration licenses in thedeep offshore. In Block 206/1 (Eni’s interest 20%) locatedWest of Shetland, the appraisal campaign was successfullycompleted with the gas and condensate Laggan discovery, where twoappraisal wells were drilled in water depths of 600 meters. InSeptember 2004, the well 2006/4AZ was tested at 37.8 mmCF/d ofgas. Information gathered is presently being analyzed and will beintegrated into the necessary studies for the final decision forthe development of Laggan.

Within the rationalization process of Eni’s assetportfolio in the North Sea following the purchase ofBritish-Borneo and Lasmo, Eni sold its interests in the T-Block(Eni operator with an 88.87% interest) which contains the Thelma,Tiffany and Tony oil fields, and in the B-Block (Eni operatorwith an average interest of 60%), where the Balmoral, Glamis andStirling oil fields are located, as well as its interest in theMarkham gas field (Eni operator with a 37.53% interest) offshorethe Netherlands.

> 
*Rest of the World*

In 2004, Eni’s operations in the rest of the worldaccounted for 21% of its total worldwide production ofhydrocarbons.

In *Saudi Arabia* in March 2004 Eni, as operator of aconsortium with an international oil company and Saudi Aramco,was awarded an exploration license (Eni interest being 50%) forexploration, development and production of natural gas in the Carea covering approximately 52,000 square kilometers in the Rubal Khali basin at the border with Qatar and the United ArabEmirates. The project provides for geophysical surveys and thedrilling of 4 exploration wells. The gas discovered will be soldto the domestic market for power generation, water desalinizationand as feedstock to petrochemical plants. Condensates and LPGextracted from the gas will be exported to international markets.This project marks Eni’s return to upstream activities in acountry where it had operated in the early 1970s.

*Australia* Eni has been present in Australia since 2000.In 2004, Eni’s hydrocarbon production averaged 20 KBOE/dmainly of oil.

Eni holds interests in 9 exploration licenses in theNorth-Western offshore, in seven of which it is operator withinterests ranging from 65% to 100%. Three of these licenses arelocated in the Timor Sea (WA-280-P, AC/P-21 and TP-22), and fourin the Western offshore (WA-326-P, WA-328-P, WA-25-L andWA-22-L).

In June 2004 in the WA-25-L permit (Eni is operator with a 65%interest) near the WA-234-P permit where the Woollybutt field islocated, drilling of the Scallybutt-1 appraisal well started andidentified hydrocarbon reserves on the Western side ofWoollybutt. Evaluations are underway for defining the amount ofadditional reserves present.

In February 2004 production started from the offshore gas andliquid Bayu Undan field (Eni’s interest 12.04%) located inthe Zoca 91/12-13 Block in the international cooperation areabetween Australia and East Timor, at a water depth of 80 meters.In 2004, the field produced about 6 KBBL/d net to Eni. Productionis scheduled to peak at about 160 KBBL/d (18 KBBL/d net to Eni)in 2009. The project includes two phases. The first phase,started in February 2004, for the development of liquids and thesecond phase, excepted to commence late in 2006 for thedevelopment of LNG. In phase one three production and treatmentplatforms, relevant facilities and an FSO vessel for the storageof liquids have been installed. The second phase entails theconstruction of a 26-inch diameter 500 kilometer long sealinethat will link the field to Darwin, where an onshore LNG plantwith a 3.5 million tonnes/year capacity is under construction.Under a 17-year long contract, gas produced will be sold to twoJapanese companies, Tokyo Electric and Tokyo Gas, that bought a10.08% interest in the integrated project. LNG production isscheduled to commence in the first quarter of 2006. Eni expectsits share of capital expenditure for this project to amount toapproximately dollar 256 million.

*Azerbaijan*As part of its asset rationalizationprogram, in 2004, Eni divested all its interests in proved andunproved property held in Azerbaijan. Eni still retains a 5%interest in the Baku-Tblisi-Ceyhan pipeline (BTC) correspondingto a right to transport up to 50 KBBL/d of crude oil.

*Croatia*Eni, through a 50/50 joint venture with INA,the national Croatian company, operates the Ivana natural gasfield, located 40 kilometers West of Pola in the Adriaticoffshore in approximately 40 meter deep waters. The field isoperated through a main production platform, called Ivana A, andthree satellite platforms, Ivana B, D and E.

In November 2004 the Marica field started production at 2KBOE/d net to Eni. In the medium term the reaching of fullproduction at Marica and the development of other fieldsdiscovered in the area – Ivana C/K, Ika, Ida, Katarina andAnnamaria – are expected to increase Eni’s currentproduction level of 6 KBOE/d, until reaching a peak production of10 KBOE /d net to Eni in 2007.

*Indonesia*Eni has been present in Indonesia since 2000.In 2004, hydrocarbon production net to Eni averaged 29 KBOE/d.Eni’s producing interests are located in the onshore area inEast Kalimantan (Borneo) regulated by the Sanga Sanga PSA(Eni’s interest 37.81%) operated by Virginia Indonesia Co,in which Eni holds a 50% interest. This area produces mainlynatural gas (about 80%). This gas is treated at the Bontangliquefaction plant, the largest in the world, and is exported tothe Japanese, South Korean and Taiwanese markets.

Eni’s exploration activities in Indonesia focus on thedeep offshore of East Kalimantan (Borneo). Eni holds interests in8 exploration permits with interests ranging from 20% to 50%(Ganal, Rapak, Popodi, Papalang, Muara Bakau, Ambalat and Bukat),and 100% in the Bulungan Block in the Tarakan basin. Eni isoperator of Muara Bakau, Ambalat, Bukat and Bulungan located inthe Kutei and Tarakan oil basins.

In the Ganal exploration area (Eni’s interest 20%) in theKutei basin, the Gehem-2 and Gehem-3 exploration wells, drilledto a total depth of 5,360 and 5,000 meters, respectively,confirmed the extension of the gas and condensates bearing strataalready identified by the previous well Gehem-1 and identified anew oil bearing area. According to the development plan, gasproduced will be sent to the Bontang liquefaction plant. Thisproject is the first step of the Kutei Master Plan for theintegrated development of all discoveries in the area (includingGehem, Gada, Gula and Ranggas).

Appraisal activities on the Gula discovery had a positiveoutcome. The exploration well Gula-3 drilled at a depth of 5,335meters allowed identification of further gas bearing strata.

In the Bukat permit in Tarakan, Eni as operator made an oiland gas discovery currently under evaluation.

*Iran* Eni has been present in Iran since 1957. In 2004,liquid production net to Eni averaged 9 KBBL/d. The mainproducing oil fields operated by Eni under buy back contracts areSouth Pars phases 4 and 5 (Eni operator with a 60% interest) inthe offshore of the Persian Gulf and Darquain (Eni operator witha 60% interest) onshore. Eni also holds interests in the Dorood(45%) and Balal (38%) fields in the offshore of the Persian Gulf.

In October 2004 production of the natural gas and condensateSouth Pars field phases 4 and 5 commenced. The project providesfor: (i) the drilling of 24 wells; (ii) the installation of twooffshore platforms in waters about 70 meters deep and offacilities for transporting the raw gas onshore; and (iii) theconstruction of an onshore gas center at Assaluyeh for theseparation of ethane, propane, butane and condensates.

The contract provides that the field’s liquid productionbe used to compensate costs incurred and to provide return oninvested capital.

At the end of 2004 production amounted to over 706 mmCF/d ofnatural gas and is expected to reach 706 BCF/year of gas and,after the separation, one million tonnes/year of propane andbutane and 80 KBBL/d of condensates. In December production ofliquids started with about 30 KBBL/d net to Eni. A productionpeak of 53 KBBL/d net to Eni is expected in 2008.

Development continued at the Darquain oil field (Eni operatorwith a 60% interest) located onshore about 50 kilometersNorth-East of Abadan. The first phase was completed with thedrilling of 8 wells, the construction of an oil center withrelevant facilities and meeting the production target set at 50KBBL/d (about 4 KBBL/d net to Eni). The second development phaseproviding for the drilling of 19 additional wells and theexpansion of the oil center capacity to 165 KBBL/d by means ofgas injection was started. A production peak of approximately 17KBBL/d net to Eni is expected in 2007.

The development of the Dorood oilfield (Eni’s interest45%) near the Kharg island continued. The completion of drillingis expected in 2006. Production is expected to peak at 85 KBBL/d(10 KBBL/d net to Eni) at the end of 2005.

*Kazakhstan* Eni has been present in Kazakhstan since1992. Eni, with an 18.52% interest, is operator for a consortiumof six international oil companies and the national Kazakhcompany Kazmunaygaz (KMG) under the North Caspian Sea. Theconsortium changed its structure in March 2005 when British Gasleft the project. The remaining members exercised theirpre-emptive right and acquired British Gas’s interest(16.67%) in proportional shares and sold half of this newlyacquired interest to KMG now new partner of the PSA. Theconsortium is involved in the exploration and production ofhydrocarbons in the offshore area where the Kashagan field wasdiscovered; management considers this field to be the mostimportant discovery in the world in the past thirty years. OnFebruary 25, 2004 the development plan for Kashagan was approvedby the Kazakh authorities. The plan will be implemented inmultiple phases. Production is expected to start in 2008 at aninitial level of 75 KBBL/d and to increase to 450 KBBL/d at theend of the first development phase. Production plateau istargeted at 1.2 mmBBL/d. Total capital expenditure is estimatedat dollar 29 billion (5.4 billion being Eni’s share)excluding the capital expenditure for the construction of theinfrastructure for exporting production to international markets,for which various options are being considered by the consortium.One of these options includes the laying of a pipeline connectingKashagan with the BTC pipeline, which is planned to startoperations late in 2005 (Eni’s interest 5%). The developmentof the field provides for the drilling of 280 wells and theconstruction of platforms and artificial islands (hubs) whichwill collect production from satellite islands. Oil andnon-reinjected gas will be treated in the hubs and delivered,through two separate lines, to onshore treatment plants (locatedat Eskene West, near Atyrau). The oil will be further stabilizedand purified; natural gas will be treated for the removal ofhydrogen sulfide and will be mostly used as fuel for theproduction plants. The remaining amounts will be marketed. AtMarch 2005, within the first phase of the field’sdevelopment, contracts for a total of dollar 6.7 billion wereawarded for the construction of infrastructure for developing thefield and for offshore production (drilling, treatment andreinjection of sour gas) and onshore treatment plants. The mostadvanced techniques are going to be applied in the completion ofthe project in order to cope with high pressures in the field andthe presence of hydrogen sulfide. In 2004, the explorationcampaign in the area of the North Caspian Sea PSA was completedwith the testing of the sixth and last commitment well Kairan-1.The campaign had a 100% success rate. Appraisal activities of theother discoveries made in the area (Kalamkas, Kashagan SW, Aktoteand Kairan) gave positive results with the Kashagan KE-6 andAktote AK-2 Dir wells.

Eni, with a 32.5% interest is co-operator with British Gas ofthe Karachaganak project in a consortium composed of fourinternational oil companies. In 2004, production from this field(net to Eni) averaged 54 KBBL/d of liquids and 195 mmCF/d ofnatural gas. The development of the natural gas and condensatefield is organized by stages, in accordance with a FinalProduction Sharing Agreement. On June 9, Eni made its first oilshipment from Karachaganak to the Novorossiysk terminal on theRussian coast of the Black Sea through the Caspian PipelineConsortium (in which Eni holds transport rights up to 3 milliontonnes/year). In the last months of 2004 production of liquidsreached 232 KBBL/d (70 KBBL/d net to Eni).

*United States* Eni has been present in the United Statessince 1966 and holds interests in more than 300 explorationlicenses, in particular as operator with interests varying from30% to 100% in over 50 licenses in the Gulf of Mexico. In 2004,Eni’s hydrocarbon production averaged 43 KBOE/d. The mainproducing fields operated by Eni are Allegheny (Eni’sinterest 100%) Morpeth (Eni’s interest 100%) and King Kong(Eni’s interest 50%), which accounted for 64% of Eni’sproduction in the United States in 2004.

A wide exploration campaign is ongoing that had a positiveoutcome in 2004 with three new oil discoveries: the SouthAllegheny (Eni operator with a 100% interest), North Black Widow(Eni’s interest 30%) and Ulysses (Eni’s interest29.375%) wells. Production is expected to start in 2005 using theproduction facilities of the nearby Allegheny, Morpeth(Eni’s interest 100%) and Medusa (Eni’s interest 25%)fields, respectively.

Furthermore the appraisal wells in the St. Malo discovery(Eni’s interest 1.25%) and the Hadrian exploration well(Eni’s interest 25%) confirmed the presence of commercialquantities of reserves of hydrocarbons.

Eni is operator in the development of the K2 oil field(Eni’s interest 18.17%) where production commenced in May2005. A peak production of 32 KBBL/d (5 KBBL/d net to Eni) isexpected in late 2005.

*Venezuela* Eni has been present in Venezuela since 1998and is operator with a 100% interest of the Dación oil field,regulated by a service contract with a 20 year term. In 2004,production from this field averaged 67 KBBL/d net to Eni.Drilling and workover interventions on producing wells areplanned for maintaining current production levels. Eni holds a26% interest in the Corocoro oil field in the West Paria Gulfblock under development, located at the mouth of the Orinocoriver. Production is expected to start in 2007 with a peak of 14KBBL/d net to Eni in 2008.

Eni holds interests in two exploration permits: Gulf of PariaEast (Eni’s interest 30%) and Gulf of Paria West (Eni’sinterest 40%), both in conventional waters. In 2004, twohydrocarbon discoveries were made (Punta Sur and Tiburon) and anevaluation plan is being prepared.

*Pakistan* Eni has beenpresent in Pakistan since 2000. In 2004, production net to Eniaveraged 45 KBOE/d, mainly of natural gas. The main natural gasproducing fields operated by Eni are Bhit (Eni’s interest40%) and Kadanwari (Eni’s interest 18.42%), which in 2004accounted for 44% of Eni’s production in Pakistan. Eni alsoholds interests in the Sawan (23.68%), Zamzama (17.75%) and Miano(15.16%) fields. In the first quarter of 2005 the Rehmat field(Eni’s interest 30%) was started-up.

Eni is operator in the Manchar (Eni’s interest 55%) andGorakh (Eni’s interest 92.5%) permits in the KirtharFoldbelt area and holds interests between 30% and 40% in fourexploration permits in the Middle Indus Basin. In February 2005,two permits were acquired in the Indus offshore (Blocks M and N,Eni’s interest 100%).

 

> 
***Capital Expenditure***

See "Item 5 – Liquidity and Capital Resources –Capital Expenditure by Segment".

 

> 
***Storage***

Natural gas storage activities are performed by Stoccaggi GasItalia SpA (Stogit) to which such activity was conferred onOctober 31, 2001 by Eni SpA and Snam SpA, in compliance withArticle 21 of Legislative Decree No. 164 of May 23, 2000, whichprovided for the separation of storage from other activities inthe field of natural gas.

Storage services are provided by Stogit through eight storagefields located in Italy, based on ten storage concessions6 vested by the Ministry of ProductiveActivities.

In 2004, Stogit increased storage capacity and the share ofcapacity used by third parties, which reached more than 50%. Fromthe beginning of its operations Stogit markedly increased thenumber of customers served and the share of revenues from thirdparties; from a nearly negligible amount, the latter accountedfor 38% of total revenues in 2004.

| **Storage** |   |   | **2002** |   | **2003** |   | **2004** |
|-------------|--------|--------|----------|--------|----------|--------|----------|
|        |   |   |          |   |          |   |          |

| Available capacity:                                            |                   |   |   |   |   |   |   |
|----------------------------------------------------------------|------------------------|--------|--------|--------|--------|--------|--------|
| -        modulation and mineral                                | (billion cubic meters) |   | 7.1    |   | 7.1    |   | 7.5    |
|   . share utilized by Eni                            | (%)                    |   | 66     |   | 53     |   | 47     |
| -        strategic                                             | (billion cubic meters) |   | 5.1    |   | 5.1    |   | 5.1    |
| Total customers                                                | (No.)                  |   | 20     |   | 30     |   | 39     |
|   .        modulation and upstream storage customers | (No.)                  |   | 14     |   | 24     |   | 29     |
|                                                           |                   |   |        |   |        |   |        |

 

##### Table of Contents

**Gas & Power**

Eni is engaged in the business of natural gas supply,transport and sale mainly in Italy and in the rest of Europe. Eniis also engaged in the business of electricity generation, whichis conducted in Italy.

Eni is pursuing the development of sales in the rest of Europeand in the LNG business in order to compensate for lower growthopportunities on the domestic market due to the limits imposed onoperators by the sector regulation. In Italy, Eni intends tomaintain sales volumes within the regulatory limits through theoptimal allocation of supplies between direct sales in Italy andin the rest of Europe and by using natural gas at its ownelectricity generation plants and, at the same time, leveragingon the expected consumption growth. Eni’s marketing policywill aim to achieve customer satisfaction by means of marketsegmentation, the integration of marketing actions and structuresand the expansion and customization of services offered tocustomers.

The development of sales on the European gas market willleverage the competitive advantage of Eni’s diversifiedportfolio of supply contracts and extensive gas pipeline network,which allows for the supply of natural gas from several sources,as well as the long standing relationships with producingcountries. Eni intends to consolidate its presence in targetmarkets (Iberian Peninsula, Germany and Turkey) and develop salesin markets with significant growth and profitability prospects(in particular France and the United Kingdom).

Eni also intends to expand its presence in LNG in order toincrease the value of its own natural gas reserves in West andNorth Africa, in the Far East and in Latin America. Eni intendsto participate in projects concerning natural gas liquefactionand regasification.

*The matters regarding future natural gas demand and salestarget discussed in this section and elsewhere herein areforward-looking statements that involve risks and uncertaintiesthat could cause the actual results to differ materially fromthose in such forward-looking statements. Such risks anduncertainties relating to future natural gas demand includechanges in underlying economic factors, changes in regulation,population growth or shrinkage, changes in the relative mix ofdemand for natural gas and its principal competing fuels, andunexpected developments in the markets for natural gas and itsprincipal competing fuels.*

 

> 
***Demand for Natural Gas in Italy***

With consumption amounting to 80 billion cubic meters in 2004(increasing by over 3% over 2003) Italy is the third largestEuropean market for natural gas after Great Britain and Germany.In 2004, about 20% of natural gas requirements were met throughdomestic production (including natural gas volumes withdrawn fromstorage), while imports covered 80%.

Eni expects natural gas consumption in Italy to reach about 91billion cubic meters in 2010, corresponding to an annual averageincrease of about 2%.

Most of this increase will concern natural gas used inelectricity generation, because of the significant advantages ofthe use of natural gas in combined cycle plants, due to its lowerinvestment cost, higher yields and reduced polluting emissions ascompared to other fuels. Demand is expected also to increase fromresidential and commercial users, due to the increased use ofnatural gas in residential space heating in households andservices, in large tertiary firms and as vehicle fuel.

 

> 
***Natural Gas Purchases***

In 2004, Eni’s Gas & Power Division supplied 76.72billion cubic meters of natural gas, with a 5.56 billion cubicmeters increase over 2003, up 7.8%, related to higher volumespurchased outside Italy (6.42 billion cubic meters), offset inpart by lower production volumes supplied in Italy (0.86 billioncubic meters). Natural gas volumes supplied outside Italy (65.42billion cubic meters) represented 85% of total supplies (83% in2003).

Outside Italy increases concerned purchases from Russia forItaly (up 1.70 billion cubic meters) partially due to thereaching of full operation of the long-term supply contractsigned in 1996 with Gazexport, from Russia for Turkey (up 0.97billion cubic meters) related to the supply contract with theTurkish company Botas, and from Algeria, the Netherlands, Libyaand Norway (up 2.33, 1.04, 0.55 and 0.30 billion cubic meters,respectively) for both the Italian and European markets. LNGpurchases from Algeria declined (0.71 billion cubic meters) dueto lower supplies from Sonatrach related to an accident occurredin early 2004 at the Skikda liquefaction plant, which reduced itstreatment capacity.

In 2004, a total of 0.93 billion cubic meters of natural gaswere withdrawn from the storage sites of Stoccaggi Gas Italia SpA(Eni’s interest 100%) as compared to 0.84 billion cubicmeters in 2003.

The table below sets forthEni’s purchases of natural gas by source for the periodsindicated.

| **Natural        gas supplies** |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|---------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                            |   |          |   |          |   |          |   |          |   |          |

|   |   | **(billion        cubic meters)** |
|--------|--------|-----------------------------------|

| ***Italy***                                 |   | **13.64** |   |   | **14.62** |   |   | **12.67** |   |   | **12.16** |   |   | **11.30** |   |
|---------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Russia for        Italy                     |   | 21.03     |   |   | 19.51     |   |   | 18.62     |   |   | 18.92     |   |   | 20.62     |   |
| Russia for Turkey                           |   |      |   |   |      |   |   |      |   |   | 0.63      |   |   | 1.60      |   |
| Algeria                                     |   | 21.56     |   |   | 18.39     |   |   | 16.35     |   |   | 16.53     |   |   | 18.86     |   |
| The Netherlands                             |   | 6.09      |   |   | 7.00      |   |   | 7.55      |   |   | 7.41      |   |   | 8.45      |   |
| Norway                                      |   |      |   |   | 1.10      |   |   | 4.83      |   |   | 5.44      |   |   | 5.74      |   |
| Croatia                                     |   |      |   |   |      |   |   | 0.31      |   |   | 0.65      |   |   | 0.68      |   |
| The United        Kingdom                   |   |      |   |   |      |   |   | 1.48      |   |   | 1.98      |   |   | 1.76      |   |
| Hungary                                     |   | 2.67      |   |   | 3.11      |   |   | 3.05      |   |   | 3.56      |   |   | 3.57      |   |
| Libya                                       |   |      |   |   |      |   |   |      |   |   |      |   |   | 0.55      |   |
| Algeria (LNG)                               |   | 2.01      |   |   | 1.79      |   |   | 1.92      |   |   | 1.98      |   |   | 1.27      |   |
| Others        (LNG)                         |   |      |   |   |      |   |   | 0.30      |   |   | 0.72      |   |   | 1.00      |   |
| Other supplies via gasline                  |   |      |   |   |      |   |   |      |   |   |      |   |   | 0.08      |   |
| Other        supplies                       |   | 0.02      |   |   | 0.03      |   |   | 0.03      |   |   | 0.04      |   |   | 0.04      |   |
| Others outside Europe                       |   | 0.94      |   |   | 0.96      |   |   | 0.96      |   |   | 1.14      |   |   | 1.20      |   |
| ***Outside        Italy***                  |   | **54.32** |   |   | **51.89** |   |   | **55.40** |   |   | **59.00** |   |   | **65.42** |   |
| **Total supplies**                          |   | **67.96** |   |   | **66.51** |   |   | **68.07** |   |   | **71.16** |   |   | **76.72** |   |
| Withdrawals        from (inputs to) storage |   | (2.43     | )      |   | 0.13      |   |   | (1.43     | )      |   | 0.84      |   |   | 0.93      |   |
| Network losses and measurement differences  |   | (0.90     | )      |   | (0.92     | )      |   | (0.50     | )      |   | (0.61     | )      |   | (0.52     | )      |
| **Available        for sale**               |   | **64.63** |   |   | **65.72** |   |   | **66.14** |   |   | **71.39** |   |   | **77.13** |   |
|                                        |   |           |   |   |           |   |   |           |   |   |           |   |   |           |   |

 

In order to meet the medium and long-term demand for naturalgas, in particular of the Italian market, Eni entered intolong-term purchase contracts with producing countries thatcurrently have a residual average term of approximately 16 years.Existing contracts, which in general contain take-or-pay clauses,will ensure a total of about 67.3 billion cubic meters of naturalgas per year (Russia 28.5, Algeria 21.5, the Netherlands 9.8,Norway 6 and Nigeria LNG 1.5) by 2008. The average annual minimumquantity (take-or-pay) is approximately 85% of said quantities.Despite the fact that management plans to sell outside Italy theincreasing volumes of natural gas available under Eni’stake-or-pay contracts, the expected development of Italian demandand supply of natural gas in the medium and long-term and theevolution of regulations in this segment represent a risk elementin the management of take-or-pay contracts. See Item 5 –"Contractual Obligations".

In 2003, Eni took about 540 million cubic meters less than itstotal minimum offtake obligation; this lower offtake wascompensated for by higher offtake in 2004. Management believesthat Eni’s fulfillment of obligations under take-or-paycontracts in 2005 is not likely to be an issue based on trends innatural gas sales in the first quarter of 2005 and expectedtrends for the remainder of the year. See "Item 5 –Recent Developments and Management Expectations of Operations.

In 2003, Eni and Gazexport (Gazprom) signed an agreement underwhich Eni has the right to sell the gas it purchases fromGazexport (Gazprom) in countries other than Italy. This agreemententails the cancellation of the so called territory destinationclause. Gazexport (Gazprom), in turn, can sell its gas to otherItalian operators. This agreement was filed for approval with theEuropean Commission, which concluded its examination of thecontract, relating to the previous territory destination clauseagreed between Eni and Gazexport (Gazprom). The Commissionrequested Eni to assume additional obligations favoringcompetition, in particular: (i) Eni should make volumes ofnatural gas purchased from Gazexport (Gazprom) available outsideItaly; and (ii) Eni shall promote the upgrading of the TAGgasline (from Austria into Italy) with deadlines consistent withthe decision of third parties to build LNG terminals in Italy.

 

> 
***Natural Gas Sales in Italy and Europe***

In 2004, natural gas sales (84.45 billion cubic meters,including own consumption and Eni’s share of sales ofaffiliates) increased by 6.12 billion cubic meters over 2003, up7.8%, due mainly to higher sales in the rest of Europe (up 4.33billion cubic meters).

In an increasingly competitive market, natural gas sales tothird parties in Italy (50.39 billion cubic meters) decreased by0.47 billion cubic meters over 2003, down 0.9%, due mainly to adecline in sales to wholesalers (down 1.18 billion cubic meters),as well as the impact of warmer weather conditions, a decline insales to industries (down 0.78 billion cubic meters), and thefact that in the fourth quarter part of sales (0.54 billion cubicmeters) to operators in these segments – in particularwholesalers – were made in accordance with certain decisionsof the Antitrust Authority (so called gas release)7.See "Regulation of the Italian Hydrocarbon Industry –Gas & Power" below. These declines were offset in partby higher sales to thermoelectric users (up 0.89 billion cubicmeters).

Natural gas sales in the rest of Europe (21.87 billion cubicmeters) increased by 4.33 billion cubic meters (up 24.7%) due toincreases registered in (i) sales under long-term supplycontracts with Italian operators of the natural gas market (up1.71 billion cubic meters), partly due to the start-up ofsupplies from Libyan fields in the fourth quarter of 2004; (ii)supplies to the Turkish market via the Blue Stream gasline (up0.97 billion cubic meters); (iii) Spain (up 0.60 billion cubicmeters) related to increased supplies to the electric companyIberdrola and to the start-up of supplies to Eni’s affiliateUnión Fenosa Gas (Eni’s interest 50%); (iv) Germany,related to the start-up of supplies to Eni’s affiliate GVS(Eni’s interest 50%) and to a German operator (overall 0.56billion cubic meters); (v) the United Kingdom related to gasmarketing activities (up 0.27 billion cubic meters); and (vi)France, related to the beginning of gas marketing activities (up0.15 billion cubic meters).

Own consumption8 amounted to3.70 billion cubic meters (1.90 billion cubic meters in 2003) andconcerned essentially supplies to EniPower (2.61 billion cubicmeters), to Polimeri Europa (0.34 billion cubic meters) and toEni’s Refining & Marketing segment (0.25 billion cubicmeters).

Sales of natural gas by Eni’s affiliates (net to Eni andnet of Eni’s supplies) amounted to 7.32 billion cubicmeters, increasing by 0.38 billion cubic meters over 2003, up5.5%, and concerned: (i) GVS with 3.37 billion cubic meters; (ii)Galp Energia (Eni’s interest 33.34%) with 1.34 billion cubicmeters; and (iii) volumes of natural gas (1.48 billion cubicmeters) treated at the Nigeria LNG Ltd liquefaction plant(Eni’s interest 10.4%) in Nigeria, sold by Nigeria LNG Ltdto US and European markets.

The table below sets forth Eni’s sales of natural gas byprincipal market for the periods indicated.

| **Natural        gas sales** |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                         |   |          |   |          |   |          |   |          |   |          |

|   |   | **(billion        cubic meters)** |
|--------|--------|-----------------------------------|

| ***Italy***                                                           |   | **57.82** |   | **56.74** |   | **50.43** |   | **50.86** |   | **50.39** |
|-----------------------------------------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Wholesalers                                                           |   | 20.68     |   | 21.09     |   | 17.02     |   | 15.36     |   | 14.18     |
| Gas release                                                           |   |      |   |      |   |      |   |      |   | 0.54      |
| End        customers                                                  |   | 37.14     |   | 35.65     |   | 33.41     |   | 35.50     |   | 35.67     |
| Industrial users                                                      |   | 18.37     |   | 18.53     |   | 14.43     |   | 13.17     |   | 12.39     |
| Thermoelectric        users                                           |   | 12.27     |   | 12.21     |   | 12.48     |   | 15.03     |   | 15.92     |
| Residential                                                           |   | 6.50      |   | 4.91      |   | 6.50      |   | 7.30      |   | 7.36      |
| ***Rest        of Europe***                                           |   | **3.90**  |   | **6.05**  |   | **12.77** |   | **17.54** |   | **21.87** |
| ***Outside Europe***                                                  |   | **0.91**  |   | **0.93**  |   | **0.92**  |   | **1.09**  |   | **1.17**  |
| **Total        sales to third parties**                               |   | **62.63** |   | **63.72** |   | **64.12** |   | **69.49** |   | **73.43** |
| Own consumption                                                       |   | 2.00      |   | 2.00      |   | 2.02      |   | 1.90      |   | 3.70      |
| **Total        sales to third parties and own consumption**           |   | **64.63** |   | **65.72** |   | **66.14** |   | **71.39** |   | **77.13** |
| **Sales of natural gas of Eni’s affiliates        (net to Eni)** |   | **0.87**  |   | **1.38**  |   | **2.40**  |   | **6.94**  |   | **7.32**  |
| Europe                                                                |   | 0.41      |   | 0.93      |   | 1.93      |   | 6.23      |   | 6.60      |
| Outside Europe                                                        |   | 0.46      |   | 0.45      |   | 0.47      |   | 0.71      |   | 0.72      |
| **Total        sales of natural gas**                                 |   | **65.50** |   | **67.10** |   | **68.54** |   | **78.33** |   | **84.45** |
|                                                                  |   |           |   |           |   |           |   |           |   |           |

 

> 
***The Italian Natural Gas Market***

The Italian natural gas market is made up of three mainsegments: residential and commercial, industrial andthermoelectric. Customers can be divided into three groups: (i)high consumption final users directly linked to the national andregional natural gas high pressure networks; (ii) final customerssuch as residential and commercial users, hospitals, schools,public utilities, small enterprises located in urban centerssupplied by wholesalers through low pressure networks; and (iii)wholesalers (mainly local distribution companies and distributorsof natural gas for automotive use) purchasing natural gas to sellit to final customers.

In 2004, Eni’s natural gas sales to wholesalers amountedto 14.18 billion cubic meters (down 7.7% over 2003).

In 2004, natural gas consumption in the Italian industrialsegment amounted to approximately 22.6 billion cubic meters (29%of total final consumption), with a 3.5% increase over 2003. In2004, Eni’s sales of natural gas to industrial usersamounted to 12.39 billion cubic meters (down 5.9% over 2003).

In 2004, natural gas consumption in the Italian thermoelectricsegment amounted to approximately 28 billion cubic meters (35% oftotal final consumption), with an approximately 9% increase over2003. In 2004, Eni’s sales of natural gas to thermoelectricusers amounted to 15.92 billion cubic meters (up 5.9% over 2003).

In 2004, natural gas consumption in the Italian residentialand commercial segment amounted to over 28 billion cubic meters(36% of total final consumption), with a 1% decrease over 2003due to the effect of warmer weather conditions. Following themerger with Italgas Più Eni manages directly over 5 millionresidential customers and in 2004 Eni’s sales in thissegment amounted to 7.3 billion cubic meters (up 0.8% over 2003).

Eni’s commercial structure is organized by branches inItaly in order to react promptly and efficiently to therequirements of large and medium enterprises, thermoelectricproducers and wholesalers. Eni’s marketing policy towardsclients of those segments provides for customized contractualoptions including, among others, various price formulas and typesof indexations aimed at controlling price volatility, on thebasis of purchase needs of clients. Eni’s commercial policyleverages on: (i) a dedicated sales team; (ii) a contact centerbusiness; (iii) a website providing new services of analysis andmonitoring of costs and gas offtake; and (iv) a portfolio of over50 different kinds of technical assistance and consultancyservices.

As a consequence of the merger with Italgas Più SpA, Eniintegrated its commercial structure with a network of channelsdedicated to households, public entities, the tertiary sector,condominiums, and small enterprises: the traditional counters, anetwork of contact centers, the website with an onlineopportunity for managing one’s contract and the network offranchisors under the "Assistenza Italgas Più" brandname, that in 2004 were 150.

Customers are offered a wide range of services. Residentialusers can contact the franchisor for supplies, installation andordinary and extraordinary maintenance of their heating systems,while condominiums, public administrations and enterprises areoffered a turn-key service for all what concerns their heatingrequirements.

 

> 
***Transmission, Dispatching and Regasification    Activities***

Transmission, dispatching and regasification activities inItaly are carried out by Snam Rete Gas, a company listed on theItalian Stock Exchange (in which Eni holds a 50.07% interest).Eni’s primary transmission network was conferred to SnamRete Gas in July 2001 in implementation of Legislative Decree No.164/2000 concerning the Italian natural gas market, whichprovides for the separation of transmission, dispatching andregasification activities from all other activities in thenatural gas segment. This Decree also establishes that transportactivity qualifies as a public concern activity and consequentlyis regulated.

The Italian natural gas transmission system is made up of anational pipeline network and a regional pipeline network for atotal length of 32,190 kilometers, of which 30,545 kilometers areowned by Eni.

The Italian national transmission network is made up of highpressure trunklines, mainly with a large diameter, which carrynatural gas from the entry points to the system – importlines, storage sites and main Italian natural gas fields –to the linking points with the regional transmission network. Thenational network includes also some interregional lines reachingimportant markets.

The regional transmission network is made up of the remaininglines and allows the transmission of natural gas to industries,power stations and local distribution companies of the variouslocal areas served.

At December 31, 2004 the national pipeline network owned byEni extended for 8,196 kilometers. Underground pipelines have amaximum diameter of 48 inches and carry natural gas at pressuresof 24 to 75 bars. The underwater pipeline crossing the MessinaStrait has a diameter of 20 to 26 inches and carries natural gasat a pressure equal to or higher than 115 bars.

The major pipelines interconnected with import trunklines thatare part of Eni’s national network are:

| • |   | for natural gas imported        from Algeria and Libya: |
|--------|--------|---------------------------------------------------------|

|   |   | - |   | two lines with a 48/42-inch        diameter, each approximately 1,500-kilometer long,        including the smaller pipes that cross underwater the        Messina strait, which link Mazara del Vallo (on the        Southern coast of Sicily) to Minerbio (near Bologna).        These lines are linked to the import pipelines that carry        natural gas from Algeria through the Sicily Channel and        from Libya through the Gela-Enna pipeline and the        underwater Greenstream gasline. The pipeline transmission        capacity at the Mazara and Gela entry points is        approximately 90 million cubic meters/d; |
|--------|--------|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • |   | for natural gas imported        from Russia: |
|--------|--------|----------------------------------------------|

|   |   | - |   | two lines with        48/42/36/34-inch diameters extending for a total length        of approximately 1,000 kilometers that are linked to the        Austrian network in Tarvisio and cross the Po Valley        reaching Sergnano (near Cremona) and Minerbio. The        pipeline transmission capacity amounts to 84.4 million        cubic meters/d. The pipeline is going to be upgraded by        the laying of a third 264-kilometer long line (of which        199 kilometers started operations at the end of 2004)        with completion expected in late 2006; |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • |   | for natural gas imported        from the Netherlands and Norway: |
|--------|--------|------------------------------------------------------------------|

|   |   | - |   | two lines, with a 48/34-inch        diameter, 301-kilometer long extending from the Italian        border at Passo Gries (Verbania), point of connection        with the Swiss network, to the node of Mortara, in the Po        Valley. The pipeline transmission capacity amounts to        57.5 million cubic meters/d. |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

In 2004, Eni’s national network increased by 203kilometers due to the entry into service of: (i) a new lineconnecting Gela, entry point of the Greenstream gasline fromLibya, to the national network near Enna. The 36-inch diameterpipe covers 66 kilometers and has a transport capacity of 25million cubic meters/d; (ii) the completion of a 30-inch diameterline connecting Pontremoli to Parma for the transmission ofnatural gas from the Panigaglia regasification terminal toNorthern Italy (70 kilometers); (iii) a 32 kilometer lineupgrading the pipeline for importing natural gas from Russia; and(iv) the sections from Palmi to Martirano and from Campochiaro toSulmona as part of the upgrade of the Transmed pipeline through athird line for a total length of 53 kilometers.

Eni’s regional transmission network is made up of pipeswith smaller diameter than the national lines for a total length22,349 kilometers. These pipes carry natural gas at pressuresbetween 5 and 12 bars, between 12 and 24 bars and between 24 and75 bars. In 2004, Eni’s regional network increased by 222kilometers due to the entry into service of new lines, upgradesand of various connections to end users.

Eni’s system is completed by: (i) 11 compressor stationswith a total power of 625 megawatts; and (ii) 5 marine terminalslinking underwater pipelines with the on-land network at Mazaradel Vallo, Messina and Gela in Sicily and Favazzina and Palmi inCalabria.

The control room of the dispatching system is located in SanDonato Milanese and oversees and monitors the whole transmissionnetwork in cooperation with peripheral units. In 2003, thissystem obtained the ISO 9001-2000 certification. Peripheral unitsare represented by 8 districts that monitor the transmissionnetwork through 69 centers that guarantee operation, maintenanceand control of the whole system. Each unit is responsible foroperations in accordance with technical specifications andapplicable laws and regulations.

In addition to the international pipeline transmission system,natural gas enters Eni’s system also through the Panigaglia(Liguria) LNG terminal, which receives LNG carried by tankerships. This terminal is currently the only one in Italy and atits maximum capacity can input 3.5 billion cubic meters/year intothe transmission network. In 2004, volumes of LNG regasifiedamounted to the equivalent of approximately 2.1 billion cubicmeters of natural gas. Upgrading of this terminal is underway bymeans of an enhancement of the boil-off gas recovery system.

In 2004, a total of 80.41 billion cubic meters of natural gaswere input in the national network, of these 65% were owned byEni.

 

| **Natural        gas transported in Italy**(1) |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                                           |   |          |   |          |   |          |   |          |   |          |

|   |   | **(billion        cubic meters)** |
|--------|--------|-----------------------------------|

| **Eni**                  |   | **63.73** |   | **58.17** |   | **54.56** |   | **51.74** |   | **52.15** |
|--------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| **Third        parties** |   | **9.45**  |   | **11.41** |   | **19.11** |   | **24.63** |   | **28.26** |
| Enel                     |   | 6.27      |   | 6.28      |   | 8.28      |   | 9.18      |   | 9.25      |
| Edison Gas               |   | 2.10      |   | 2.98      |   | 4.61      |   | 7.49      |   | 8.00      |
| Other                    |   | 1.08      |   | 2.15      |   | 6.22      |   | 7.96      |   | 11.01     |
|                     |   | **73.18** |   | **69.58** |   | **74.40** |   | **76.37** |   | **80.41** |
|                     |   |           |   |           |   |           |   |           |   |           |

----

|   |   |                                              |
|--------|--------|---------------------------------------------------|
| (1)    |   | Include        volumes input to domestic storage. |

The Italian natural gas system is supplied for about 80% withimported gas, transmitted to Italy through a network ofinternational high pressure pipelines for a total of over 4,300kilometers; in which Eni owns transportation rights, inparticular:

| • |   | the TENP pipeline,        968-kilometer long (a 500-kilometer long single line and        a 468-kilometer long doubling line) with transit capacity        of 44 million cubic meters/d and four compression        stations, transports natural gas from the Netherlands        through Germany, from the German-Dutch border of Bocholtz        to Wallbach at the German-Swiss border;                                                                                                                                                                                                                                                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the Transitgas pipeline,        291-kilometer long, with one compression station, which        transports natural gas from the Netherlands and from        Norway crossing Switzerland with its 165-kilometer long        main line and a 71-kilometer long doubling line, from        Wallbach where it joins the TENP pipeline to Passo Gries        at the Italian border. It has a transit capacity of 61        million cubic meters/d. A new 55-kilometer long line from        Rodersdorf at the French-Swiss border to Lostorf, an        interconnection point with the line coming from Wallbach        was built for the transport of Norwegian gas; |
| • |   | the TAG pipeline,        1,018-kilometer long, made up of two lines, each about        380-kilometer long and a third line 258-kilometer long,        with a transit capacity of 81 million cubic meters/d and        three compression stations, which transports natural gas        from Russia across Austria from Baumgarten, the delivery        point at the border of Austria and Slovakia, to Tarvisio,        point of entry in the Italian natural gas transport        system;                                                                                                                                                                       |
| • |   | the TTPC pipeline,        742-kilometer long, made up of two lines each        371-kilometer long with a transit capacity of 78 million        cubic meters/d and three compression stations, which        transports natural gas from Algeria across Tunisia from        Oued Saf Saf at the Algerian border to Cap Bon on the        Mediterranean coast where it links with the TMPC        pipeline;                                                                                                                                                                                                                                                        |
| • |   | the TMPC pipeline for the        import of Algerian gas, 775-kilometer long, made up of        five lines each 155-kilometer long with a transit        capacity of 101 million cubic meters/d which crosses        underwater the Sicily Channel from Cap Bon to Mazara del        Vallo in Sicily, the point of entry into the Italian        natural gas transport system;                                                                                                                                                                                                                                                                                   |
| • |   | the Greenstream pipeline for        the import of Libyan gas, 520-kilometer long, with a        transit capacity of 24.4 million cubic meters/d which        crosses underwater the Mediterranean Sea from Mellitah to        Gela in Sicily, the point of entry into the Italian        natural gas transport system. The pipeline started        operations in October 2004, when fully operational it        will transport 8 billion cubic meters/year (of these 4        billion are Eni’s share) produced in Libyan fields,        see "Exploration & Production – Libya"        above.                                           |

 

On May 25, 2005, Eni and the Algerian company Sonatrach haveagreed to upgrade the TTPC pipeline by 3.2 billion cubic metersof annual transport capacity starting from 2008 and up to further3.3 annual billion cubic meters starting from 2012. The transportcapacity of the import line from Algeria is currently around 27billion cubic meters/year and will reach 33.5 billion cubicmeters/year in 2012. Expenditure for the expansion of the TTPCpipeline amounts to euro 330 million and will be entirelyfinanced by Eni. The whole additional transport capacity will besold to third party importers in Italy. Sonatrach will carry outinvestments aimed at reinforcing with an equivalent capacity thepipelines extending from Algeria to the border with Tunisia. Theagreement also provides for the restructuring of theTransmediterranean Pipeline Company Limited (TMPC), equally ownedby Eni and Sonatrach, which owns the TMPC subsea pipeline linkingTunisia to the Italian coast, and a new contractual framework fortransport services.

Eni plans to upgrade the TAG pipelineby3.2 billion cubic meters of annual transport capacity startingfrom 2008. This additional capacity will be sold to third partieson the basis of a process designated to guarantee equalconditions. Eni expects its share of capital expenditure for thisproject to amount to approximately euro 115 million. At presentthe transport capacity of the TAG pipeline is 32.5 billion cubicmeters per year.

Eni holds a 50% interest in the Blue Stream underwaterpipeline linking the Russian and Turkish coast of the Black Sea.When fully operational, this 774-kilometer long pipeline with atransmission capacity of 49 million cubic meters/d, willtransport 16 billion cubic meters per year in 2010 (Eni’sshare 8 billion) of Russian natural gas to be sold on the Turkishmarket (see "Development Projects" below).

 

> 
***Distribution activity***

Distribution involves the delivery of natural gas toresidential and commercial users in urban centers through lowpressure networks. Eni, through its 100% subsidiary Italgas andother subsidiaries, is engaged in the distribution activity inItaly serving 1,236 municipalities through a low pressure networkconsisting of over 47,000 kilometers of pipelines at December 31,2004. Legislative Decree No. 164/2000 concerning the opening upof the natural gas market in Italy defines distribution as apublic service which is subject to regulation and its managementis entrusted to natural gas companies by local governmentsexclusively under bid procedures. Concessions existing at thecoming into force of the Decree and awarded with a bid procedureexpire on December 31, 2012; all other concessions expire onDecember 31, 2007 (with an optional one-year extension in case ofpublic interest). See "Regulation of the Italian HydrocarbonIndustry – Gas & Power" below.

 

> 
***Development Projects***

Eni is engaged in various development projects concerning thesale of natural gas in European markets and in the LNG businessin order to compensate for lower growth opportunities on thedomestic market, due to the limits set on operators by the sectorregulation. In these European markets Eni can leverage on afavorable competitive positioning ensured by gas availability,access to infrastructure, long standing relations with producingcountries and knowledge of markets. Eni intends to also developits presence in the LNG business which provides interestinggrowth prospects, leveraging on the value of its assets, on itsparticipation in liquefaction projects aimed at exploiting itsnatural gas reserves (mainly in North and West Africa, the FarEast and Australia) and on the purchase of interests inregasification terminals located in strategic consumption markets(United States, the United Kingdom and the Far East).

*Germany*Eni has been present on the German natural gasmarket since late 2002 through GVS (Gasversorgung SüddeutschlandGmbH) in which it acquired a 100% interest in a joint venturewith the German electricity operator EnBW. GVS is the sixthlargest operator in the German gas market and the fourth in termsof volumes transported. Through a 1,863-kilometer long gaspipeline network (of these 1,750 are owned and 113 are managed)it transports and markets about 7 billion cubic meters of gas peryear to local distribution companies serving about 750municipalities in the South-Western areas of the country.

In January 2005 Eni agreed a 14 year contract, starting in2006, for the supply of 1.2 billion cubic meters/year of naturalgas to the German company Wingas. The gas will be delivered atEynatten at the German-Belgian border.

> 
*Iberian Peninsula*

*Portugal*Eni operates on the Portuguese market throughGalp Energia (Eni’s interest 33.34%). On March 31, 2004 thePortuguese Government, Eni, Energias de Portugal (EdP), ReteEletrica National (REN), Parpublica and Galp Energia (Galp)defined agreements for: (i) Eni’s exit from refining andmarketing of refined products in Portugal; (ii) Eni’sfocusing its interests in natural gas through the purchase of a49% stake in Gas de Portugal after the spin-off by Galp Energiaof its transport and distribution network; and (iii) theremaining 51% interest owned by EdP. On December 9, 2004 theEuropean Commission refused to authorize this transactionconsidering that it would have strengthened EdP’s dominantposition on the Portuguese electric market; this brought to anend the agreements of March 31, 2004 and revived the agreementssigned in 2000 by Eni and the Portuguese Government on themanagement of Galp. In order to evaluate possible alternatives tothe transactions defined on March 31, 2004, in January 2005 Eniand the Portuguese Government defined a new agreement whichpostpones Eni’s right to increase its interest in Galp (calloption). In 2004, Galp Energia sold about 4.4 billion cubicmeters of natural gas to about 820,000 customers through anetwork of high, medium and low pressure pipelines about11,700-kilometer long. Galp’s assets include among othersinterests in two import infrastructures, the Transmaghrebpipeline and the Sines LNG terminal, which provide access to theIberian market.

*Spain*Eni operates on the Spanish market through theUnión Fenosa Gas group (Eni’s interest 50%, the remaining50% being held by Unión Fenosa SA), which is active in naturalgas supply and sale to final users and to power generationcompanies. In 2004, natural gas sales of Unión Fenosa Gasamounted to 1.2 billion cubic meters. Unión Fenosa Gas active inLNG through an 80% interest in a liquefaction plant with acapacity of over 7 billion cubic meters per year, located atDamietta on the Egyptian coast that started operations in January2005, and through a 7.36% interest in a liquefaction plant underconstruction in Oman, which is expected to start operations in2006. In addition, it holds an 18.9% and a 42.5% interest in theEl Ferrol and Sagunto regasification plants under construction,managed by the Reganosa and Saggas companies. The Sagunto plantis expected to start operations at the end of 2005, while the ElFerrol plant is expected to start operations in 2006.

*Turkey - Blue Stream*Eni and Gazprom hold equal sharesin Blue Stream Pipeline Company BV, which operates the BlueStream transport system, that links the Russian (Dzhubga) to theTurkish (Samsun) coast of the Black Sea. The gasline transportsnatural gas produced in Russia which is sold jointly by Eni andGazprom in Turkey to the Turkish company Botas under a long-termcontract. In 2004, Botas withdrew approximately 3.2 billion cubicmeters of natural gas (of which 1.6 billion were Eni’sshare). Volumes transported and marketed will increaseprogressively in future years and are targeted to about 16billion cubic meters per year (8 billion net to Eni) in 2010.

 

> 
***LNG***

Eni is a party in various initiatives in the area of LNG. Whatfollows is a description of the major initiatives.

*Nigeria*Eni holds a 10.4% interest in Nigeria LNG Ltd(NLNG) that manages the Bonny natural gas liquefaction plant andexports LNG. This interest allows Eni to market its provedreserves of Nigerian natural gas. The plant, made up of threetreatment trains with an overall capacity of about 11.2 billioncubic meters/year of liquefied natural gas, is undergoing anupgrade by means of the installation of two further trains,expected to start operating in the second half of 2005. In July2004 the shareholders of NLNG approved the construction of asixth train with an expenditure of about dollar 400 million, netto Eni, including also the expenditure related to the upstreamphase. The sixth train is expected to start operations in 2007.When fully operational in 2007 the plant will have a capacity of26.5 billion cubic meters/year of LNG.

Eni also takes part in a study for the construction of aliquefaction terminal at Brass on the Nigerian coast, about 100kilometers West of Bonny. The plant will have a capacity ofapproximately 14 billion cubic meters/year of LNG (and 1.2million tonnes/year of LPG). Natural gas supplies to this plantwill come from Eni’s production volumes of natural gas, see"Exploration & Production – Nigeria" above.

*Australia*Eni holds a 12.04% interest in the Bayu Undanproject (see: "Exploration & Production - DevelopmentProjects", above) which provides for the construction of aliquefaction plant for the production of approximately 4.5billion cubic meters/year of LNG destined to the Japanese market.

*Egypt*In January 2005 the first LNG shipment wasdelivered to the Damietta treatment plant (Eni’s interest40%). When fully operational the plant will produce approximately7 billion cubic meters/year of LNG mainly directed to the Spanishmarket.

*USA*In March 2005 Eni signed a preliminary agreementfor the purchase of a share of regasification capacitycorresponding to 4 to 6 billion cubic meters/year of LNG at theCameron terminal, under construction on the coast of Louisiana,for a term of 20 years. The terminal is expected to be completedin 2008 with an initial capacity of 15 billion cubic meters/year.This deal provides Eni with access to the North American gasmarket which will absorb part of Eni’s African reserves.

 

> 
***Other Developments***

> 
*Demerging of Italgas*

On June 23, 2004, Eni’s Board of Directors approved thedemerger of Italgas, with assignment to Eni of the interests heldby Italgas in Italian companies engaged in the sale of naturalgas to the residential segment (including the 100% interest inItalgas Più) and foreign natural gas distribution companies(including 40% in Tigaz), as well as the incorporation of ItalgasPiù into Eni. Italgas, with headquarters in Turin, continues tomanage the distribution network. As a result of the incorporationof Italgas Più, Eni will have direct access to the approximately5 million customers supplied by the company in Italy, optimizingits commercial structure. This operation is in line with thescope of the public tender offer launched in November 2002 forItalgas shares, aiming at integrating commercial and developmentpolicies within Eni natural gas business, and simplifies theGroup’s shareholding structure.

> 
*Sale of the water business*

On December 13, 2004, Italgas signed agreements for the saleof its majority interest (67.05%) in Società Azionaria per laCondotta di Acque Potabili to Amga SpA and Smat SpA for euro 85.1million (euro 15.57 per share). On January 20, 2005 the ItalianAntitrust Authority authorized the transaction, which was closedon March 15, 2005.

On March 10, 2005, Italgas signed agreements for the sale ofits 100% interest in Acquedotto Vesuviano SpA to Gori SpA foreuro 20 million. The transaction was authorized by the ItalianAntitrust Authority in April 2005 and closed in May 2005.

The above transactions are part of Eni’s strategy ofconcentrating its resources in its core natural gas business.

 

> 
***Electricity Generation***

Eni, through EniPower, is one of the major operators inelectricity generation on the Italian market. Operating since2000, EniPower owns power stations located at Eni’s sites inBrindisi, Ferrera Erbognone, Livorno, Mantova, Ravenna, Ferraraand Taranto with installed capacity in operation of approximately3.3 gigawatts at December 31, 2004.

In 2004, Eni sold 17 terawatthour of electricity, of whichabout 13.85 were produced by EniPower, corresponding to over 5%of the Italian market, and 10 million tonnes of steam.

Eni is implementing a plan for expanding its electricitygeneration capacity targeting in 2007 an installed capacity of5.3 gigawatts. Planned expenditure amounts to euro 2.2 billion,of which 1.6 billion is already expensed. In 2004, the FerreraErbognone and Ravenna power stations started their fullcommercial operation, while construction is still underway atBrindisi, Mantova and Ferrara.

High efficiency, low environmental impact, reduced expenditureand construction times are the main features of these plants,which show interesting profitability prospects due to theexpected increase in demand for electricity and the ability tooperate in co-generation (combined electricity and steamgeneration). The co-generation mode has been acknowledged by theAuthority for Electricity and Gas as a production mode thatentails priority on the national dispatching network and theexemption from the purchase of "green certificates"9.

Eni estimates that with the same amount of energy (electricityand heat) produced, EniPower power stations will reduce emissionsof carbon dioxide by approximately 11.8 million tonnes, ascompared to emissions caused by conventional power stations.According to management’s estimates, this amount correspondsto approximately 8% of the total carbon dioxide generation of theItalian thermoelectric segment in 2002. These power stations willalso generate negligible amounts of particulate and sulfuroxides, as well as very low emissions of nitric oxides. EniPowerintends to become a cost leader in the Italian electricityindustry thanks to the high technology content and optimal sizeof the plants it is building. When fully operational in 2008,consumption of natural gas of Eni’s plants will reach over 6billion cubic meters/year, supplied by Eni.

| **Power Generation**        |                                       |   |     |   |     |   |     |
|-----------------------------|--------------------------------------------|--------|----------|--------|----------|--------|----------|
|                        |                                       |   | **2002** |   | **2003** |   | **2004** |
|                        |                                       |   |          |   |          |   |          |
| **Purchases**               |                                       |   |     |   |     |   |     |
| Natural        gas          | (million cubic meters)                     |   | 819      |   | 940      |   | 2,617    |
| Other fuels                 | (thousand tonnes of oil        equivalent) |   | 885      |   | 847      |   | 695      |
| **Sales**                   |                                       |   |     |   |     |   |     |
| Electricity production sold | (terawatthour)                             |   | 5.00     |   | 5.55     |   | 13.85    |
| Electricity        trading  | (terawatthour)                             |   | 1.74     |   | 3.10     |   | 3.10     |
| Steam                       | (thousand tonnes)                          |   | 9,302    |   | 9,303    |   | 10,040   |
|                        |                                       |   |          |   |          |   |          |

**Ferrera Erbognone** On May 14, 2004 the combined cyclepower station was inaugurated, the first one in Italy after theopening up of the electric market. This power station has aninstalled capacity of approximately 1,030 megawatts articulatedin three combined cycle units, two of them with approximately 390megawatts capacity are fired with natural gas, the third one withapproximately 250 megawatts capacity will be fired in part withnatural gas and complemented with refinery gas obtained from thegasification of tar from visbreaking from Eni’s nearbySannazzaro de’ Burgondi refinery.

**Ravenna** Two new combined cycle 390 megawatts unitsstarted operations in 2004. Added to the existing 190 megawatts,the power station’s installed capacity reached approximately970 megawatts.

**Brindisi** Three new combined cycle units each with 390megawatt capacity are under construction. When fully operationalthe power station will have a total capacity of approximately1,320 megawatts, including already existing amounts. Thecompletion of the power station is expected between the end of2005 and the first quarter of 2006.

**Mantova** Work is underway for the installation of twonew combined cycle 390 megawatts units, the first one of whichalready performed its first parallel run with the nationalnetwork. The second unit is expected to start operating in thesecond half of 2005, with full operation in early 2006. Whencompleted, the power station will have a total installed capacityto approximately 840 megawatts. This power station will providesteam for heating purposes delivered to Mantova’s urbannetwork through a remote heating system.

**Ferrara** EniPower owns 51% of the share capital ofSocietà EniPower Ferrara (SEF) in partnership with EGL Italia,an Italian affiliate of the Swiss group EGL. SEF started theconstruction of two new combined cycle units with a capacity of390 megawatts each which will bring total installed capacity atFerrara to 840 megawatts. Operations are expected to start in2007. In 2004, some 80 megawatts of capacity were purchased.

 

> 
***Capital Expenditure***

See "Item 5 – Liquidity and Capital Resources –Capital Expenditure by Segment".

 

##### Table of Contents

**Refining & Marketing**

Eni is engaged in refining and sale of refined products,mainly in Italy, and the rest of Europe.

According to management’s assumptions the scenario of therefining industry in Europe in the medium term will becharacterized by: (i) a decline in gasoline consumption in favorof diesel fuel, related to the renewal of the car fleet thatfavors diesel cars; (ii) a progressive substitution of fuel oilwith natural gas; (iii) an increase in differential between lightand heavy crudes that favors high conversion capacity refineries;and (iv) the evolution of European fuel specifications asconcerns sulfur content (50 ppm from 2005 and 10 ppm from 2009).In this context Eni intends to increase the conversion capacityand flexibility of its refineries in order to upgrade itsproduction to meet European environmental standards anddifferentiate its range of products dedicated to specific marketsegments.

Eni intends to continue the upgrading process of itsdistribution network in Italy in order to reach Europeanstandards in terms of average throughput and services tocustomers. In this area Eni intends to increase its offer ofdiversified fuels with low environmental impact and to promotecustomer loyalty initiatives and develop non oil activities. Inthe rest of Europe Eni intends to strengthen its position intarget markets, where it can obtain logistical and operatingsynergies and exploit the well-known Agip brand. Sales volumeswill be increased by buying or leasing well equipped and highthroughput services stations and building new ones.

*The matters regarding future plans discussed in thissection and elsewhere herein are forward-looking statements thatinvolve risks and uncertainties that could cause the actualresults to differ materially from those in such forward-lookingstatements. Such risks and uncertainties include difficulties inobtaining approvals from relevant Antitrust Authorities anddevelopments in the relevant market.*

 

> 
***Supply and Trading***

In 2004, a total of 67.05 million tonnes of oil were purchased(63.4 in 2003), of which 35.73 million tonnes were fromEni’s Exploration & Production segment10,19.9 million tonnes under long-term contracts with producingcountries and 11.42 million tonnes on the spot market. Some 24%of oil purchased came from West Africa, 22% from North Africa,16% from the North Sea, 17% from countries of the former SovietUnion, 11% from the Middle East, 7% from Italy and 3% from otherareas. Some 32.39 million tonnes were resold, representing anincrease of 1.19 million tonnes over 2003, up 3.9%. In addition,3.10 million tonnes of intermediate products were purchased (3.43in 2003) to be used as feedstocks in conversion plants and 18.8million tonnes of refined products (17.73 in 2003) sold as acomplement to own production on the Italian market (4.99 milliontonnes) and on markets outside Italy (13.83 million tonnes).

 

> 
***Refining***

Eni is engaged in refining activities in Italy and ownsinterests in refineries in Germany and the Czech Republic with atotal refining capacity (balanced with conversion capacity) of 34million tonnes (equal to 681 KBBL/d) of which 29.2 million tonnescapacity is located in Italy.

Eni’s refining system in Italy is made up of five whollyowned refineries and a 50% interest in the Milazzo refinery inSicily. In March 2005 Eni sold its 28% interest in Erg RaffinerieMediterranee SpA (Priolo refinery) to Erg SpA. Eni’s whollyowned refineries in Italy had a balanced capacity of 25.2 milliontonnes (equal to 504 KBBL/d), with a 59.2% conversion equivalentcapacity. Eni intends to consolidate its refining activity by:(i) increasing flexibility and conversion capacity with the aimof producing fuels adequate to demand and meeting Europeanenvironmental standards, in particular Eni aims at increasing theconversion index of its wholly and partiality owned refineries inItaly from 61% in 2004 to 67% in 2008; and (ii) reducing FOBrefining capacity in order to reduce its exposition to thevolatility of margins, typical of low complexity refinerieslocated far from their end markets. The constant improvement inEni’s refining system will allow it to increase itsintegration with the Exploration & Production segment inorder to increase intake volumes of own crudes. The share of owncrudes processed will increase from 33% in 2004 to over 36% in2008.

The table below sets forthcertain statistics regarding Eni’s refineries at December31, 2004.

|                                                                         |   | **Location** |   | **Ownership Interest** |   | **Conversion        Equivalent**(1) |   | **Balanced Primary Distillation Capacity**(2) |
|------------------------------------------------------------------------------|--------|--------------|--------|------------------------|--------|-------------------------------------|--------|-----------------------------------------------|
|                                                                         |   |              |   |                        |   |                                     |   |                                               |
| Wholly-owned refineries:                                                     |   |         |   |                   |   |                                |   |                                          |
|      Sannazzaro                                     |   | Lombardy     |   | 100.0%                 |   | 42.5                                |   | 160,000                                       |
|      Gela                                           |   | Sicily       |   | 100.0%                 |   | 140.1                               |   | 100,000                                       |
|      Taranto                                        |   | Apulia       |   | 100.0%                 |   | 71.6                                |   | 90,000                                        |
|      Livorno                                        |   | Tuscany      |   | 100.0%                 |   | 11.4                                |   | 84,000                                        |
|      Porto        Marghera                          |   | Veneto       |   | 100.0%                 |   | 22.8                                |   | 70,000                                        |
|                                                                         |   |         |   |                   |   |                                     |   |                                               |
|                                                                         |   |         |   |                   |   | 59.2                                |   | 504,000                                       |
| Partly-owned        refineries:                                              |   |         |   |                   |   |                                |   |                                          |
|      Milazzo                                        |   | Sicily       |   | 50.0%                  |   | 69.6                                |   | 80,000                                        |
|      Ingolstadt/Vohburg/Neustadt                    |   | Germany      |   | 20.0%                  |   | 32.6                                |   | 52,000                                        |
|      Schwedt                                        |   | Germany      |   | 8.0%                   |   | 41.8                                |   | 19,000                                        |
|      Kralupy/Litvinov                               |   | Czech Rep.   |   | 16.3%                  |   | 28.8                                |   | 26,000                                        |
|                                                                         |   |         |   |                   |   |                                     |   |                                               |
|                                                                         |   |         |   |                   |   | 49.7                                |   | 177,000                                       |
|                                                                         |   |         |   |                   |   |                                |   |                                          |
|           Total        Eni |   |         |   |                   |   | 56.7                                |   | 681,000                                       |
|                                                                         |   |         |   |                   |   |                                     |   |                                               |

----

|   |   |                                                                                                                                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Stated in        fluid catalytic cracking equivalent/topping (% by        weight), based on 100% of balanced primary distillation        capacity.                                 |
| (2)    |   | Barrels per        calendar day. Based on percentage equity interest        ownership in the refinery, not on actual utilization of        balanced primary distillation capacity. |

Each of Eni’s Italian refineries is specialized based onits logistical configuration, geographic location and integrationwith other Eni business segments.

**Sannazzaro,** with a balanced primary refining capacityof 160 KBBL/d and an equivalent conversion index of 42.5% is oneof the most efficient refineries in Europe. Located in theSouth-West of the Po Valley, at the confluence of the rivers Poand Ticino, it produces mainly gasolines, gasoil and other lightproducts for the supply of markets in North-Western Italy,Switzerland and Bavaria. Besides its primary distillation plants,this refinery contains two catalytic reforming plants used toincrease the octane number of gasolines, an isomerization plantand three desulfurization plants, which allow a high degree offlexibility of production related to market and environmentalconditions. The conversion plants are: a fluid catalytic cracker(FCC), an HDCK middle distillate conversion and a visbreakingthermal conversion unit. This refinery processes mainly oil fromRussia, Africa and the North Sea, oil from Eni’s nearbyVillafortuna field and, more recently, CPC Blend crude oil fromthe Caspian Sea carried through the CPC pipeline. From alogistical standpoint this refinery is located along the route ofthe Central Europe Pipeline, which links the Genova terminal withFrench speaking Switzerland and Bavaria. In 2004, works continuedfor the completion of the tar (heavy residue from visbreaking)gasification plant that will produce syngas that will be used tofire the nearby EniPower power station at Ferrera Erbognone. Inthe medium term Eni plans an increase in the conversion capacityof this refinery by building a new hydrocracking unit (for theproduction of high quality diesel fuel, kerosene for aircraftsand lubricant bases for the Livorno refinery). Capitalexpenditure for this project is expected to amount to euro 170million.

**Gela,** with a balanced primary refining capacity of 100KBBL/d and an equivalent conversion index of 140.1% represents anupstream integrated pole with the production of heavy crudesobtained from nearby Eni fields offshore and onshore Sicily,while downstream it is integrated with Eni’s nearbypetrochemical plants. Located on the Southern coast of Sicily, itmanufactures fuels for automotive use and residential heatingpurposes, as well as petrochemical feedstocks. Its highconversion level allows it to minimize the yield of fuel oil andsemi-finished products. Besides its primary distillation plants,this refinery contains the following plants: an FCC unit withadvanced technology for the conversion of low grade feedstocksand two coking plants for the vacuum conversion of heavyresidues. All these plants are integrated in order to processheavy residues and feedstocks and manufacture valuable products.This refinery also contains modern residue and exhaust fumetreatment plants which allow the complex to comply with the mostexacting environmental standards. Oil and oil products arehandled on land and by sea.

**Taranto,** with a balanced primary refining capacity of90 KBBL/d and an equivalent conversion index of 71.6%, canprocess a wide range of crudes and semi-finished products withgreat operational flexibility. It mainly produces fuels forautomotive use and residential heating purposes for theSouth-Eastern Italian markets. Besides its primary distillationplants, this refinery contains desulfurization plants andconversions plants such as: a two-stage thermal conversion plant(visbreaking/thermal cracking) and an RHU conversion plant, oneof the most advanced plants in the world that allows to converthigh sulfur content residues into valuable products with lowenvironmental impact. It processes most of the oil produced inEni’s Val d’Agri fields carried to Taranto through theMonte Alpi pipeline; in 2004, a total of 2.3 million tonnes ofthis oil were processed. In the medium term Eni plans an increaseof the conversion capacity of this refinery through theconversion of one of the four RHU reactors into a hydrocrackingplant for the manufacture of high quality diesel fuel and virginnaphtha destined to Eni’s Brindisi petrochemical plant.Planned expenditure amounts to approximately euro 60 million.

**Livorno,** with abalanced primary refining capacity of 84 KBBL/d and an equivalentconversion index of 11.4%, manufactures mainly gasolines, fueloil for bunkering, specialty products and lubricant bases.Besides its primary distillation plants, this refinery containstwo gasoline treatment plants, an isomerization plant and anoctanization plant for the manufacture of highly environmentalfriendly gasolines, as well an advanced solvex cycle forlubricant manufacture. Its pipeline links with the local harborand with the Florence storage sites allow the Livorno facility tooperate with great efficiency as concerns reception, handling anddistribution of products.

**Porto Marghera,** with a balanced primary refiningcapacity of 70 KBBL/d and an equivalent conversion index of22.8%, produces mainly gasolines and other light products for thesupply of markets in North-Eastern Italy, Austria, Slovenia andCroatia. Besides its primary distillation plants, this refinerycontains a gasoline treatment plant, octanization plants and atwo-stage thermal conversion plant (visbreaking/thermal cracking)for increasing yields of valuable products.

On March 2, 2005 Eni sold to Erg SpA its 28% interest in ErgRaffinerie Mediterranee SpA and Erg Nuove Centrali SpA,anticipating the maturity (November 2006) of Eni’s putoption, provided for by the agreement for the restructuring ofthe Priolo site signed on October 1, 2002. In order to guaranteethe continuity of existing supply contracts of oil-basedfeedstocks to Polimeri Europa, Eni’s processing contract forabout 2 million tonnes/year of crude oil retains validity untilDecember 31, 2006 at the conditions (yields and payments)reflecting the current setup of the refinery.

In Germany Eni holds an 8.3% interest in the **Schwedt**refinery and a 20% interest in **Bayernoil**, an integratedindustrial pole including the Ingolstadt, Vohburg and Neustadtrefineries. Eni’s refining capacity in Germany amounts toapproximately 70 KBBL/d. Eni’s share of the production ofthe three integrated refineries and of the Schwedt refinery ismainly used to supply Eni’s distribution network in Bavariaand Eastern Germany.

Eni holds a 16.33% interest in **Ceska Rafinerska** whichowns and manages two refineries, Kralupy and Litvinov, in theCzech Republic.Eni’s overall balanced conversion capacityfrom this refinery amounts to 26 KBBL/d. 

Eni is evaluating a restructuring of the Bayernoil refinerypole and the purchase of interests in strategically locatedrefineries aimed at supporting growth in its distributionactivities in the rest of Europe.

The table below sets forth Eni’s petroleum productsavailability figures for the periods indicated.

| **Petroleum        products availability** |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                                       |   |          |   |          |   |          |   |          |   |          |

|   |   | **(million        tonnes)** |
|--------|--------|-----------------------------|

| **Italy**                                                       |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |
|-----------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Products        processed in wholly-owned refineries            |   | 32.93     |   |   | 32.24     |   |   | 30.09     |   |   | 25.09     |   |   | 26.75     |   |
| Products processed for third parties                            |   | (3.41     | )      |   | (1.45     | )      |   | (1.88     | )      |   | (1.72     | )      |   | (1.50     | )      |
| Products        processed in non owned refineries               |   | 8.41      |   |   | 5.92      |   |   | 6.27      |   |   | 8.43      |   |   | 8.10      |   |
| Products consumed and lost                                      |   | (2.11     | )      |   | (1.95     | )      |   | (1.91     | )      |   | (1.64     | )      |   | (1.64     | )      |
| ***Products        available***                                 |   | **35.82** |   |   | **34.76** |   |   | **32.57** |   |   | **30.16** |   |   | **31.71** |   |
| Purchases of finished products and change in        inventories |   | 4.30      |   |   | 5.19      |   |   | 6.27      |   |   | 5.86      |   |   | 5.07      |   |
| Finished        products transferred to foreign cycle           |   | (4.58     | )      |   | (4.96     | )      |   | (5.56     | )      |   | (5.19     | )      |   | (5.03     | )      |
| Consumption for power production                                |   |      |   |   |      |   |   | (1.74     | )      |   | (1.07     | )      |   | (1.06     | )      |
| ***Sales***                                                     |   | **35.54** |   |   | **34.99** |   |   | **31.54** |   |   | **29.76** |   |   | **30.69** |   |
| **Outside Italy**                                               |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |
| Products        available                                       |   | 3.07      |   |   | 3.02      |   |   | 2.98      |   |   | 3.36      |   |   | 4.04      |   |
| Purchases and change in inventories                             |   | 10.27     |   |   | 10.27     |   |   | 12.16     |   |   | 12.12     |   |   | 13.78     |   |
| Finished        products transferred from Italian cycle         |   | 4.58      |   |   | 4.96      |   |   | 5.56      |   |   | 5.19      |   |   | 5.03      |   |
| ***Sales***                                                     |   | **17.92** |   |   | **18.25** |   |   | **20.70** |   |   | **20.67** |   |   | **22.85** |   |
| ***Sales        in Italy and outside Italy***                   |   | **53.46** |   |   | **53.24** |   |   | **52.24** |   |   | **50.43** |   |   | **53.54** |   |

|   |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|

In 2004, refinery intake processing on Eni’s own accountin Italy and outside Italy (37.68 million tonnes) increased by2.25 million tonnes over 2003, up 6.4%, due mainly to: (i)increased intake processing in Italy (1.55 million tonnes, up5.1%) in particular at the Gela, Taranto and Sannazzarorefineries, the effects of which were offset in part by theimpact of the maintenance standstill of the Livorno and Milazzorefineries; and (ii) higher processing in the rest of Europe (0.7million tonnes, up 19.3%) due essentially to higher processing atCeska Rafinerska (Eni’s interest 16.33%), which, under thenew organization defined in the second half of 2003, provides aprocessing service to shareholders proportional to theirinterests (formerly shareholders bought finished products fromthe refinery according to their requirements). Total intakeprocessing (on own account and for third parties) on wholly ownedrefineries amounted to 26.75 million tonnes (25.09 in 2003) withfull utilization of their overall balanced capacity. About 33% ofall oil processed came from Eni’s Exploration &Production Division (32.9% in 2003).

 

> 
***Logistics***

Eni is engaged in storage and transport of petroleum productsin Italy. Its logistical integrated infrastructure consists of 12directly managed storage sites and a network of petroleum productpipelines.

Eni holds interests in five companies established by the majorItalian operators in the oil business in Vado Ligure-Genova(Petrolig), Arquata Scrivia (Sigemi), Venice (Petroven), Ravenna(Petra) and Trieste (DCT) aimed at reducing costs, increasingefficiency and providing integrated services to customers.

For the transport of refined products on land Eni also owns apipeline network, integrated by leased pipelines extending over3,210 kilometers, of these 1,513 are wholly owned.

Eni’s logistics system also makes use of a leased fleetof tanker ships and tanker trucks for the distribution of refinedproducts on the retail and wholesale markets.

Eni also holds a 65% interest in Costiero Gas Livorno, acompany that operates an underground storage facility in Livornowith the capacity to store 45,000 cubic meters of propane.

Eni intends to improve the efficiency of its logistics systemalso through the creation of joint ventures and agreements withother oil companies. In the short-term actions are planned on thelogistics systems of Rome, Naples and Trieste with the aim ofreducing operating costs and improving efficiency.

 

> 
***Distribution and Marketing***

Eni markets a wide range of refined petroleum products,primarily in Italy, through an extensive direct sales network,franchises and other distribution systems. The table below setsforth Eni’s sales of refined products by distributionchannel for the periods indicated.

 

**Oil products sales in Italy and outsideItaly**

|   |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |   |          |   |          |

|   |   | **(million        tonnes)** |
|--------|--------|-----------------------------|

| *Italy*                               |   |      |   |      |   |      |   |      |   |      |
|---------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Retail        sales                   |   | 11.57     |   | 11.64     |   | 11.14     |   | 10.99     |   | 10.93     |
| Wholesale sales                       |   | 11.10     |   | 11.24     |   | 10.64     |   | 10.35     |   | 10.70     |
|                                  |   | **22.67** |   | **22.88** |   | **21.78** |   | **21.34** |   | **21.63** |
| Petrochemicals                        |   | 4.93      |   | 4.23      |   | 3.82      |   | 2.79      |   | 3.05      |
| Other        sales (1)                |   | 7.94      |   | 7.88      |   | 5.94      |   | 5.63      |   | 6.01      |
| **Sales in Italy**                    |   | **35.54** |   | **34.99** |   | **31.54** |   | **29.76** |   | **30.69** |
| *Outside        Italy*                |   |      |   |      |   |      |   |      |   |      |
| Retail sales rest of Europe           |   | 2.35      |   | 2.47      |   | 2.57      |   | 3.02      |   | 3.47      |
| Retail        sales Africa and Brazil |   | 1.43      |   | 1.71      |   | 1.44      |   | 1.18      |   | 0.57      |
|                                  |   | **3.78**  |   | **4.18**  |   | **4.01**  |   | **4.20**  |   | **4.04**  |
| Wholesale        sales                |   | 5.46      |   | 5.55      |   | 5.65      |   | 6.01      |   | 5.30      |
|                                  |   | **9.24**  |   | **9.73**  |   | **9.66**  |   | **10.21** |   | **9.34**  |
| Other        sales (1)                |   | 8.68      |   | 8.52      |   | 11.04     |   | 10.46     |   | 13.51     |
| **Sales outside Italy**               |   | **17.92** |   | **18.25** |   | **20.70** |   | **20.67** |   | **22.85** |
|                                  |   | **53.46** |   | **53.24** |   | **52.24** |   | **50.43** |   | **53.54** |
|                                  |   |           |   |           |   |           |   |           |   |           |

----

|   |   |                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Includes        bunkering, consumption for power production (until 2001)        and sales to oil companies. From 2002, includes also        sales of MTBE. |

 

In 2004, sales of refined products (53.54 million tonnes)increased by 3.11 million tonnes over 2003, up 6.2%, mainly dueto higher sales outside Italy to oil companies and traders (3.05million tonnes), on retail markets in the rest of Europe (0.45million tonnes) and on wholesale markets in Italy (0.35 milliontonnes). These increases were offset in part by the divestment ofactivities in Brazil (1.6 million tonnes).

 

> 
***Retail Marketing***

> 
*Retail sales in Italy*

Sales of refined products on retail markets in Italy in 2004(10.93 million tonnes) were in line with those of 2003; theeffect of the sale/closure of service stations within the networkrationalization process and of the decline in the number ofhighway concessions following bid procedures was almost entirelyoffset by higher sales in service stations with higherthroughput. Market share declined by 0.3 percentage points from36.6% to 36.3%. Average throughput (1,863,000 liters) increasedby 50,000 liters over 2003, up 2.8%. Average throughput of Agipbranded service stations increased by 4.5% (from 2,418,000 to2,528,000 liters).

At December 31, 2004, Eni’s retail distribution networkin Italy consisted of 7,244 service stations (49% of these ownedby Eni), 46 less than at December 31, 2003, due to the closure of167 service stations, and the decline in the number of highwayconcessions (11 units) offset in part by the positive balance(106 units) of purchases and releases of lease contracts, theopening of 24 new service stations and the awarding of 2 highwayconcessions.

Eni is implementing a process of upgrading of its distributionnetwork in Italy with the objective to reach European standardsin terms of throughput and services provided to customers. Tothis end it intends to promote initiatives aimed at developingcustomer loyalty and developing non-oil activities (catering andconvenience stores) and to offer a range of different fuels. Inthe medium term, Eni plans to increase the average throughput ofits Agip branded service stations.

In 2004, Eni started to sell the new BluSuper gasoline, whichguarantees better engine performance and efficiency and reducespolluting emissions, thanks to its high antidetonating powerresulting from a higher octane number (98 as compared to 95 ofordinary gasolines) and its lack of sulfur. BluSuper complementsBluDiesel, sold since 2002, and is part of Eni’s strategy toimprove the quality of its fuels, anticipating their compliancewith EU regulations (mandatory from 2009) and targeting its offerto customers’ requirements, leveraging on Eni’sintegrated refining-logistics-distribution system. In 2004,BluSuper sales amounted to 83 million liters. At year end Agipbranded service stations selling BluSuper were about 1,000,corresponding to about 23% of the network.

In 2004, sales of BluDiesel totalled 1.2 billion liters (up37.8% over 2003), corresponding, according to management’sestimates, to 21% of total diesel fuel volumes sold on the Agipbranded network (16% in 2003) and to 7% of all diesel fuel saleson the Italian market (5.2% in 2003). At the end of 2004 about3,900 Agip branded service stations were selling BluDiesel,corresponding to about 90% of the Agip network.

In 2004, Eni carried out a Do-It-Yourself campaign whichallowed customers accessing self-service outlets provided with anelectronic card to obtain price discounts or gifts in proportionto the total amount of purchased fuel, plus a bonus for the mostloyal customers and long-distance drivers. At year end the numberof cards distributed exceeded 3.8 million. The amount of fuelpurchased with these cards was about 30% of all fuel sold on Agipbranded service stations. Service stations participating in thisinitiative were approximately 3,200. Points registered byfidelity cards increased by about 50% over 2003.

Eni continued also its AgipMaxi promotional initiativeaddressed to truck drivers who purchase diesel fuel at theapproximately 800 Agip branded service stations participating inthe program. Active fidelity cards were over 38,000.

The improvement in the quality of service to customers led toa further expansion of the automation process of the domesticnetwork. At December 31, 2004 nearly all Agip branded servicestations were provided with a corporate credit card system.

In 2004, Eni continued the development of the EuropeanMulticard Routex paying card addressed to professional transport(transporters and car fleets) with sales of 1.4 billion liters(up 9.2% over 2003), while the number of customers provided withthis card increased by about 3,000 to 45,000 users at year end.Multicard is used internationally and is part of theinternational Routex consortium, made up of four oil companies.

Eni continued the development of its non-oil retail activitiesaimed at promoting the development of its network in line withEuropean standards, such as the diffusion of self-servicefacilities, high-tech car care systems, catering services andinnovative commercial outlets. To this end Eni owns masterfranchisor rights with exclusive rights for the oil sector forsome international brands of the restaurant and catering sector.

In 2004, a total of 103 new affiliations were added to theAgipCafè® branded outlets launched in 2003, and byyear end 207 franchises were active, while 2 new Pans & Cooutlets and 7 new convenience stores under the"SpazioAgip" brand name were opened. A total of 88 newcar-wash facilities were opened on Agip branded service stations.

In the next four years Eni intends to continue the developmentof its non-oil activities and expects to provide 70% of its Agipbranded network with these structures by 2008 (50% in 2004).

As part of its rationalization strategy Eni sold its 50%interest in Finifast, a catering company, to its former partnerFini.

In April 2005, Eni signed a preliminary agreement to divestits 100% interest in its subsidiary Italiana Petroli. See"Item 5 – Recent Developments".

> 
*Retail sales outside    Italy*

Effective July 1, 2004 Eni sold to the Brazilian companyPetrobras its 100% interest in Agip do Brasil SA, engaged in thedistribution of refined products through a network of 1,544service stations and in the sale of bottled LPG through a networkmade up of 25 bottling facilities and 26 storage sites. Proceedsfrom the sale, including net borrowings transferred, amounted todollars 509 million.

Following the divestment of distribution activities in Brazil(which included 1,544 service stations at December 31, 2003) atDecember 31, 2004, Eni’s retail distribution network outsideItaly was represented by service stations located only in therest of Europe and consisted of 1,896 service stations, 83 morethan at December 31, 2003, following purchases defined in 2003 inGermany (86 service stations), whose effects were offset in partby the closure of 11 service stations and the release of leasecontracts (in Switzerland, Hungary and France).

Sales of refined products on retail markets in the rest ofEurope (3.47 million tonnes) increased by 0.45 million tonnesover 2003, up 14.9%, related to the progressive consolidation ofservice stations purchased in 2003, in particular in Spain,Germany and France. Average throughput (2,393,000 liters)increased by 15,000 liters over 2003, up 0.6%.

The areas were Eni’s presence is relevant areSouth-Central Germany, Spain, Austria, Switzerland andSouth-Western France. Eni intends to develop its presence inthese areas, where it can leverage on its well known brand nameand on logistic and operational synergies.

In the medium term, Eni plans to increase sales of refinedproducts in the rest of Europe by purchasing, leasing andbuilding service stations and to increase average throughput.

Non oil activities outside Italy is performed under the"CiaoAgip" brand name in 1,100 service stations, ofthese 353 are in Germany and 163 in France.

 

> 
***Wholesale Marketing and Other Sales***

Eni sells gasolines and fuels for automotive use and forheating purposes, fuels for agricultural vehicles and forvessels, gasolines and fuel oil. Major customers are wholesalers,the agricultural and manufacturing industries, public utilitiesand transports. Agricultural customers and fishing fleets aresupplied directly at 60 agricultural centers and 100 owned orleased marine fuel outlets.

Eni provides its customers with its experience in the area offuels with a wide range of products that cover all marketrequirements. Along with traditional products provided with thehigh quality Eni standard, there is also an innovative lowenvironmental impact line, which includes Advancediesel andBiodiesel (with very low content of hydrogen sulfide,particulates and carbon dioxide) especially targeted for publicand private transports and heating.

Customer care is provided by a very widespread commercial andlogistical organization present all over Italy and articulated inlocal sales offices aided by a network of agents, sales personsand concessionaires.

Eni also sells jet fuel directly at 38 airports, of which 27are in Italy, and marine fuel (bunkering) directly at 38 ports,of which 23 in Italy.

Sales on wholesale markets in Italy (10.70 million tonnes)increased by 0.35 million tonnes over 2003, up 3.4%, due mainlyto higher sales of asphalt and fuel oil to the thermoelectricsector. Market share increased by 2.9 percentage points from 24.1in 2003 to 27%.

Sales to petrochemical companies in Italy (3.05 milliontonnes) increased by 0.26 million tonnes, up 9.3%, due mainly toincreased demand for refinery products.

Outside Italy, wholesale sales (5.3 million tonnes) decreasedby 0.71 million tonnes, down 11.8% due mainly to the divestmentof activities in Brazil, whose effects were offset in part byhigher sales in Germany, Spain and France.

 

> 
***Other Businesses***

*LPG*

In Italy Eni is engaged in the production, distribution andsale of LPG. In 2004, Eni sold 676,000 tonnes of LPG for heatingand automotive use, with a 19.1% market share. Additional 400,000tonnes of LPG were sold through other channels mainly to oilcompanies and traders. LPG activities in Italy derive theirproducts from 5 Italian refineries and from imports received atthe 3 coastal storage sites located in Livorno, Naples andRavenna. Product availability and customer requirements are metalso with other 10 owned plants/storage sites in Italy and 45contracts for bottling and storage with third parties’facilities. Eni’s LPG sales network is organized over sevensale areas with 19 direct sales offices, 17 agencies and 26concessionaires. Products are sold also to over 145,000 customersowning small tanks, while the sale network of LPG bottlesincludes over 12,000 outlets. In the past few years LPG pipelineswere developed and over 12,000 customers are served throughdirect links with 95 storage facilities.

Following the sale of LPG activities in Brazil, Eni is presentonly in Ecuador with a 36.6% market share in 2004.

Outside Italy, LPG wholesale sales amounted to 1.09 milliontonnes with a decrease of 630,000 tonnes, down 36.6% over 2003,due essentially to the divestment of activities in Brazil.

> 
*Lubricants*

Eni operates 10 (owned and co-owned) blending plants, inItaly, Europe, North and South America, Africa and the Far East.

In Italy Eni produces base oils and a range of productsincluding over 650 different blends. Eni owns know-how for theformulation of products for vehicles (engine oil, special fluidsand transmission oils) and industries (lubricants for hydraulicsystems, industrial machinery and metal processing). Base oilsare manufactured primarily at Eni’s refinery in Livorno. Eniowns a 33% interest in Viscolube, the main facility in Italy forthe reprocessing of used oils. Eni owns two facilities for theproduction of additives and solvents. In 2004, retail andwholesale sales in Italy amounted to over 142,000 tonnes with a25.8% market share. Eni also sold approximately 5,000 tonnes ofspecial products (white oils, transformer oil and anti-freezefluids).

Outside Italy sales amounted to approximately 110,000 tonnes,of these about 50% were registered in Europe (mainly Germany, theNetherlands and Spain) and 26% in the Americas (mainly UnitedStates and Argentina).

> 
*Oxygenates*

Eni, through its subsidiary Ecofuel (Eni’s interest100%), sells about 2 million tonnes/year of oxygenates mainlyMTBE (8% of world demand) and methanol. About 71% of products aremanufactured in Eni’s plants in Ravenna, Venezuela (in jointventure with Pequiven) and Saudi Arabia (in joint venture withSabic), the remaining 29% is bought. In Venezuela Eni plans toconvert its MTBE plants to the manufacture of isoethane, due tothe environmental problems posed by MTBE.

 

> 
***Capital Expenditure***

See "Item 5 – Liquidity and Capital Resources –Capital Expenditure by Segment".

 

##### Table of Contents

**Petrochemicals**

Eni operates in the businesses of olefins and aromatics, basicintermediate products, chlorine derivatives, polystyrene,elastomers and polyethylene. Its major production sites arelocated in Italy and in Western Europe.

In 2004, sales of petrochemical products (5.299 milliontonnes) increased by 33,000 tonnes, up 0.6% over 2003, dueessentially to the increase registered in olefin sales related toa recovery in demand, whose effect was offset in part bydeclining sales in aromatics and intermediates, related toaccidents and market problems, the divestment of the Baytownplant (thermoplastic rubber) and the shutdown of plants.

At December 31, 2004, Eni’s sales network covered 17countries, with Italy accounting for 54% of sales, the rest ofEurope for 40% and the rest of the world for 6% (52%, 41% and 7%,respectively in 2003).

Production (7,118,000 tonnes) increased by 211,000 tonnes, up3.1% over 2003, due in particular to higher olefin production.Total nominal production capacity decreased by 2.1% over 2003,due essentially to the divestment of the Baytown plant, theshutdown of the Ravenna polybutadiene manufacturing line and thePorto Marghera butadiene plant. The average capacity utilizationrate calculated on nominal capacity increased by 3.9 percentagepoints (from 71.3% to 75.2%), due mainly to an increasedutilization rate of crackers and the favorable effect of theshutdown of plants with low utilization rate.

The table below sets forth Eni’s main petrochemicalproducts availability for the periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002******(1) |   | **2003******(1) |   | **2004** |
|--------|----------|--------|----------|--------|-----------------|--------|-----------------|--------|----------|
|   |          |   |          |   |                 |   |                 |   |          |

|   | **(thousands        metric tonnes)** |
|--------|--------------------------------------|

| Basic petrochemicals                         | 6,475  |   |   | 6,119  |   |   | 4,304  |   |   | 4,014  |   |   | 4,236  |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Styrene and        elastomers                | 1,693  |   |   | 1,537  |   |   | 1,538  |   |   | 1,635  |   |   | 1,606  |   |
| Polyethylene                                 | 108    |   |   | 84     |   |   | 1,274  |   |   | 1,259  |   |   | 1,276  |   |
| Polyurethane                                 | 255    |   |   | 91     |   |   |   |   |   |   |   |   |   |   |
|                                         |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         | 8,532  |   |   | 7,830  |   |   | 7,116  |   |   | 6,907  |   |   | 7,118  |   |
|                                         |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
| Internal        consumption                  | (3,674 | )      |   | (3,185 | )      |   | (2,607 | )      |   | (2,651 | )      |   | (2,615 | )      |
| Purchases and change in inventories          | 757    |   |   | 588    |   |   | 984    |   |   | 1.010  |   |   | 796    |   |
|                                         |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
|      Total products | 5,616  |   |   | 5,233  |   |   | 5,439  |   |   | 5,266  |   |   | 5,299  |   |

|   |  |   |  |   |  |   |  |   |  |
|--------|--|--------|--|--------|--|--------|--|--------|--|

----

|   |   |                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | As compared        to 2002, in 2003 Eni’s activities have been grouped        differently: Syndial (former EniChem) was included in the        "Other activities" segment, which includes all        Eni companies not included in specific segments. Data for        years preceding 2002 have not been reclassified. |

 

The table below sets forth Eni’s sales of mainpetrochemical products by volume for the periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2000** |   | **2001** |   | **2002******(1) |   | **2003******(1) |   | **2004** |
|--------|----------|--------|----------|--------|-----------------|--------|-----------------|--------|----------|
|   |          |   |          |   |                 |   |                 |   |          |

|   | **(thousands        metric tonnes)** |
|--------|--------------------------------------|

| Basic petrochemicals                      | 4,002 |   | 3,928 |   | 2,894  |   | 2,704  |   | 2,766  |
|-------------------------------------------|-------|--------|-------|--------|--------|--------|--------|--------|--------|
| Styrene and        elastomers             | 1,253 |   | 1,138 |   | 1,151  |   | 1,171  |   | 1,150  |
| Polyethylene                              | 107   |   | 84    |   | 1,448  |   | 1,391  |   | 1,383  |
| Polyurethane                              | 253   |   | 83    |   |   |   |   |   |   |
|                                      |       |   |       |   |        |   |        |   |        |
|      Total sales | 5,616 |   | 5,233 |   | 5,493  |   | 5,266  |   | 5,299  |
|                                      |       |   |       |   |        |   |        |   |        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | As compared        to 2002, in 2003 Eni’s activities have been grouped        differently: Syndial (former EniChem) was included in the        "Other activities" segment, which includes all        Eni companies not included in specific segments. Data for        years preceding 2002 have not been reclassified. |

 

> 
*Basic petrochemicals*

Sales of basic petrochemicals (2,766,000 tonnes) increased by62,000 tonnes over 2003, up 2.3%, due to increases registered inolefins (up 7.2%, in particular ethylene and butadiene) due to arecovery in demand, whose effects were offset in part by loweraromatics sales (down 5.2%), related in particular to thestandstill of the Priolo plant, lower trading activities, andlower intermediate sales (down 2.3%), due mainly to lower acetoneand phenol availability related to a standstill for an accidentoccurred at the Porto Torres dock.

Basic petrochemical production (4,236,000 tonnes) increased by222,000 tonnes over 2003 (up 5.5%) mainly in olefins due tohigher utilization rates of plants and a decline in standstills.

> 
*Styrene and elastomers*

Styrene sales (709,000 tonnes) decreased by 14,000 tonnes over2003, down 2%, due mainly to lower ABS/SAN sales (down 5.9%)related to the rationalization of the customer/product portfoliocaused by the impending shutdown of the Ravenna plant, expectedin the first half of 2005, and lower styrene sales. Thesenegative factors were offset in part by increased expandablepolystyrene sales pushed by increasing demand especially inEastern Europe in the segment of thermal insulation andindustrial packaging. Said volumes include 112,000 tonnes,122,000 tonnes and 129,000 tonnes for the years 2004, 2003 and2002, respectively of styrene purchased under a buy/sellagreement with a third party.

Elastomer sales (441,000 tonnes) decreased by 7,000 tonnesover 2003, down 1.5%, due mainly to the shutdown of the Ravennapolybutadiene rubber line (in late 2003) and the divestment ofthe Baytown (USA). These negative factors were offset in part byan about 8% increase in other product sales, in particular SBRrubber (up 24%), TPR rubber (up 20%) and EPR rubber (up 19.5%)pushed by the increase in demand. Latex sales declined (down2.2%), due to problems in one relevant market.

Production of styrene (1,118,000 tonnes) was substantiallystable as compared to 2003. Lower ABS/SAN production (down 11%),related to the planned capacity reduction was offset by higherexpandable polystyrene production (up 8%) related to increasingdemand.

Elastomers production (488,000 tonnes) decreased by 4%, due todivestments and shutdowns. Without taking into account thesefactors, production increased by approximately 11%, withincreases higher than 20% in EPR and SBR rubber, in line with theincrease in demand.

> 
*Polyethylene*

Sales of polyethylene (1,383,000 tonnes) were substantiallystable as compared to 2003.

Production (1,276,000 tonnes) increased by 1.4%, in line withthe trends in demand; the most significant increases concernedEVA (up 11%) and LLDPE (up 1.2%), while HDPE production declined(down 1.6%).

 

> 
***Capital Expenditure***

See "Item 5 – Liquidity and Capital Resources –Capital Expenditure by Segment".

 

##### Table of Contents

**Oilfield Services Construction andEngineering**

Eni operates in oilfield services and construction throughSaipem, a company listed on the Italian Stock Exchange(Eni’s interest 43%), operating in offshore and onshoredrilling and construction.

Eni, through its subsidiary Snamprogetti (100% Eni), isengaged in engineering and contracting in the area of plants forhydrocarbon production, treatment and transmission, for theliquefaction and treatment of natural gas, for natural gasupgrading (GTL, syngas, methanol, ammonia, urea), for theconversion of heavy residues from conventional and nonconventional crudes, for the chemical industry, for powergeneration, infrastructure and environmental protection.

Orders acquired in 2004 amounted to euro 5,784 million. About90% of new orders acquired was represented by work to be carriedout outside Italy, and 14% by work originated by Eni companies.Eni’s order backlog was euro 8,521 million at December 31,2004 (euro 9,405 million at December 31, 2003). Projects to becarried out outside Italy represented 84% of the total orderbacklog, while orders from Eni companies amounted to 8% of thetotal.

| **Orders        acquired and order backlog** |   |   |     |   |     |   |     |
|----------------------------------------------|--------|--------|----------|--------|----------|--------|----------|
|                                         |   |   |          |   |          |   |          |
|                                         |   |   | **2002** |   | **2003** |   | **2004** |
|                                         |   |   |          |   |          |   |          |

| **Orders acquired**                    | (million euro) |   | **7,852**  |   | **5,876** |   | **5,784** |
|----------------------------------------|----------------|--------|------------|--------|-----------|--------|-----------|
| Oilfield        Services Construction  |           |   | 5,454      |   | 4,298     |   | 4,387     |
| Engineering                            |           |   | 2,398      |   | 1,578     |   | 1,397     |
| Originated        by Eni companies     | (%)            |   | 12         |   | 11        |   | 14        |
| To be carried out outside Italy        | (%)            |   | 96         |   | 91        |   | 90        |
| **Order        backlog**               | (million euro) |   | **10,065** |   | **9,405** |   | **8,521** |
| Oilfield Services Construction         |           |   | 5,158      |   | 5,225     |   | 5,306     |
| Engineering                            |           |   | 4,907      |   | 4,180     |   | 3,215     |
| Originated by Eni companies            | (%)            |   | 13         |   | 10        |   | 8         |
| To be        carried out outside Italy | (%)            |   | 78         |   | 81        |   | 84        |
|                                   |           |   |            |   |           |   |           |

> 
 

***Oilfield Services and Construction***

Saipem intends to consolidate its competitive positioning inthe segment of large EPIC projects for the development ofoffshore and deep offshore hydrocarbon fields by leveraging onits technological and operational skills, engineering and projectmanagement capabilities and ability to operate in remote areasand hostile environments. With these qualifications Saipem plansto meet key success factors of this business represented by theability to evaluate risks in the bidding phase, to manageefficiently the execution of projects and to optimize engineeringactivities by delocalizing support activities to low cost areasand creating local logistical bases.

Saipem intends to develop its operating and technical know-howin the gas-to-market segment, which includes projects ofconstruction of offshore and onshore natural gas transmissionsystems, natural gas liquefaction and regasification plants– and the development of hydrocarbon fields in deep waters.It also intends to expand in the leased FPSO business, for whichWest Africa is the region with the most interestingopportunities, and in floating LNG treatment systems integratedfor production, storage, transport and regasification.

Saipem intends to intensify efficiency improvement actions inall its activities, in particular by reducing supply andexecution costs while maintaining a high utilization rate ofequipment and improving its flexible structure in order to reducethe impact of possible negative cycles.

The most significant orders won in 2004 in oilfield servicesand construction were:

| • |   | In the Offshore construction        area: in the **Middle East**: two offshore contracts        for Dolphin Energy Ltd for the engineering, procurement        and laying of two gas pipelines each 12-kilometer long        and one pipeline 372-kilometer long from the North Field        offshore Ras Laffan in Qatar to the onshore terminal of        Taweelah in the United Arab Emirates. Works will be        performed between the second quarter of 2004 and the        first half of 2006, and the installation will be carried        out by the Castoro 6 and Castoro 10 vessels; in the **North        Sea**: a contract for BBL Co for the installation of a        pipeline 230-kilometer long with a 36 inch diameter to        transport natural gas across the North Sea from        Callantsoog on the North Western Dutch coast to Bacton on        England’s East coast. The vessel Castoro 6 will        carry out the pipelaying between the second and third        quarter of 2006; in **China**: a contract for Hong        Kong Electric Co Ltd for the engineering, procurement,        transport and installation of a 92-kilometer long        underwater pipeline from the Guangdong LNG terminal to        Lamma island near Hong Kong. The pipeline will be        installed during the first half of 2005 by the Castoro 2        vessel; in **West Africa**: a contract for Total        Exploration & Production Angola for the engineering,        procurement, construction, installation and        pre-commissioning of subsea umbilicals, risers and        flowlines for the sub-sea development of the Rosa field,        as a tie back to the Girassol FPSO vessel in Block 17 in        a water depth of approximately 1,400 meters. The vessels        Saipem 3000 and Saibos FDS will carry out the job between        the first and third quarter of 2006; in the **Caspian        Sea**: four contracts: (i) two for Azerbaijan        International Operating Co within Phase 3 of the        development of the Azeri-Chirag-Gunashli field. The first        one for the construction of a template and two jackets        and associated piles, with a total weight in excess of        45,000 tonnes, and the second for transport and        installation activities of two platforms including a        template, two jackets and two topsides. These works are        due to be completed by 2007; (ii) the third one in        January 2005 for the North Caspian Sea consortium for the        construction, assembly, transport and installation of 45        piles and 2 flares, along with the installation of 16        module barges at the Ersai yard (Eni’s interest        22%). Works are scheduled to be completed by 2007; and        (iii) the fourth from the North Caspian Sea consortium        for engineering, procurement, laying and installation of        pipelines, optic fiber and umbilical cables. The        installation activities, scheduled to be completed        between 2006 and 2007, will be carried out using a new        purpose-built pipelaying barge. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

In the Liquefied Natural Gas area two turnkey contracts wereawarded: (i) the first one, in joint venture with Sofregaz forGaz de France for the construction of a regasification terminalat Fos Cavaou in France, which includes engineering, procurement,construction of the overall terminal facilities, including threeLNG storage tanks for 110,000 cubic meters each, the associatedmarine works and the regasification facilities. The plant willhave a treatment capacity of over 8 billion cubic meters/year;and (ii) the second one, in consortium with the Belgian companiesCFE, Fontec and Fluxys, for the extension from 4.5 to 9 billioncubic meters/year of natural gas of the Zeebrugge LNGregasification terminal on the Belgian coast. It includesengineering, procurement, construction of the facilities for theextension of the terminal, including one LNG storage tank for140,000 cubic meters and the regasification facilities.

In the Onshore Construction area two contracts were acquired:(i) the first one for NAOC for the engineering, procurement andconstruction of a 82-kilometer long gas pipeline in the NigerDelta connecting Rumuji to the Bonny liquefaction plant; and (ii)the second one for Shell Petroleum Development Co of Nigeria Ltdfor engineering, procurement and construction of additionalfacilities at the LNG Gas Supply Plant located in Soku, Nigeria,to increase its capacity.

In the Leased FPSO area a contract for Repsol YPF for theextraction of the fuel oil from the wreck of the Prestige, theoil tanker sunk offshore Galicia, Spain, in November 2002.

In the Onshore drilling area, in January 2005, a contract forthe North Caspian Sea consortium for drilling activities in BlockD of the Kashagan field utilizing two drilling rigs owned by theclient.

In the Offshore drilling area in January 2005 two contractswere acquired. The first one for Saudi Aramco involving theoffshore drilling rig Perro Negro 2 for activities to beperformed offshore Saudi Arabia for three years starting in thesecond half 2005. The second one for Petrobel involves therenewal of Perro Negro 4 utilization for two years for workoveractivities on the Belayim field offshore Egypt.

> 
*Business areas*

> 
OFFSHORE CONSTRUCTION

Saipem is able to execute large EPIC (Engineering,Procurement, Installation and Commissioning) projects for thedevelopment of offshore hydrocarbon fields by integrating itstechnological and operational skills, supported by a world-classfleet, with engineering and project management capabilitiesacquired on the market (among which Bouygues Offshore, MossMaritime, Petromarine, Idpe). The demand for these services isexpected to increase in particular in West Africa, the CaspianSea, the Far East, Russia and Asia Pacific, in accordance withplans for the development of hydrocarbon reserves announced bythe major oil companies.

The development of offshore fields, especially in the deepoffshore, is more and more frequently performed by means offloating production units (FPU), where Saipem intends tostrengthen its competitive positioning. Among FPUs, FPSO vessels11 offer the best developmentprospects due to their storage capacity, which allows to developfields remote from transmission infrastructure, and to theirversatility, which allows at the end of the useful life of afield to relocate vessels on other fields thus expanding theiruseful life.

Saipem is engaged in the segment of design, procurement andinstallation of fixed platforms, in particular in the segment ofultra heavy lifting, thanks to the technical features of itsvessels. It is also engaged in: (i) the laying of large diameterlong distance subsea pipelines and transport infrastructure bothin conventional and deep offshore; (ii) underwater development inthe deep offshore, which includes laying of small diameter pipes,umbilical lines, risers and other subsea structures thanks to thedesign ability of its engineering structures and the installationcapacity of its vessels.

Its offshore construction fleet is made up of 25 vessels and45 robotized vehicles able to perform advanced subsea operations.Among its major vessels are: (i) Saipem 7000, semi-submersiblevessel with dynamic positioning system, with 14,000 tonnes oflift capacity (the highest of this kind in the world), capable tolay pipelines using the J-lay technique to the maximum depth of3,000 meters. This vessel has been used to lay the Blue Streampipeline in the waters of the Black Sea at the record depth of2,150 meters; (ii) the Castoro 6 semi-submersible vessel, capableof laying pipes in waters up to 1,000 meters deep; (iii) theSaipem 3000 multifunction vessel for the development ofhydrocarbon fields, derived from the transformation of theMaxita, provided with cranes capable of lifting over 2,000tonnes; (iv) the Semac semi-submersible vessel used for largediameter underwater pipe laying; and (v) the Saibos FDS for thedevelopment of underwater fields in dynamic positioning, providedwith cranes lifting up to 600 tonnes and a system for verticalpipe laying to a depth of 2,000 meters.

> 
OFFSHORE DRILLING

Saipem provides offshore drilling services to oil companiesmainly in key areas such as West Africa, the Middle East, theNorth Sea and North Africa. Its offshore drilling fleet consistsof 10 advanced vessels properly equipped for its primaryoperations and some drilling plants installed on board of fixedoffshore platforms. The technical features of its vessels allowSaipem to keep significant market positions in the most complexareas of deep and ultra deep waters. One of its most importantoffshore drilling vessels is the Saipem 10000, designed toexplore and develop hydrocarbon reservoirs operating in excess of3,000 meters water depth in full dynamic positioning. The shiphas a storage capacity of 140,000 barrels and can maintain asteady operating position without anchor moorings by means of 6computerized azimuth thrusters, which offset and correct theeffect of wind, waves and current in real time. Capitalexpenditure for building this ship amounted to about dollar 300million. The vessel is operating in ultra deep waters (over 1,000meters) in West Africa.

Other relevant vessels are Scarabeo 5 and 7, third and fourthgeneration semi-submersible rigs able to operate at depths of1,900 and 1,200 meters of water, respectively.

> 
LEASED FPSO

Saipem provides to oil companies services for the developmentof offshore hydrocarbon fields by leasing its fleet of FPSOvessels. Following its recent acquisitions (in particular MossMaritime and Bouygues Offshore) Saipem significantly strengthenedits design skills. The leasing of an FPSO represents analternative to direct expenditure for oil companies. West Africais the market with the highest expected growth rates due to thenumber of development projects announced or started-up by oilcompanies. Saipem’s main vessels are: (i) FPSO Firenze, atanker ship which, after its conversion into a floatingproduction and storage vessel, has been installed in Eni’sAquila field, in the Adriatic Sea, where it operates at a depthof 850 meters; and (ii) FPSO Mystras that has been installedsince January 2004 in the Okono and Okpoho oil fields operated byEni with a 100% interest in the deep offshore of Nigeria. Saipemintends to expand its market share in this business and plans toupgrade its offer by designing new generic FPSO vessels, designedand equipped in direct cooperation with the client in order toidentify standard features that make the vessel easily employablein more than one development projects according to theclient’s portfolio of assets.

> 
ONSHORE CONSTRUCTION

Eni operates in the construction of plants for hydrocarbonproduction (separation, stabilization, collection ofhydrocarbons, pumping stations, water injection) and treatment(removal and recovery of sulfur dioxide and carbon dioxide,fractioning of gaseous liquids, recovery of condensates) and inthe installation of large onshore transmission systems(pipelines, compression stations, terminals). The demand for thiskind of services from the oil industry is expected to increase inthe medium term, in particular long distance pipelines representone of the favorite systems for linking production areas withtheir end markets, despite the increasing competition from othertransport modes (LNG, GTL). The main operation areas are theCaspian Sea, Russia’s Far East, Africa and the Middle East.Saipem intends to consolidate its competitive positioning in thissegment by exploiting in particular the opportunities provided byremote areas, characterized by the lack of infrastructure, whereit can leverage on its distinctive ability to operate indifficult contexts and to manage complex projects. Saipem is alsocapable of providing onshore services complementary to offshoreoperations, which represents a competitive advantage for thedevelopment of projects in areas such as the Caspian Sea.

> 
ONSHORE DRILLING

Eni operates in this area as main contractor for the majorinternational oil companies.

Onshore drilling is conducted through 47 facilities located inSaudi Arabia, North Africa, Central Asia, Peru, Venezuela andItaly. Some of these facilities can drill to 10,000-meter depthsin high pressure and high temperature environments. Saipemintends to focus its activities in areas where it has beenpresent for a long time and to search opportunities in areas withproved development prospects such as Central Asia, the MiddleEast and North Africa.

Saipem can also exploit the opportunities provided by theemergence of new logistically demanding remote areas lackinginfrastructure that require the ability to operate in hostileenvironmental conditions.

> 
LNG

Saipem operates in the LNG segment following its purchase ofBouygues Offshore and Moss Maritime which contributed theirexcellent competence in the LNG chain, complementary to theonshore and offshore transmission of natural gas. The marketsoffering the highest potential are Asia, Europe and the Americas.Services provided by Saipem include: (i) the onshore segmentwhich, according to management, shows interesting growthprospects, where Saipem is engaged in the design and constructionof regasification terminals, storage tanks and vessels; and (ii)the offshore segment, that includes FSRU (Floating StorageRegasification Units) and FLNG (Floating Liquefaction plants forNatural Gas) integrated systems which, according to management,show interesting growth prospects in the medium term due to theirlower environmental impact and greater flexibility as compared toother systems. Saipem intends to develop its presence in thisarea.

> 
MAINTENANCE, MODIFICATION & OPERATION

Saipem is also present in the MMO business which complementsthe company’s activities and provide interesting growthprospects for the increasing tendency of oil companies tooutsource these services (both routine work andupgrading/revamping) and for the development of remote areas forhydrocarbon production. Saipem is capable of seizing theopportunities provided by this segment by leveraging on itsspecialized know-how also as project manager, on its resourcesand network of logistical bases.

 

> 
***Engineering***

Snamprogetti intends to strengthen its competitive positioningin the market segment of high complexity (in terms of size,execution and technology) EPC (Engineering, Procurement andCommissioning) projects requiring a wide and integrated range ofservices, management capabilities, flexible organization and acontinuous development of new technologies that can strengthenSnamprogetti’s competitive positioning. In order to attainthis objective, Snamprogetti intends to enhance its role ofglobal contractor based on its skills in terms of executioncapabilities, level of services provided and development ofproprietary technologies.

It will focus its activity on market segments selected in sucha way as to guarantee a good balance of profitability and riskprofiles. In order to reduce the cyclicality of the segment ofservices for the oil and gas industry, it will expand itspresence in the large infrastructure business in Italy, inparticular in the transport system.

Snamprogetti intends to expand the provision of qualifiedservices in the phases of front end loading of projects(feasibility studies, conceptual, basic, FEED engineering andproject management) mainly to major clients and as a support toEni’s investment plans. It will also intensify actions forimproving efficiency and operating flexibility also through therationalization of its operating structure, the development oflow cost engineering centers, the optimization of procurement,the adoption of the most stringent international best practicesin terms of working tools and methods and the hiring of highlyqualified resources.

Snamprogetti continues to enhance its proprietary portfolio oftechnologies by means of support activities to the development onan industrial scale of technologies in strategic areas ofinterest of Eni, such as the conversion of heavy crudes and highpressure transmission of natural gas, and the development ofknow-how in the field of the manufacture of high quality fuelsand in the area of natural gas upgrading (GTL, syngas, methanol,ammonia, urea).

In 2004, the engineering order backlog declined by euro 965million due in particular to the postponement of many projects onreference markets and of the depreciation of the dollar over theeuro. In the first quarter of 2005, the activity recoveredsomewhat and orders were acquired for approximately euro 3billion, in particular the following contracts were awarded: (i)from Abu Dhabi Gas Industries (GASCO) for the Ruwais 3rdLNG Train project for NGL (natural gas liquids) production fromthe F and G wells of the Thalama field; (ii) in cooperation withSNC Lavalin for the engineering, procurement and construction ofthree plants for the hydrotreatment of oil distillates with atotal capacity of approximately 130 KBBL/d in the CanadianNatural Resources Ltd complex at Fort McKay, Canada within theHorizon Oil Sands project; and (iii) from Saudi Aramco for theconstruction of a natural gas treatment and compression plant inHawiyah in Saudi Arabia.

Among the most significant orders won in 2004 are:

| • |   | in the Upstream area, in        particular: (i) a contract in joint venture with Technip,        Kellog Brown Root for Nigeria LNG Ltd, JGC for        engineering, procurement and construction of the sixth        liquefaction train with a capacity of 4 million        tonnes/year at the Bonny plant in Nigeria. The same joint        venture already built the first four trains and is        completing the fifth one; (ii) a contract in joint        venture with Chiyoda Corporation for Ras Laffan Liquefied        Natural Gas Co Ltd II for engineering, procurement and        construction of the fifth liquefaction train with a        capacity of 4.7 million tonnes/year at the Ras Laffan        complex in Qatar. The contract confirms the success of        the joint venture in the construction of the third and        fourth train; and (iii) a contract in joint venture with        Chiyoda and Mitsui & Co Ltd, for the development of        the Ras Laffan - Al Khaleej Gas Project Phase 1 project        in Qatar for Exxon Mobil. This is an expansion of the        contract acquired in 2003. The project aims at recovering        LPG and natural gasoline and includes a complex for the        separation, recovery and treatment of natural gas with a        capacity of 7.7 billion cubic meters/year; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | in the Chemical complex        area, a contract in a consortium with Yanes y Asociados        for Superoctanos for the engineering, procurement and        construction of a plant for the manufacture of iso-octane        with a capacity of 380,000 tonnes/year. The plant will        operate with a proprietary technology (Eni-Ecofuel) and        provides for the conversion of the existing MTBE plant in        Jose, Venezuela.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

> 
*Business areas*

> 
PLANTS

*Oil & Gas* Snamprogetti is engaged in the executionof complex and technologically advanced projects in the area ofplants for hydrocarbon production, natural gas treatment andupgrading, (LNG, recovery and fractioning of natural gasliquids). Based on the capital expenditure plans announced by oilcompanies, Snamprogetti expects a strong growth in the demand forservices in these areas. In particular the segment of transportand treatment of natural gas seems the most dynamic due to theprogressive globalization of demand and supply of natural gas.Snamprogetti intends to consolidate its know-how in natural gastreatment, where capital expenditure for expanding liquefactionand regasification capacity of about 100-120 million tonnes/yearof LNG (equivalent to 140-170 billion cubic meters/year) areexpected in the next four years.

*Refining* Snamprogetti is engaged in the segment ofconventional plants (grass root refineries and refining units)and plants for the hydroconversion and hydrotreatment of heavyresidues and distillates. Snamprogetti intends to seize thegrowth opportunities of the business of plants for heavy residueconversion and production of clean fuels. Growth in this businessis supported by the wider availability of heavy crudes and by theincreasingly stringent environmental requirements on emissionsestablished worldwide. At Eni’s Taranto refinery the firstdemonstration plant with 1.2 KBBL/d capacity based on the EniSlurry Technology is nearing completion. This technology has ahigh strategic value and aims at meeting the increasing demandfor upgrading of heavy crudes and non conventional crudes (tarsands) and for conversion of refining residues (see:"Innovative Technologies" below).

*Chemical Complexes* Snamprogetti is engaged in the areaof plants for the conversion of natural gas (syngas, GTL,hydrogen, ammonia, methanol and urea) and gas-to-chemicals(ethylene and ethane derivatives). The demand for syngas ismarkedly increasing for its application in the gas to liquidsfield for the manufacture of high quality diesel fuel fromnatural gas; in this segment, where syngas is a critical element,Snamprogetti owns a proprietary technology through its affiliateHaldor Topsøe (Eni’s interest 50%). Snamprogetti holds asound position in the design and construction of plants for theproduction of nitrogen-based fertilizers and high-octaneadditives for gasoline (MTBE, ETBE, TAME andiso-octene/iso-octane), based on proprietary technologies.Snamprogetti intends to strengthen its competitive position inthe segment of world scale plants for ammonia and ureaproduction, demand for which is supported by increasingconsumption in Asia, with capital expenditure in new capacityconcentrated in areas where gas has a competitive price (MiddleEast, Africa, Latin America). Snamprogetti intends to seize theopportunities for the construction of plants for the manufactureof ethylene and petrochemical products from ethane, whererelevant capital expenditure is expected in areas wherefeedstocks have a low price (especially the Middle East). Incooperation with an international partner Snamprogetti is engagedin the development of a technology for the manufacture of styrenefrom ethane (see: "Innovative Technologies" below).

*Energy* Snamprogetti is active in the design andconstruction of combined cycle power stations also fired withrefinery residues (IGCC - Integrated Gasification CombinedCycle). Snamprogetti intends to make use of the relevant know-howit acquired in the construction of EniPower power stationssearching for new projects in Italy and outside Italy.

> 
FIELD UPSTREAM FACILITIES    AND PIPELINES

Snamprogetti is engaged in the design and construction ofpipelines for the transmission of hydrocarbons, collectionnetworks and upstream plants (construction of primary separationplants, gas and water injection systems, compression and pumpingstations), the demand for which is expected to grow. Snamprogettiis developing new advanced technologies for high pressuretransport of natural gas aimed at the exploitation of reserveslocated in remote areas (see: "Innovative Technologies"below).

> 
INFRASTRUCTURE

Snamprogetti is active in the field of design and constructionof great infrastructure in Italy. In particular it is working onthe completion of the high speed/high capacity train tracks fromMilan to Bologna.

The Italian market for large infrastructure projects showsinteresting prospects after the approval of a 10-year plan forthe construction of public works by the Italian Government. Thetypes of works, their size, the introduction of simpler andfaster authorization procedures, the modes of implementation ofprojects based on their critical variables (time, cost, qualityand profitability) and the acknowledgement of the role of GeneralContractor are the elements on which Snamprogetti bases itsefforts to win orders in this area, also in order to reduce thecyclicality of the demand for services from the oil andpetrochemical industries.

> 
AQUATER - ENVIRONMENTAL ACTIVITIES

Snamprogetti, through its Aquater - Environmental Activitiesdivision, is active in the field of projects for environmentalremediation and reclamation, protection of the soil andintegrated water systems in the framework of the optimization ofcompatibility of industrial development and environmentalprotection. The division provides a wide range of engineeringservices for the soil, the environment and natural resources andis active both as a consultant and as a main contractor in thearea of environmental remediation, reclaiming of plants, wastemanagement, water purification and civil works.

> 
CEPAV Uno and CEPAV Due

Eni holds interests in the CEPAV Uno (50.36%) and CEPAV Due(52%) consortia that in 1991 signed two contracts with TAV SpA toparticipate in the construction of the tracks for high speed/highcapacity trains from Milan to Bologna (under construction) andfrom Milan to Verona (in the design phase).

As part of the project for the construction of the tracks fromMilan to Bologna, an addendum to the contract between CEPAV Unoand TAV SpA was signed on June 27, 2003, redefining certain termsand conditions. Works completed at the end of 2004 correspondedto 60% of the total contractual price in line with thecontractual obligations; however, the existence of expanddescription obstacles, made known to the client may contribute toa delay in construction in 2005 and beyond.

As concerns the Milan-Verona portion, in December 2004 CEPAVDue presented the final project, prepared in accordance with LawNo. 443/2001 on the basis of the preliminary project approved bythe CIPE.

The final project will be examined by TAV, presented to theConferenza dei Servizi and approved by CIPE for approval.

As concerns the arbitration procedure requested by theconsortium against TAV for the recognition of damage related toTAV’s belated completion of its tasks, in September 2004 atechnical survey was requested by the arbitration committee, thatis expected to be completed by mid-2005. The date for the finaldecision was set at January 31, 2006.

 

##### Table of Contents

**Other Activities**

Eni SpA engages in strategic planning, human resourcesmanagement, finance, administration, legal affairs, internationalaffairs and corporate research and development functions for theCompany. Through Enifin SpA, Societa FinanziamentiIdrocarburi-Sofid SpA and Eni International BV, Eni carries outlending, factoring, leasing and insurance activities, principallyon an intercompany basis. Eni also engages in informationtechnology, communications, technology research and otheractivities.

Starting from January 2003 Eni’s non-core activities havebeen reorganized as follows:

| • |   | Syndial (former EniChem) was        included in the "Other Activities" segment,        which includes all Eni companies not included in specific        segments (such as, among others, EniData, Sieco,        Tecnomare, EniTecnologie, Eni Corporate University, AGI); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the new "Corporate and        financial companies" segment was created, which        includes Eni Corporate, Sofid and the financial companies        formerly included in the "Other activities"        segment.                                               |

In addition, following its merger into Eni in 2004, EniDataSpA, which managed Eni’s IT activities, and was formerlyincluded in "Other activities", is now included in"Corporate and financial companies".

On February 4, 2005 shareholders of Albacom (Eni SpA - 35%,Mediaset SpA - 19.5%, Banca Nazionale del Lavoro SpA (BNL) -19.5%) sold their interests in Albacom to British Telecom Plc(BT). The contract provides also for the sale to BT by Eni andMediaset of a financial receivable (Eni’s share is euro 87million) acquired at nominal value from BNL related to a euro 250million loan granted by BNL to Albacom and guaranteed by thepartners proportionally to their interest. BNL sold to BT theresidual amount of the loan. The consideration for the sale ofthe interest and financial receivable, payable after 5 years, islinked to a formula linked in turn to EBITDA achieved by Albacomin the year closing on March 31, 2009 with a floor and a capcharged with interest accrued. Given the objective uncertaintiesof the situation, in the preparation of 2004 consolidatedfinancial statements the floor price was assumed, whichcorresponds to euro 26 million for Eni’s share, with therecognition of a total charge, before tax, of euro 103 million,for euro 41 million related to the interest (book value) and foreuro 62 million to a provision to the contingency reserve againstBNL’s financial receivable of euro 87 million (see Item 5– "Results of operations").

Management does not consider Eni’s activities in theseareas to be material to its overall operations.

> 
***Seasonality***

*Eni’s results of operations reflect the seasonalityin demand for natural gas and certain refined products used inresidential space heating, the demand for which is typicallyhighest in the first quarter of the year, which includes thecoldest months, and lowest in the third quarter, which includesthe warmest months.*

 

 

##### Table of Contents

**Research and Development**

Eni pursues technological excellence, based on the promotionand dissemination of experience, expertise and know-how, asessential factors in competitiveness, as well as economic andenvironmental sustainability of its industrial activities.

In 2004, Eni consolidated the new model of technologicalinnovation that had been launched in 2002 to support growth andcontinuing expansion. This entails the integration of R&Dskills into so called "technological platforms" aimedat greater effectiveness of innovation in complex projectscapable of generating a long-term competitive advantage.

As for the reorganization of Eni’s R&D structures in2004 the R&D department of the Exploration & ProductionDivision operating in the "development and production"area was transferred to EniTecnologie SpA. Eni also continued theimplementation of its human resources plan, aimed at increasinglyadapting available resources and capabilities to the requirementsof projects and businesses.

In 2004, Eni’s expenditure for research and developmentamounted to euro 257 million, of which euro 210 million wereexpensed in the year (euro 238 million in 2003). At December 31,2004, approximately 1,470 persons were employed in research anddevelopment activities (1,400 at December 31, 2003).

Eni is aware of the key role innovative technologies play inthe future development of the hydrocarbon industry, it thereforeintends to develop key technologies that can contribute to theestablishment of competitive advantages and to the meeting of itslong to medium term growth and profitability objectives. Researchprojects are selected according to a strict evaluation of theirreturn and are carefully monitored in light of the maximizationof the value of Eni’s project portfolio.

In the next four years Eni intends to invest over euro onebillion in R&D, balancing projects aimed at reachingshort-term objectives for business units with group-wide projectsaimed at strengthening medium to long-term businesssustainability. In particular the main focus of Eni’sR&D lines are: (i) reserve replacement and reduction ofmineral risk; (ii) production from non conventional hydrocarbonreserves and optimal management of reserves with high hydrogensulfide and sulfur content; (iii) expansion in the natural gasmarket and utilization of associated gas and gas located inremote areas; (iv) improvement of quality and performance offuels in light of the evolution of engines to increasinglyperfected and efficient systems with lower impact on air quality;(v) efficient use of fossil fuels through an improvement inrefining yields and an optimal use of each fuel with reducedenvironmental impact; and (vi) mitigation of greenhouse effect,through the capture and geological sequestration of carbondioxide.

Eni intends to pursue global alliances in order to participatein research projects that have a longer horizon than thefour-year plan. Following is a brief description of the maintechniques applied or under development.

> 
*Hydrocarbon exploration and production*

> 
INNOVATIVE TECHNOLOGIES FOR SUBSOIL SURVEY

In order to prepare a geological model of fields as near aspossible to reality aimed at the simulation and monitoring offields, Eni developed significant industrial applications ofhighly innovative technologies. The main objective of thesetechnologies is the reduction of mineral risk and theoptimization of processes for extracting and recoveringhydrocarbons.

New and relevant developments have been reached in the 3DCommon Reflection Surface (CRS) Stack, Deep Migration Phase ShiftPlus Interpolation (PSPI) and Kirchoff True Amplitude (KTA)proprietary technologies, which allowed to obtain significantlyhigher results than conventional technologies. The relevantimprovement of the final seismic imaging and the higher densityand precision of information on the characteristics of subsoilsof fields (in Italy, the Gulf of Mexico, West and North Africa)allowed to reduce the risk associated to the definition ofgeological models in the field’s development phasetime.

Significant developments and industrial applications derivedalso from advanced technologies for modeling and monitoringfields, such as: the integrated workflow for the characterizationand study of fractured systems, cross-well seismics, 4D or timelapse seismics to monitor the behavior of producing fields overtime.

> 
DRILLING OF "ADVANCED WELLS"

Eni developed and applied at industrial level a series oftechnologies that allow to drill highly complex wells withgreater operating efficiency. In particular, lean profiledrilling, developed and patented by Eni, is applied in deepvertical and deviated wells especially in high pressure and hightemperature environments allowing a reduction in time and costsand in environmental impact as it reduces the volume of rockhandled. Wells obtained with this technique are high quality andlow risk. The technique basically consists in reducing to aminimum the tolerance between the diameter of wells and theirlining columns while keeping the production casing unchanged. Theverticality and direction of the hole are guaranteed byinnovative tools such as "Vertitrack" (former SDD,straight-hole drilling device) and "Autotrack"developed and applied by Eni in cooperation with Baker-Hughes.Lean drilling was successfully applied both in Italy (Vald’Agri, Trecate) and outside Italy (Tunisia, Algeria andEgypt) and entailed significant benefits such as higher safetyand higher savings of costs and time. The application in Vald’Agri is a record lean drilling in highly deviated wells (a13"3/8 casing in a 14"3/4 hole with inclination up to60°).

In deep water drilling Eni’s innovative proprietarytechnology is the dual casing running which allows forsimultaneous drilling of the first two superficial holes of adeep water well, the simultaneous lowering of the superficialcasings and the cementing. The application of this technologyallows for a significant reduction in time and costs and aperfect verticality of the two casings and the well head.

> 
INNOVATIVE TECHNOLOGIES FOR THE TREATMENT OF LIQUIDS

In the field of transmission and treatment of hydrocarbons Enideveloped and applied innovative technologies with particularattention to multi-phase fluids (water, oil and/or gas) in orderto optimize production and reduce its environmental impact. Inparticular, Eni successfully tested at its Cavone oil center apilot plant for the removal of oils from layer waters whichallows to reduce the residual concentration of hydrocarbons inwater to less than 10 ppm, starting from an initial content ofover 1,000 ppm. The system is based on the use of adsorbingpolymers capable first to capture oil particles and then torelease them favoring their coalescence and making them easier toseparate. The system is currently being engineered in order tomake it useable on platforms. Another ongoing project aims atoptimizing new design centrifugal systems for the separation ofwater from oil and for the confirmation of innovativetechnologies for removing soluble organic compounds.

Also in the field of multiphase pumping Eni is applyinginnovative technologies as an alternative to traditionalproduction systems in marginal fields, fields located in frontierareas or difficult contexts such as deep waters. The multiphasetechnology becomes extremely useful, in terms of economicbenefits, in offshore applications where the possibility totransport production from the wells over long distances allows totransfer processing activities on existing facilities andinfrastructure, thus significantly reducing technical costs forthe development of fields. Infield applications of multiphasepumping have been recently installed offshore and onshore in theUnited Kingdom and Tunisia with other partners in order to obtaina higher recovery of hydrocarbons.

> 
MANAGEMENT OF HYDROGEN SULFIDE AND SULFUR

The R&D project for the optimal management of reserveswith high content of hydrogen sulfide and sulfur started in 2003is continuing. The project aimed at developing innovativetechnologies and/or advanced processes able to manage thedisposal and possible exploitation of high amounts of sour gasand sulfur that are co-produced with hydrocarbons, whilerespecting safety and the environment. In particular innovativeprocesses for the separation of hydrogen sulfide and itsconversion into plain sulfur and the storage and/or use of thissulfur are in the development phase. In parallel innovativeprocesses are being studied for the reinjection of hydrogensulfide into the field and its monitoring.

> 
ENI SLURRY TECHNOLOGY

At Eni’s Taranto refinery the testing is ongoing of aDemonstration Plant with a 1.2 KBBL/d capacity based on EniSlurry Technology (EST) which, when demonstrated in 2005, willprovide Eni with an important competitive lever. This is astrategically relevant technology because it allows a moreeconomic use of heavy crudes and the total transformation of abarrel of oil into high quality fuels, avoiding the fatalproduction of fuel oil, otherwise destined to be used inelectricity generation in Rankine cycles with low yield and highenvironmental impact. The subtraction of fuel oil fromthermoelectric use will indirectly favor the penetration ofcombined cycle gas fired plants with high efficiency and very lowenvironmental impact.

> 
TRANSMISSION: TAP PROJECT

The TAP Project (High Pressure Transmission) aims atdeveloping reliable technologies for making the transmission viapipeline of relevant amounts of natural gas from production areasto consuming markets economically viable, thus favoring the saleof gas produced by Eni’s upstream activities. This projectwas started in May 2003 and is aimed at developing the mostadvanced long distance, high capacity, high pressure and highgrade solutions with relevant targets related to: (i) distancesover 3,000 kilometers; (ii) natural gas volumes to be transportedof about 20-30 billion cubic meters/year; (iii) pressure equal toor higher than 15 Mpa; and (iv) use of high and very high gradesteel (e.g., X100). In 2004, the construction phase started of anexperimental pilot pipeline with 48-inch diameter in the utmostresistant steel, which will significantly contribute to reducethe time necessary for the development of the technology. Withinthis project also the construction of a 10-kilometer long portionof pipe in X80 steel started.

> 
CONVERSION OF NATURAL GAS INTO LIQUIDS

Aim of the project is to exploit the relevant natural gasreserves that are not extracted because too far from end markets,through their conversion into high quality, synthetic oilproducts totally sulfur and aromatic free. At Eni’sSannazzaro pilot plant, research on production of wax by means ofFischer-Tropsch technology was completed and validationactivities are underway.

> 
INNOVATIVE FUELS: CLEAN DIESEL FUEL PROGRAM

In 2004, Eni started to sell the new BluSuper gasoline, whichguarantees better engine performance and efficiency and reducespolluting emissions, thanks to its high antidetonating powerresulting from a higher octane number (98 as compared to 95 ofordinary gasolines) and its lack of sulfur. BluSuper complementsBluDiesel, sold since 2002, and is part of Eni’s strategy toimprove the quality of its fuels, anticipating their compliancewith EU regulations (mandatory from 2009) and targeting its offerto customers’ requirements, leveraging on Eni’sintegrated refining-logistics-distribution system.

Feeding system, in particular in valves, allowing the engineto maintain its performance over time.

Eni also continued R&D activities of various process linesaimed at improving the quality of its gasoil pool, among these aprocess for oxidating desulfurization in order to manufacturesulfur-free gasoil at competitive prices.

> 
GHG PROGRAM: GEOLOGICAL SEQUESTRATION OF CARBON DIOXIDE

R&D in the field of environmental protection led to thestart-up of an integrated research program Green House Gases(GHG), aimed at verifying the feasibility of the geologicalsequestration of CO2 in depleted fields and saltyaquifers. As for the former, the potentially employable fieldshave been identified and characterized. The definition of a pilotproject will be completed in 2005. As part of the program, Enidecided to participate in the second phase of the CO2Capture project aimed at finding practical solutions for thecapture and sequestration of CO2.

> 
HYDROGEN PROJECT

Eni’s interest in this field is aimed at the creation ofa portfolio of technologies that may be employed in theproduction of hydrogen as energy vector from various primaryenergy sources. In 2004, Eni started the construction of a pilotplant for the development of a new type of multi-fuel reformerbased on catalytic oxidation with low contact time of liquid andgaseous hydrocarbons. The aim is to produce hydrogen atcompetitive costs also in medium to small sized plants with highflexibility related to refinery feedstocks available.

> 
STYRENE FROM ETHANE

In cooperation with Dow Chemical Co Eni is developing aninnovative technology for the production of styrene monomer fromethane and benzene, that, compared to conventional techniquesbased on ethylene, will allow to reduce production costs, asconfirmed by the demonstration plant, and to free themanufacturer from the need to locate the plant near apetrochemical complex producing ethylene, obtaining also greaterflexibility.

 

 

##### Table of Contents

**Insurance**

Eni constantly assesses its exposure for the Italian andforeign activities that are mainly covered through the OilInsurance Limited ("OIL"), a mutual insurance andreinsurance company that provides to its members a broad coveragetailored to the specific requirements of oil and energycompanies. Eni makes use of a captive insurance company thatcovers the risks and implements Eni’s Worldwide InsuranceProgram re-insured with high quality securities in order tointegrate the terms and conditions of the OIL coverage.

An insurance risk manager works in close contact with managersdirectly involved in core business activities in order toevaluate potential risks and their financial impact on the Group.This process allows to define a constant level of risk retentionand, conversely, the amount of risk to be transferred to themarket.

The level of insurance maintained by Eni is generallyappropriate for the risks of its businesses.

 

 

##### Table ofContents

**Environmental Matters**

> 
***Environmental Regulation***

Together with other companies in the industries in which itoperates, Eni is subject to numerous EU, national, regional andlocal environmental laws and regulations concerning its oil andgas operations, products and other activities, includinglegislation that implements international conventions orprotocols. In particular, these laws and regulations require theacquisition of a permit before drilling for hydrocarbons maycommence, restrict the types, quantities and concentration ofvarious substances that can be released into the environment inconnection with exploration, drilling and production activities,limit or prohibit drilling activities on certain protected areas,and impose criminal or civil liabilities for pollution resultingfrom oil, natural gas, refining and petrochemical operations.These laws and regulations may also restrict emissions anddischarges to surface and subsurface water resulting from theoperation of natural gas processing plants, petrochemicalsplants, refineries, pipeline systems and other facilities thatEni owns. In addition, Eni’s operations are subject to lawsand regulations relating to the generation, handling,transportation, storage, disposal and treatment of wastematerials.

Environmental laws and regulations have a substantial impacton Eni’s operations. Some risk of environmental costs andliabilities is inherent in particular operations and products ofEni, as it is with other companies engaged in similar businesses,and there can be no assurance that material costs and liabilitieswill not be incurred. Although management, considering theactions already taken, with the insurance policies to coverenvironmental risks and the provision for risks accrued, does notcurrently expect any material adverse effect upon Eni’sconsolidated financial statements, as a result of its compliancewith such laws and regulations, there can be no assurance thatthere will not be a material adverse impact on Eni’sconsolidated financial statements due to: (i) the possibility ofas yet unknown contamination; (ii) the results of the on-goingsurveys and the other possible effects of statements required byDecree No. 471/1999 of the Ministry of Environment concerning theremediation of contaminated sites; (iii) the possible effect offuture environmental legislation and rules, like the Decree No.367 of the Ministry of Environment, published on January 8, 2004,that introduces new quality standards for aquatic environment anddangerous substances. This Decree modifies completely the actualset of rules, because of the imposition of qualitative standards,that can be reached only through considerable investments; (iv)the effect of possible technological changes relating to futureremediation; and (v) the possibility of litigation and thedifficulty of determining Eni’s liability, if any, asagainst other potentially responsible parties with respect tosuch litigation and the possible insurance recoveries.

Management of waste, toxic waste, packaging and packagingwaste is regulated by Legislative Decree No. 22 of February 5,1997 which refers to three European Directives (91/156/CEE,91/689/CEE and 94/62/CE) and provides incentives to cleantechnologies and recycling and reuse of waste. This decreeprohibits the uncontrolled disposal of waste underground and inthe water and obliges polluting entities to remediate pollutedareas. Whenever it is not possible to identify one person orentity responsible for existing pollution, the owner of thepolluted area is expected to pay for its remediation. This decreebecame operational with Decree No. 471/1999 of the Ministry ofthe Environment, which also defined: (i) limits for thecontamination of soils and underground waters; (ii) generalguidelines for remediation and environmental recovery of pollutedareas; and (iii) criteria for the identification of pollutedareas of national interest. For the storage of toxic waste, thedecree favors techniques avoiding transport of waste and theiron-site treatment. Whoever causes, willfully or accidentally,pollution of an area or actual danger of pollution is expected toreact within 48 hours according to the procedure set by thedecree. At present Eni is not yet able to evaluate the possiblefuture consequences deriving from the completion of on-goingsurveys and other possible effects of the application of DecreeNo. 471/1999 of the Ministry of Environment; however there can beno assurance there will not be a material adverse impact onEni’s results of operations and financial position from theapplication of that decree. Law 388/2000 changed the regulationsconcerning the remediation of polluted sites, easing thediscipline of crimes related to events prior to LegislativeDecree No. 22/1997 and imposing the remediation of sites whereindustrial activity is ongoing. However, the remediation is to becarried out provided that it does not involve a significantdisruption in operations; remediation costs can be amortized inten years.

In accordance with European guidelines, the protection fromwater pollution was strengthened with Legislative Decree No.152/1999 as completed by Decree No. 258/2000 and by Decree No.367 of the Ministry of Environment. Decree No. 258/2000 providesfor an integrated protection of water resources by extendingcontrol from each discharge place to all the effects ofaccumulation and interactions of various discharges into onesingle water course and set quality objectives to be reachedwithin 2008. All discharges require preventive authorization, tobe renewed every four years, and must lie below the thresholdsset by Regions. To date Eni cannot evaluate the possible impactof the application of Decree No. 152/1999 as completed by DecreeNo. 367 of the Ministry of Environment. However, there can be noassurance that there will not be a material adverse impact onEni’s operations due to measures adopted by localauthorities whenever the quality of a certain water source doesnot comply with set standards due to the industrial activity ofall plants located above that water source.

Law 372/1999 will gradually enter into force. This law, whichis related to the European Directive 96/61/CE (IPPC –Integrated Pollution Prevention and Control), envisages thatindustrial installations will apply for an integratedauthorization concerning emissions, wastes and water discharges.Before April 2005 the competent authorities should have completedthe process of the IPPC authorization. Many of Eni’s plants– refineries, chemical plants, power stations – willhave to comply with this law. All the Eni installations aregetting ready to request and obtain the IPPC authorization, whichwill have a 5 years duration, in general, and 8 years forinstallations registered according to EMAS regulation. In orderto secure the extended authorization, some Eni installations haveobtained or are in the process of obtaining the EMASregistration.

As of the year 2003, according to the IPPC Directive, theMember States had to communicate their 2001 national values ofemissions into the atmosphere, wastes produced and managed and,finally, discharges into water of some compounds specified in theannexes of the directive relative to EPER (European PollutantEmission Register). The Directive applies to several Eni plants,so the Eni divisions and/or companies which own these plants,have reported their data to the authority in charge of preparingthe Italian national communication.

 

> 
***HSE activity***

In an operating context requiring companies, in particularthose in the energy sector, to meet strict environmentalsustainability requirements and to reduce risks, Eni’sHealth Safety Environment (HSE) activities are increasinglyoriented to the application and certification of rigorous HSEmanagement systems, in an effort to constantly improve theirperformance through specific projects aimed at meeting the mainchallenges of sustainability of Eni’s operating sectors.

At the end of 2003, Eni issued a management system model (MSG)based on a yearly cycle including planning, implementation,control, review of results and definition of new objectives. In2004, business units started implementing this management systemalong with an audit program aiming at checking its functioning inEni’s divisions and subsidiaries and at identifying anymeasures for its improvement. Two preliminary audits wereperformed in the Refining & Marketing and Exploration &Production Divisions, which will lead to an audit system to beextended to all the sectors.

In 2004, Eni’s business units continued to obtaincertification of their management systems and operating unitsaccording to the most stringent international standards. In 2004,the Livorno refinery qualified under the EMAS standard and thesame procedure is underway at the Taranto refinery. Proceduresfor the certification under ISO 14001 standard are underway andare going to be extended to a number of foreign subsidiaries inthe Exploration & Production sector.

In 2004, certifications reached a total of 133, with a 8.1%increase on 2003.

The expansion of the certification activity of managementsystems led to an increase in audit activities that in 2004totalled 3,454, in line with the high levels of the past fewyears.

Aware that training and professional qualification of the over2,000 experts working in the HSE area are crucial for managingactivities, two projects were launched:

| • |   | the HSE area professional        model project, aimed at increasing the sharing of        knowledge and improving the professional and managerial        skills also through the development of internal knowledge        management tools (HSENET); |
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| • |   | the HSE training project,        aimed at disseminating and integrating HSE culture in        business strategies, involving professionals not directly        operating in this sector.                                                             |

In 2004, a total of 1,115,600 hours of HSE training wereprovided to participants all over the world.

HSE expenditure in 2004 amounted to euro 1,131 million, with a22% increase as compared to 2003. Expenditure directed toenvironmental protection was 71.2% of the total, 26.1% wasdirected to safety and the remaining 2.7% was directed to healthissues. Current environmental expenditure of euro 549.6 millionwere mostly related to the intense program of site remediationstarted in the past few years. See the chapter on HSE expenditureof Eni’s 2004 HSE Report for a detailed analysis ofexpenditure by segment.

Due to the progressive implementation of the MSG in allbusiness units, the issues of safety, health and the environmentare becoming more and more integrated into the process ofbusiness planning and development.

Following a careful analysis of specific HSE problems of thedifferent business areas an agenda for HSE issues by segment ofactivity has been defined, which identifies the priorities to beachieved in the short, medium and long-term and establishessector objectives.

In the area of safety, Eni is producing its best efforts inimproving workplace conditions by means of prevention andprotection programs aimed at reducing injury rates for employeesand contractors in general.

In 2004, injury rates deteriorated slightly as compared to2003, interrupting the positive trend of preceding years.

In order to improve the level of preparedness to any possibleemergency, the emergency rooms operating in Milan and Rome werefurther strengthened along with the management systems ofsignificant emergencies.

In the area of health, an important e-medicine project isunderway, aimed at improving the quality of the health supportsystem provided to workers and health operators in Italy andabroad. This program aims at disseminating best practices in thefield of health in all operational contexts, keeping into accountspecific cultural and geographic features. E-medicine is based onthe integrated development of a remote health service tofacilitate the treatment of pathologies and face healthemergencies, on the creation of a health card for all workers andon an e-learning platform (continuous training for healthoperators).

In the field of the environment, a priority issue is thereduction of greenhouse gases produced by human activities, inparticular of carbon dioxide, that contribute to climate change.This objective has become even more important after Russiaendorsed the Kyoto Protocol, which came into force in February2005 (see below).

Further information on objectives and environmentalperformances of Eni Group companies are included in Eni’s2004 Report on Health, Safety and the Environment.

 

> 
***Implementation of the Kyoto Protocol***

During 2002 the Kyoto Protocol was ratified by the EU and alsoby Italy, with Law No. 120/2002. According to this law, Italycommitted itself to reduce greenhouse gas emissions by 6.5% inthe period 2008-2012 as compared to 1990 values. Reductions canbe achieved both through internal measures and through a seriesof instruments supplementary to internal measures. These are theso-called flexible mechanisms, which allow an enterprise to carryout projects in developing countries (CDM – CleanDevelopment Mechanism) and in industrial countries withtransition economies (JI – Joint Implementation) in order toobtain emissions credits and to purchase emissions allowancesfrom other Annex I countries, that have a surplus of theseemissions (IET – International Emission Trading). Emissioncredits and purchased allowances may be used by an enterprise tocomply with its assigned emissions limit in other countries.

The National Action Plan for the reduction of greenhouse gasemissions 2003-2010, sets out the allowances that each sector andcompany will be issued; the Italian National Allocation Plan alsoprovides for recourse to flexible mechanisms in order to meet theobjectives set by the Kyoto Protocol. Eni has cooperated with theauthorities responsible for the preparation of the NationalAllocation Plan. In fact, thanks to its presence in 70 countries,Eni is an elective partner for carrying out CDM and JI projectsthus contributing to the Italian program of greenhouse gasreduction. In December 2003 during the Conference of Parties tothe Kyoto Protocol – COP9 – Eni and the Ministry of theEnvironment signed a Voluntary Agreement for using flexiblemechanisms, promoting CDMs and JIs and contributing to thesustainable development of host countries.

A significant reduction potential can be derived fromproduction activities outside Italy, that in some cases, giventhe lack of local market outlets, require the flaring of naturalgas associated to oil production. The elimination of flaring andthe use of associated gas for the development of local economiesallow sustainable development while reducing greenhouse gasemissions. The validation of such projects as CDM and JI willprovide emission credits and facilitate the achievement of theItalian reduction target, as set by the Kyoto Protocol. Enialready carried out Zero Gas Flaring projects in Nigeria andCongo while others are underway. In 2004, Eni prepared thedocumentation required for the Kwale-Okpai combined cycle powerstation in Nigeria to qualify as a Clean Development Mechanismproject, the power station utilizes the associated gas formerlyflared. Moreover, Eni endorsed the Global Gas Flaring ReductionInitiative of the World Bank in order to fight for theelimination of obstacles to the completion of gas flaringreduction projects.

Other relevant initiatives related to the Kyoto Protocolconcern the introduction of the European scheme of emissiontrading in 2005. Most of Eni’s industrial sites are includedin this scheme and will be assigned a cap of emissions accordingto the National Allocation Plan. In the first period emissionsexceeding the set cap, if not matched by equivalent emissionallowances, will be subject to a fine amounting to euro 40 foreach tonne of carbon dioxide. All companies are going to identifyand carry out projects for emission reduction.

The best solutions for compliance with the Kyoto Protocol arethe use of low emission energy sources and the adoption of highlyefficient technologies. To address the greenhouse gas challenge,Eni completed in 2004 a detailed analysis for defining itsstrategy to respond to climate change and to participate in theEuropean emissions trading system, identifying a number ofprojects for energy saving and emission reduction from itsplants.

To ensure comprehensive, transparent and accurate accountingfor GHG emissions, which is consistent over time, Eni introduceda protocol for the accounting and reporting of greenhouse gasemissions (GHG Accounting and Reporting Protocol), which is anessential requirement for emission certification. Indeed,accurate reporting will support the strategic management of risksand opportunities related to greenhouse gases, the definition ofobjectives and the evaluation of progress.

For safer and more accurate management of GHG emissions andwith a view to supporting accounting and certification of theseemissions, Eni decided to implement a commercial database tofacilitate evaluation of emissions in compliance with themethodologies laid down in its own GHG Accounting and ReportingProtocol.

Eni introduced a complete, accurate and transparent protocolfor accounting and reporting of greenhouse gas emissions, whichis an essential requirement for emission certification. Indeed,accurate reporting will support the strategic management of risksand opportunities related to greenhouse gases, the definition ofobjectives and the evaluation of progress,

As a support to its generalstrategy for a sustainable management of greenhouse gases, Enicontinued its programs for the development of natural gas inItaly and outside Italy by means of technologically advancedprojects such as the Blue Stream gas pipeline from Russia toTurkey and the Greenstream pipeline from Libya to Sicily.Increased gas availability in Italy will lead to a furtherexpansion of the gas-power integration through high efficiencycombined cycles with much lower carbon dioxide emissions thancoal and liquid fuels.

In a medium term perspective work is underway on theseparation of carbon dioxide and its permanent storage ingeologic reservoirs, a part of the CO2 CaptureProject, an international R&D program carried out inconjunction with other oil companies.

Eni identified a number of projects for energy saving andemission reduction from its plants. Eni also evaluated theopportunities derived from the Flexible Mechanisms envisaged bythe Kyoto Protocol; in particular it prepared the documentationrequired to qualify as a Clean Development Mechanism project thealready constructed Kwale-Okpai combined cycle power station inNigeria, that utilizes the associated gas formerly flared. Thisproject is part of a voluntary agreement signed with the ItalianMinistry of the Environment in 2003 as one of the FlexibleMechanisms available to companies under the Kyoto Protocol.

 

##### Table of Contents

**Regulation of Eni's Businesses**

> 
***Regulation of exploration and production activities***

Eni’s exploration and production activities are conductedin many different countries and are therefore subject to a broadrange of legislation and regulations. These cover virtually allaspects of exploration and production activities, includingmatters such as license acquisition, production rates, royalties,pricing, environmental protection, export, taxes and foreignexchange. The terms and conditions of the leases, licenses andcontracts under which these oil and gas interests are held varyfrom country to country. These leases, licenses and contracts aregenerally granted by or entered into with a government entity orstate company and are sometimes entered into with privateproperty owners. These arrangements usually take the form oflicenses or production sharing agreements. See "Regulationof the Italian Hydrocarbons industry" and"Environmental Matters" for a description of thespecific aspects of the Italian regulation and of environmentalregulation concerning Eni’s exploration and productionactivities.

Licenses (or concessions) give the holder the right to explorefor and exploit a commercial discovery. Under a license, theholder bears the risk of exploration, development and productionactivities and provides the financing for these operations. Inprinciple, the license holder is entitled to all production minusany royalties that are payable in kind. A license holder isgenerally required to pay production taxes or royalties, whichmay be in cash or in kind. Both exploration and productionlicenses are generally for a specified period of time (except forproduction licenses in the United States which remain in effectuntil production ceases). The term of Eni’s licenses and theextent to which these licenses may be renewed vary by area.

Production sharing agreements (PSAs) entered into with agovernment entity or state company generally obligate Eni toprovide all the financing and bear the risk of exploration andproduction activities in exchange for a share of the productionremaining after royalties, if any.

In general, Eni is required to pay income tax on incomegenerated from production activities (whether under a license orproduction sharing agreement). The taxes imposed upon oil and gasproduction profits and activities may be substantially higherthan those imposed on other businesses.

 

> 
**Regulation of the Italian Hydrocarbons Industry**

***Overview***

*The matters regarding the effects of recent or proposedchanges in Italian legislation and regulations or EU directivesdiscussed below and elsewhere herein are forward-lookingstatements and involve risks and uncertainties that could causethe actual results to differ materially from those in suchforward-looking statements. Such risks and uncertainties includethe precise manner of the interpretation or implementation ofsuch legal and regulatory changes or proposals, which may beaffected by political and other developments.*

The Italian hydrocarbons industry is regulated by acombination of constitutional provisions, statutes, governmentaldecrees and other regulations that have been enacted and modifiedfrom time to time, including legislation enacted to implement EUrequirements (collectively, the "Hydrocarbons Laws").

In the early 1990s, the Government commenced the gradualliberalization of the Italian hydrocarbons industry byimplementing legislation that provided for, among other things:(i) the elimination of price controls on petroleum products, (ii)the abolition of Eni’s right of first refusal with respectto the purchase of natural gas produced offshore Italy; (iii) theimplementation of a partial third-party access system for thetransportation of domestic natural gas; (iv) the establishment ofa system for the updating of on natural gas retail prices; and(v) the establishment of a royalty reduction program. Law No. 481of November 14, 1995 (the "Authority Law"), providedfor the establishment of a new regulatory body, known as theAutorità per l’Energia Elettrica e il Gas (the"Authority for Electricity and Gas"), a public bodycharged with, among other things, regulatory supervision ofelectricity activities and natural gas distribution in order toguarantee the promotion of competition and efficiency whileproviding for an adequate level of service quality. As the latteris concerned, the Authority for Electricity and Gas is mainlyresponsible for the public service of natural gas distributionthrough urban networks.

Legislative Decree No. 164/2000 ("Decree No. 164"),which enacted into Italian Legislation European Directive onNatural Gas 98/30/CE, regulates the Italian natural gas market.Prior to the implementation of Decree No. 164, the Italiannatural gas market lacked a legislative framework. See"– Natural Gas" below.

Legislative Decree No. 32 of February 11, 1998 ("DecreeNo. 32") as amended by Legislative Decree No. 346 ofSeptember 8, 1999 and Law Decree No. 383 of October 29, 1999,significantly changed Italian regulation of service stations. Inparticular, the Decree replaced the process of concessionsgranted by the Ministry of Industry, regional and localauthorities with a license granted by city authorities. See"– Refining and Marketing of Petroleum Products"below.

Legislative Decree No. 443 of October 29, 1999 ("DecreeNo. 443") modified Legislative Decree No. 112 of March 31,1998 ("Decree No. 112"), which attributed to Regionsmany responsibilities in the field of energy and specifically inthe sector of hydrocarbons. Decree No. 443 attributes to theState administrative decisions concerning exploration andproduction of hydrocarbons in the Italian offshore, as well asnatural gas storage in fields, while administrative decisionsconcerning exploration and production of hydrocarbons on theItalian mainland are made by the State in agreement with Regions.

 

> 
***Exploration and    Production***

*Exploration Permits and Production Concessions* Pursuantto the Hydrocarbons Laws, all hydrocarbons existing in theirnatural condition in strata in Italy or beneath its territorialwaters (including its continental shelf) are the property of theState. Exploration activities require an exploration permit,while production activities require a production concession, ineach case granted by the Ministry of Productive Activities(formerly Ministry of Industry). The initial duration of anexploration permit is six years, with the possibility ofobtaining two three-year extensions and an additional one yearextension to complete activities underway. Upon each of thethree-year extensions, 25% of the area under exploration must berelinquished to the State. The initial duration of a productionconcession is 20 years, with the possibility of obtaining oneten-year extension and additional five-year extensions until thefield depletes.

*Royalties* The Hydrocarbons Laws require the payment ofroyalties for hydrocarbon production. Royalties are equal to 7%and 4%, respectively, for onshore and offshore production of oiland 7% for both onshore and offshore production of natural gas.

*Preferential Rights* Until December 31, 1996, Eni wasentitled to a number of preferential rights, including, amongother things, the exclusive right to explore for and exploit,without permit or concession, hydrocarbon deposits in theExclusive Area.

In 1994, the EU enacted a licensing directive (the"Licensing Directive"), which required member states toenact legislation eliminating, by December 31, 1996, all lawsthat provided exclusive rights to a single entity in a specificgeographic area. Legislative Decree No. 625/1996 (Decree No.625), which was adopted to implement the Licensing Directive,eliminated the exclusivity of Eni’s rights in the ExclusiveArea. Decree No. 625 allows Eni to obtain upon applicationexploration permits and production concessions having effect fromJanuary 1, 1997 that would preserve such rights as have vestedunder the regime of exclusivity (based on the activities thathave been carried out or are currently underway).

 

> 
***Gas & Power***

> 
*Natural gas market in Italy*

The European Directive on Natural Gas was implemented intoItalian legislation through Legislative Decree No. 164 of May 23,2000 ("Decree No. 164"), effective from June 21, 2000.As concerns natural gas activities carried out by Eni the mostrelevant aspects of the decree are as follows: (i) starting in2003 all customers are eligible customers (with access to thenatural gas system); (ii) from January 1, 2003 to December 31,2010 no single operator is allowed to hold a market share higherthan 50% of domestic sales to final customers. In addition, nosingle operator is allowed to supply more than 75% of all naturalgas volumes introduced in the domestic transmission network by2002, decreasing by 2 percentage points per year until it reaches61%. The two ceilings are calculated net of losses (in the caseof sales) and own consumption. A three-year average mechanism isused to evaluate whether volumes introduced in the domestictransmission network or sold to final customers are above setceilings. Those ceilings are considered exceeded if at the end ofthe first three-year period, the average of volumes introduced inthe domestic transmission network or sold to final customers ishigher than the allowed average for that period. In subsequentyears, the three-year average is calculated on data of the mostrecent three years; (iii) imports from the European Union arefree, while natural gas imported from outside the European Unionis subject to an authorization of the Ministry of ProductiveActivities. Subjects importing from countries outside the EU mustsecure a certain availability of strategic storage. Suchconstraints apply also to the import contracts entered intobefore the coming into effect of Decree No. 164, these contractsare automatically considered authorized since this date; (iv)natural gas transport and dispatching activities are to becarried out by a separate company that is not allowed to carryout any other activity in the natural gas field, with the onlyexception of storage, for which, however, accounting andoperating separation is envisaged. Also distribution, whichincludes the transport of natural gas by means of local gaspipeline networks for delivery to customers, is to be carried outby a separate company which may not perform other gas relatedactivities. Sale activity to final customers is compatible onlywith import, export and production activities and is subject toan authorization from the Ministry of Productive Activities.Concessions for the distribution of natural gas will be assignedonly through an auction procedure; and (v) tariff criteria andreturn on capital employed for transport, dispatching, storage,use of LNG terminals and distribution are determined by theAuthority for Electricity and Gas. Third parties are allowed toaccess transport infrastructure, storage sites, LNG terminals anddistribution networks on a regulated basis. As provided for bythe decree, a Network Code containing norms and regulations forthe operation of and access to infrastructure was prepared byoperators on the basis of criteria set by the Authority forElectricity and Gas.

In particular 2004 was the end of the first three-yearregulated period for natural gas volumes input in the domestictransmission network, in which the allowed percentage is 73% ofdomestic consumption of natural gas. Eni’s presence on theItalian market complied with the limit.

*Law No. 239 of August 23, 2004 on the restructuring of theenergy sector in Italy*

This law provides for:

| • |   | a derogation to third party        access granted to companies that make direct or indirect        investments for the construction of new infrastructure or        the upgrading of existing ones such as: (i)        interconnections between EU Member States and national        networks; (ii) interconnections between non-EU States and        national networks for importing natural gas to Italy;        (iii) LNG terminals in Italy; and (iv) underground        storage facilities in Italy. Investing companies can        obtain priority on the conferral of new capacity for a        portion of not less than 80% of the new capacity        installed and for a period of at least 20 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| • |   | Paragraph 34 of the single        article prohibits undertakings active in the field of        natural gas and electricity with a concession for local        public services or for the management of networks        (excluding all sale activities) from operating in a        competitive market for post-counter services, in the        areas where they hold the concession for the duration of        the concession, including through subsidiaries or        affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • |   | Paragraph 51 cancels        paragraph 5 of Article 16 of Legislative Decree No.        164/2000, which obliged distribution companies to        ascertain the existence of plants which do not only        supply gas to productive units and safety of post-counter        services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | Paragraph 69 provides the        authentic interpretation of the rule introduced by        Legislative Decree No. 164/2000 concerning the        transitional regime of concessions for natural gas        distribution activities in urban centers existing at June        21, 2000, which allows for an anticipated repayment of        the distribution service, despite being provided through        a bid procedure rather than direct entitlements. This law        changes the provisions defined by Legislative Decree No.        164/2000 by: (i) extending to December 31, 2007, the        transitional period for the continuation of existing        concessions, with a possible extension of one further        year when public interest is considered important by        local authorities; and (ii) cancelling the adding up of        possible extensions, as provided for by Legislative        Decree No. 164/2000, in case of certain conditions        (business restructuring, size parameters, shareholding        composition). The end of concessions awarded on the basis        of a bid procedure remains set at December 31, 2012. |

> 
 

*Natural gas market in Europe - Directive 2003/55/CE*

On August 4, 2003, the European Directive 2003/55/CE of theEuropean Parliament and the European Council came into force. Itcontains common regulations for the internal market of naturalgas and repeals Directive 98/30/CE. Member States are to includethe directive into their laws by July 1, 2004.

The most relevant aspects of the directive are the following:

| • |   | member States must designate        an operator for transmission, distribution and storage        systems of natural gas and LNG;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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| • |   | where the transmission        system operator is part of a vertically integrated        undertaking, it shall be independent at least in terms of        its legal form, organization and decision making from        other activities not relating to transmission. These        rules shall not create an obligation to separate the        ownership of assets of the transmission system from the        vertically integrated undertaking. Unbundling of        transmission and distribution from other activities in        the field of natural gas was already set in Legislative        Decree No. 164/2000, but the Directive provides also for        a "functional separation"; i.e., those persons        responsible for the management of the transmission system        operator may not participate in company structures of the        integrated natural gas undertaking responsible, directly        or indirectly, for the day-to-day operation of the        production, distribution and supply of natural gas;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | member States shall ensure        the implementation of a system of third party access to        the transmission and distribution system, LNG facilities,        storage facilities and upstream pipeline networks; access        to the system is regulated; negotiated access is provided        only for storage facilities as an alternative option to        regulated access;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| • |   | natural gas undertakings may        refuse access to the system: (i) on the basis of lack of        capacity; (ii) where the access to the system would        prevent them from carrying out their public service        obligations; (iii) on the basis of serious economic and        financial difficulties with take-or-pay contracts. In the        latter case, undertakings can apply for a derogation.        Member States or the designated competent authority may        decide to grant a derogation, and shall notify the        Commission without delay of their decision. When deciding        on the derogations, the Member State, or the designated        competent authority shall take into account, in        particular, the following criteria: (i) the seriousness        of the economic and financial difficulties encountered by        natural gas undertakings and transmission undertakings or        eligible customers; and (ii) the extent to which, when        accepting the take-or-pay commitments in question, the        undertaking could reasonably have foreseen, that serious        difficulties were likely to arise. Serious difficulties        shall in any case be deemed not to exist: (i) when the        sales of natural gas do not fall below the level of        minimum offtake guarantees; (ii) in so far as the        relevant gas purchase take-or-pay contract can be        adapted; and (iii) when the natural gas undertaking is        able to find alternative outlets. In Italy the rules and        modes of operation of the transmission network are        established by the Authority for Electricity and Gas in        implementation of Legislative Decree No. 164/2000,        through Decision No. 137/2002. On the basis of these        criteria natural gas transmission companies prepare        network codes that need to be approved by the Authority        for Electricity and Gas (see Section "Decision No.        137/2002" below); |
| • |   | application of the rules        concerning derogation from third party access. In        particular, Article 22 provides for an exemption from the        general criteria of third party access in the case of        major new gas infrastructures and of significant        increases of capacity in existing infrastructures. This        exemption, aimed at favoring investments in new capacity,        will be granted on a case by case basis; in Italy this        derogation is allowed by Law No. 239/2004 – (see        Section "Law No. 239 of August 23, 2004"        above);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| • |   | opening up of the market:        the deadlines for the recognition of eligible customers        are longer than those specified in Legislative Decree No.        164/2000, which extended this definition from January 1,        2003 to all customers as follows: July 1, 2004 for all        non-household customers and July 1, 2007 for all        customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

Eni does not expect any major impact on its activity in thenatural gas business deriving from the mere implementation ofDirective 2003/55/CE into the Italian body of laws.

> 
*Directive 2004/67/CE*

Directive 2004/67/CE concerning measures to safeguard securityof natural gas supply was approved on April 26, 2004; the newDirective asked Member States to implement measures assuringnatural gas supply, with particular attention to residentialuses. 

Law No. 62 of April 18, 2005, "Legge comunitaria2004" defined the criteria that delegate to the Governmentthe formulation of legislative decrees implementing theDirectives 2003/55/CE and 2004/67/CE.

> 
*Natural Gas prices*

Prices of natural gas sold to industrial and thermoelectriccustomers as well as to wholesalers are freely established amongbuyers and sellers following the liberalization of the naturalgas sector introduced by Decree No. 164. Eni applies amulti-choice price structure to its individual customers orgroups of customers who are able to choose among various forms ofprice indexation. This price structure aims at reducing theimpact of the volatility of raw material prices due tofluctuations in the prices of energy parameters and in exchangerates by introducing mechanisms that minimize commodity risks.The Authority for Electricity and Gas holds a power ofsurveillance on this matter (see below). See below for adiscussion of natural gas prices of sales of natural gas toresidential and commercial customers which were not eligiblecustomers until December 31, 2002.

> 
*Distribution and sale    of natural gas to residential and commercial customers*

Under Law No. 481/1995 (establishing the Authority forElectricity and Gas) and Legislative Decree No. 164/2000, theAuthority for Electricity and Gas retains the power ofestablishing criteria and parameters to be homogeneously appliedin Italy in the determination of natural gas distribution tariffsand selling prices to residential and commercial customers.

With Decision No. 237 dated December 28, 2000 as amended, theAuthority for Electricity and Gas determined tariff criteria fornatural gas distribution activity for the first regulated periodending on September 30, 2004. Tariffs are determined so thatannual revenues from natural gas distribution activity coveroperating costs and the remuneration of capital employed and areadjusted yearly according to the price cap method based onparameters and formulas determined by the Authority forElectricity and Gas. Capital employed is determined by applying aparameter-based method or, alternatively, a method of revaluedhistorical cost for those companies that published auditedfinancial statements starting with the fiscal year ended beforeJanuary 1, 1991 (which include Italgas). With Decision No. 170 ofSeptember 29, 2004 the Authority for Electricity and Gas definedgas distribution tariffs for the second regulated period fromOctober 1, 2004 to September 20, 2008, setting at 7.5% the rateof return on capital employed of distribution companies, ascompared to the 8.8% rate set for the preceding regulated period.The rate of productivity recovery – one of the components ofthe annual adjustment mechanism of tariffs – was set at 5%of operating expenses and amortization charges (as compared tothe 3% rate applied to total expenses and charges in thepreceding regulated period). The Regional Administrative Court ina decision published on February 16, 2005, cancelled theAuthority’s decision. The latter filed a claim with theCouncil of State, that, on March 8, 2005 suspended the RegionalAdministrative Court’s decision while waiting for thejudgment.

As concerns sale of natural gas to residential and commercialcustomers, the Decree of the President of the Council ofMinisters of October 31, 2002 conferred to the Authority forElectricity and Gas the powers to: (i) define, calculate andupdate and gas selling prices also after the opening up ofmarkets set at January 1, 2003 for customers who werenot-eligible customers until December 31, 2002; (ii) definemethods for updating selling prices with reference to variablecosts that minimize the impact of inflation; and (iii) definecriteria for allocating the costs deriving from social supportmeasures, in order to reduce the aggregate net cost ofinterventions as much as possible and to ensure neutrality in theapplication of selling prices to the various groups of users.Consistently with this decree, the Authority for Electricity andGas: (i) with Decision No. 195 of November 29, 2002 changed themethods for periodically updating selling prices for natural gasin connection with changes in international prices of crude oiland refined products. Such changes concern the schedules updateprocess (from every two months to every three), and the durationof the reference period for the calculation of changes in averageinternational prices as compared to the application quarter (fromthe preceding six months to the preceding nine months). Theinvariance threshold, beyond which tariffs are updated, remainedat 5%; and (ii) with Decision No. 207 of December 12, 2002, itdecided that companies selling natural gas through local networkscan maintain the conditions applied to non-eligible customersuntil December 31, 2002 until the customer accepts a new contractoffer. In addition, the Authority for Electricity and Gas decidedthat these companies can propose their own new contract offersdetermined according to the criteria established by the Authorityfor Electricity and Gas, adequately advertising them before March31, 2003 (such offers must be published on the companies webpage, on at least one newspaper of general circulation and on theOfficial Gazette of their region or autonomous province).

The Authority for Electricity and Gas with Decision No. 138 ofDecember 4, 2003, as modified by Decision No. 27/2004, introducedtwo provisions intended for end customer who were non-eligiblecustomers until December 31, 2002 and to end customers that havenot exercised their capacity to enter new contracts:

| • |   | a reduction in the supply        price, by means of a discount in tariff of about 50% of        the average reductions registered in the wholesale market        starting in 2002 for what concerns the cost of raw        materials, net of the storage and transmission        components, and 100% of reductions in transmission and        storage tariffs registered in tariff adjustments for        thermal years 2002-2003 and 2003-2004; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | a compensation in favor of        distribution areas with high unit costs by means of a        discount on the distribution cost covering component. The        discount is financed by a slight increase in the variable        part of the distribution tariff applied to all        distribution areas. This compensation is administered by        a governmental agency until September 30, 2006.                                                |

Decision No. 138/2003 sets at July 31, 2005 the date beforewhich the Authority for Electricity and Gas will control thedegree of competition on the market for end customers, in orderto decide any cancellation or change of the obligation imposedupon companies selling natural gas by Article 1 of Decision No.207/2002 (entailing the application of the same conditionsapplied until the customer accepts a new contract offer to allend customers who at December 31, 2002 were not eligiblecustomers and to those that were eligible customers but did notchoose to sign new contracts).

In order to dampen the inflationary pressures related to theincrease in international oil prices in the second half of 2004,the Authority for Electricity and Gas, with Decision No. 248 ofDecember 29, 2004, changed the indexing mechanism concerning theraw material component in tariffs paid by end customers that werenon-eligible customers until December 31, 2002 according toDecision No. 195/2002. The decision introduced the followingchanges: (i) establishment of a cap set at 75% for the changes inthe raw material component if Brent prices fall outside the 20-35dollar/barrel range; (ii) change of the relative weight of thethree products making up the reference index of energy priceswhose variations – when higher or lower than 5% as comparedto the same index in the preceding period – determine theadjustment of raw material costs; (iii) substitution of one ofthe three products included in the index (a pool of crudes) withBrent crude; and (iv) reduction in the value of the variablewholesale component of the selling price by euro 0.25 cents percubic meter in order to foster the negotiation of pricesconsistent with average European prices in gas import contractsstarting from October 2005. Decision No. 248/2004 also imposesthe obligation to provide new price arrangements consistent withthe said decision on the sale of natural gas to wholesalers undercontracts that do not contain price adjustment clauses in case ofchanges in the adjustment rules of supply conditions. Eni filed aclaim against Decision No. 248/2004, requesting its suspension,given the serious economic and financial prejudice deriving fromthe application of the decision. On January 25, 2005 the RegionalAdministrative Court of Lombardia accepted the claim thussuspending the Authority's decision and set to June 2005 thehearing for the settlement of the claim. On March 22, 2005 theCouncil of State rejected the Authority’s claim requestingthe annulment of the suspension. Eni’s management expectsthat the changes introduced by Decision No. 248/2004, ifimplemented as drafted, will have a material impact on operatingincome for 2005. See "Item 3 – Risk Factors".

> 
*Decision No. 188/2004    of the Authority for Electricity and Gas*

With Decision No. 188/2004 of October 27, 2004, the Authorityrequired natural gas importing operators, among which Eni, togive information concerning: (i) dates and supplier for eachcontract; (ii) FOB purchase prices; (iii) updating price formulasand other details; and (iv) volumes and FOB purchase averageprices on a monthly basis for each supplying contract relating tothe period October 2002-September 2004. 

Eni appealed this decision with the Regional AdministrativeCourt that with Decision No. 2962/2004 on December 1, 2004partially accepted Eni’s appeal suspending the obligation onpart of Eni to communicate: (i) dates and supplier for eachcontract; and (ii) FOB purchase prices. On March 22, 2005, thisobligation was definitely cancelled by the RegionalAdministrative Court with Decision No. 89/2005.

According to the Regional Administrative Court’sdecision, Eni gave the Authority information about updating priceformulas and other details about supplying contracts in order tocomply with the Authority’s requirement and to collaboratein the process opened by the Authority to update the methodologyof indexation of natural gas prices to the raw material componentof the price formulas of natural gas sale contracts. This processwas opened with Decisions No. 178/2004 and finalized withDecision No. 248/2004 (See above for a discussion of Decision No.248/2004).

Taking into account the Regional Court’s decision, Enigave the Authority only part of the information required; inparticular information concerning volumes supplied and monthlyFOB purchase average prices was not provided because theiravailability allow for the calculation of those pieces ofinformation the presentation of which was annulled by theRegional Administrative Court’s decision.

On June 16, 2005, with Decision No. 107/2005 the Authoritystarted a formal inquiry against Eni and other importingoperators stating Eni’s failure to comply with the Authorityinformation requirement. The Authority may impose a fine on Eni.

> 
*Inquiry on the quality of distribution services*

On May 17, 2005, the Authority for Electricity and Gas startedan inquiry on the alleged violation of its decisions concerningthe quality of distribution services (Decision No. 168/2004) andthe minimum contractual conditions of sale service (Decision No.229/2001) by Italgas and Italgas Più (from January 1, 2005merged into Eni SpA). In particular the inquiry intends toclarify:

| • |   | for Italgas Più from        September to December 2004, belated emission of invoices        as compared to periods set by the Authority for        Electricity and Gas and defaults in communication        concerning postponement of payments recognized to        customers which could represent a violation of the        minimum quality standard imposed by the Authority for        Electricity and Gas; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | for Italgas from August 26        to September 5, 2004 wrong statements on the number of        services requested by Italgas Più customers (new        linkages and the like).                                                                                                                                                                                                                                  |

> 
*Inquiries by the Antitrust Authority*

*Sale contracts outside Italy* With a decision ofNovember 21, 2002, the Antitrust Authority judged that Eni hadviolated competition rules by entering in 2001 into contractsoutside Italy with other operators importing into Italy thesupplied volumes and thus limiting third party access to naturalgas transport infrastructure. The Antitrust Authority consideredthat these contracts infringe the rationale of Article 19 ofLegislative Decree No. 164/2000 which defines the limits forvolumes to be input by single operators into the nationalnetwork. With the same decision and taken into account the lackof clarity of Italian regulations and Eni’s availability toincrease the transmission capacity of gaslines outside Italy, theAntitrust Authority imposed on Eni a symbolic fine amounting toeuro 1,000 and requested Eni to submit "implement measuresto eliminate infringing behaviors with specific attention to theupgrading of the transmission network or equivalentactions".

On June 18, 2004, Eni submitted to the Antitrust Authority aproposal entailing the sale to third parties of a total of 9.2billion cubic meters of natural gas in the four-thermal yearperiod starting in October 1, 2004 through September 30, 2008,corresponding to 2.3 billion cubic meters for each thermal year,before such natural gas enters the national transmission networkat Tarvisio. With a decision of June 24, 2004, the AntitrustAuthority judged this proposal adequate to end the effects of theviolation of competition rules highlighted in the November 21,2002 decision. With the decision of October 7, 2004 that closedthe above mentioned procedure, the Antitrust Authorityacknowledged that Eni has taken proper measures for executing thedecision of November 21, 2002 by signing gas release contracts.However, it fined Eni euro 4.5 million alleging that Eni hadcomplied belatedly with the Antitrust Authority’sindications. On December 6, 2004, Eni filed a claim with theRegional Administrative Court of Lazio against this decision andrequesting the annulment of the fine that was however recorded inEni’s accounts. In May 2005 the Regional AdministrativeCourt repealed this claim. Eni paid the fine imposed on it by theAntitrust Authority.

A claim filed by Eni with the Regional Administrative Court ofLazio against the decision of November 21, 2002 is still pending.

*Trans Tunisian Pipeline Co* On February 1, 2005, theAntitrust Authority notified Eni of the opening of a procedure,according to Article 14 of Law No. 287/1990, to ascertain analleged abuse of dominant position. The events leading to theopening of the procedure relate to behavior of Trans TunisianPipeline Co Ltd (TTPC), wholly owned by Eni, concerning itsdecision to consider expired certain ship-or-pay contracts signedon March 31, 2003 with four shippers awarded capacity onTTPC’s pipeline due to the non-occurrence of suspensiveclauses, and therefore not to proceed to an upgrade of thepipeline before 2007.

> 
*Joint official inquiry    of the Authority for Electricity and Gas and the Antitrust    Authority*

On June 17, 2004, the Authority for Electricity and Gas andthe Antitrust Authority decided to close their joint survey intothe natural gas market started February 20, 2003. BothAuthorities consider the overall level of competition of theItalian natural gas market unsatisfactory. According to bothAuthorities one of the main reasons for this is the verticalintegration of Eni in the supply and transport of gas,notwithstanding the antitrust ceilings introduced that limituntil 2010 the volumes of natural gas input to consumption inItaly.

Among the possible measures which in their opinion couldenhance the level of competition in the natural gas market are:(i) the upgrading by Eni of infrastructure for the import ofnatural gas from Russia (TAG) and Algeria (TTPC); (ii) theestablishment of an independent transmission system operator(ISO) that owns and operates both the national high pressuretransport grid and the storage assets of natural gas; (iii) aframework for the assignment to third parties of natural gasvolumes or natural gas contracts relating to Eni’stake-or-pay long-term natural gas supply contracts; and (iv) thesale by Eni to third parties of adequate gas volumes at a pricenear to the supply cost without control on the recipients.

> 
*Transport*

*Transport tariffs* With Decision No. 120 of May 30,2001, the Authority for Electricity and Gas published thecriteria which transport companies have to apply in determiningnatural gas transport and dispatching tariffs on national andregional transportation networks, as provided for by Decree No.164. Tariffs are subject to approval by the same Authority, whichensures their compliance with preset criteria. The new tariffsystem substituted preceding agreements between Eni and customersof any category. The new tariff system is in force for the firstregulatory period including four thermal years and started onOctober 1, 2001 (the "thermal year" goes from October 1to September 30). At the beginning of each calendar yeartransport companies submit the tariff proposal to the Authorityfor Electricity and Gas which in turn approves or rejects theproposal of transport companies.

Criteria established by the Authority for Electricity and Gasprovide for a cap on revenues from transport and dispatchingactivity ("allowed revenues") which is adjustedannually; those criteria also provide for a separate treatment ofrevenues on existing assets and on new capital expenditure onexpansions and extension of infrastructure. In the first thermalyear allowed revenues are calculated as the sum of: (i) operatingcosts including storage and modulation costs; (ii) amortizationand depreciation of transport assets; and (iii) return on netcapital employed. Net capital employed is calculated byrevaluating historic costs of transport infrastructure(pipelines, compressor stations and other support equipment) onthe basis of certain inflationary indexes; resulting amounts areadjusted to take into account the residual useful life of assets(pipelines are estimated to have a useful life of 40 years) andalso subtracting State grants. The application of thismethodology implies an estimated value of Eni’s transportassets of approximately euro 9.6 billion. This, however, is avaluation for regulatory purposes and should not be read as anindication of the market value of Snam Rete Gas. The rate ofreturn on capital employed set by the Authority for Electricityand Gas is 7.94% (pre-tax). Once established, allowed revenuesfor the first year are divided into two components: (i) capacityrevenues equal to 70% of allowed revenues which are the maximumamount of revenues collectable from the sale of transportcapacity to customers; and (ii) commodity revenues equal to 30%of allowed revenues which are the maximum amount of revenuescollectable from transported volumes. Starting from the secondyear these two components are adjusted on a yearly basis to takeinto account inflation and certain reduction factors (set at 2%and 4.5% for capacity revenues and commodity revenues,respectively); commodity revenues are also adjusted totransported volumes of the current regulatory period. The 2%reduction factor on capacity revenues provides scope forimproving results of operations of the transport company if costreductions exceed the set amount, whereas the 4.5% reductionfactor on commodity revenues provides scope for improving resultsof operations of the transport company if transported volumesgrow more than the reduction factor. Allowed revenues can also beincreased to reflect costs associated with exceptional events,quality improvement in service and efficient utilization ofresources; these increases have yet to be established by theAuthority for Electricity and Gas. New capital expenditure inextension and expansion enable transport companies to increasethe capacity revenue by a stated percentage in the regulatoryperiod following the period in which new capital expenditure ismade. In addition, those capital expenditure give rise to a 6year fixed increase in allowed commodity revenues. This tariffsystem will be in force for four years (first regulatory period).At the end of the first regulatory period, all transport costcomponents will be recalculated and 50% of higher cost reductionswith respect to established efficiency improvements will berecognized to transport companies and 50% will be transferred tocustomers. Once the allowed revenues are established, transportcompanies define individual tariffs to clients which are based ona charge for the capacity used at the entry location (border,fields, storage sites) and the capacity used at interconnectionnodes with regional networks (divided into 15 zones) and on acharge for the capacity used at regional level, providing fordiscounts to those entering the network at less than 15kilometers from the interconnection point. A further charge(commodity charge) is related to the amounts of gas transportedplus an annual fixed charge varying according to the deliverypoints.

On May 2, 2005, the Authority for Electricity and Gaspublished the Consultative Document defining proposals abouttransportation tariffs for the second regulatory period (October1, 2005-September 30, 2008).

*Network code* With Decision No. 75 of July 1, 2003, theAuthority for Electricity and Gas approved Snam Rete Gas NetworkCode, which defines rules and regulations for the operation andmanagement of the transmission network. The Network Code, inaccordance with Legislative Decree No. 164/2000, is based on thecriteria set by the Authority for Electricity and Gas withDecision No. 137/2002, aimed at guaranteeing equal access to allcustomers, maximum impartiality and neutrality in transport anddispatching activities. The Network Code regulates the allocationof transmission capacity, obligations of transporter and customerand the procedures through which customers can sell capacity toother users. The allocation of transport capacity at entry pointsin the national gasline network (point of interconnection withimport gaslines) can be annual or can last up to five thermalyears. Entities eligible to request multiannual allocation areparties in multiannual import contracts within the limit of theirdaily average contract volumes. Available capacity is allocatedto parties in multiannual import contracts containing take-or-payclauses signed before August 10, 1998 (date of coming in force ofEuropean Directive 98/30/CE), with priority over other customers;if in a thermal year requests for capacity happen to be higherthan available capacity, a pro-rata mechanism is applied incompliance with the aforementioned priority.

Parties in annual or shorter import contracts and parties inmultiannual import contracts are eligible to request annualcapacity allocation within the limit of maximum daily contractvolumes and the difference between maximum daily contract volumesand average daily contract volumes, respectively. Availabletransport capacity is allocated to parties in annual importcontracts and parties in multiannual import contracts withpriority; if in a thermal year requests for capacity happens tobe higher than available capacity, a pro-rata mechanism isapplied in compliance with the aforementioned priority.

Eni filed a claim against Decision No. 137/2002 with theRegional Administrative Court of Lombardia, that was partiallyaccepted with a decision of December 2004. The Authority forElectricity and Gas filed a counter claim against this decisionwith the Council of State and informed Eni on February 19, 2005.

*Law Decree No. 239/2003 (protection against black-outs)*Law Decree No. 239/2003, converted with amendments into Law No.290/2003, contained among other things new provisions for theconstruction of generation plants and terminals for theregasification of liquefied natural gas, as well as simplifiedprocedures for the authorization of plants for electricitygeneration, electric mains, pipelines and gaslines. The Decreealso prohibits companies operating in the natural gas andelectricity industries to hold stakes higher than 20% in theshare capital of companies owning and managing national networksfor the transmission of natural gas and electricity from July 1,2007. Following this provision, Eni will have to sell part of itsstake in Snam Rete Gas – until it reaches the 20% maximuminterest allowed. For a discussion of the expected impact of thissale, see "Gas & Power – Transmission, Dispatchingand Regasification Assets" above. In 2004 Eni sold 9.054% ofthe share capital of Snam Rete Gas, thus reducing its interest to50.06%.

On February 18, 2005, the Council of Ministers, on proposal ofthe Ministry of Economy and Finance, presented a Draft Decree ofthe President of the Council of Ministers which defined criteriaand modes for the divestment of the interest held by Eni in SnamRete Gas SpA (50.06%). The special powers of the Ministry ofEconomy and Finance provided for by the regulations on thedivestment of interests held by the Italian Government will beincluded in the by-laws of this company. After the publication ofthe relevant Decree, Eni will continue the procedure for the saleof Snam Rete Gas SpA shares until Eni’s interest reaches 20%before July 1, 2007.

> 
*Preliminary investigation on the management and    operation of the Panigaglia LNG regasification terminal*

The Authority for Electricity and Gas with Decision No. 204 ofNovember 18, 2004, started a preliminary investigation on themanagement and operation of Eni’s Panigaglia LNGregasification terminal and on LNG supplies to the Italian marketin the thermal years from 2001 to 2004 in order to ascertain anybehavior infringing the rules of equal access and equalconditions and neutrality in providing the regasificationservices.

> 
*Electricity generation*

Law No. 239/2004 changed the criteria for becoming an eligiblecustomer that had been set in Legislative Decree No. 79/1999 thathad opened up the electricity market and set at July 1, 2007 thefinal opening up of the domestic electricity market for allcustomers. From July 1, 2004 only non household customers areeligible customers and from September 28, 2004 all finalcustomers (individual or associated) that in the preceding yearhad consumption destined to industrial activities and to thepublic administration activity exceeding 0.05 GWh.

The Authority for Electricity and Gas completed the definitionof rules regulating the Electricity exchange set up from April 1,2004 and introduced: (i) an economic management of dispatchingwhich allows the selection of plants for the supply ofelectricity based on the criteria of the Market Clearing Pricewhich is defined, for each hour, as the price set at theintersection of the demand and supply curve and which is providedto all the plants scheduled. Furthermore, with Decision No.253/2004 the Authority for Electricity and Gas approved theregulation of dispatching for 2005 that was presented by theGestore della Rete di Trasmissione Nazionale SpA("GRTN"); (ii) the regulations for the control ofmarket power that aims at avoiding speculations by operators.Among other things, it provides for tenders managed by the SingleBuyer for the signing of financial contracts (the Contract forDifferences) with eligible customers. Under these contracts thesupplier receives a premium in euro/megawatt and if the MarketClearing Price is higher than the contract price (the StrikePrice), the supplier pays the difference to the Single Buyer;(iii) a return on production capacity provided to the nationalelectric system in case of seasonal criticalities, inimplementation of Legislative Decree No. 379 of December 19,2003, that introduced the remuneration of electricity generationcapacity in order to guarantee that domestic demand is met withthe required reserve margins; (iv) a reorganization of timeframes that represent the main reference for the determination ofselling prices in bilateral contracts, as per Decisions No.5/2004 and 235/2004 (they are now more homogenous and consistentwith the dynamics of national consumption; the previous onesprovided for higher tariffs in winter months); and (v) a fee forthe assignment of rights of use of transmission capacity (CCT)and an unbalancing charge (in case of differences between theproduced and scheduled volume of energy for every fifteenminutes). In 2004, together with other operators, EniPower andEniPower Trading (its subsidiary involved in the electricity saleto "eligible customers") filed a claim against Article42 of Decision No. 48/2004 and subsequent related decisions forthe aspects concerning CCT with the Regional Administrative Courtof Lombardia. The merits of the claim were discussed on June 14,2005, together with the Decision 237/2004 which also establishedfor 2005 the CCT. The Regional Administrative Court rejected theclaims, but motives have not yet been published. The twocompanies will probably lodge an appeal with the Council ofState.

With Decision No. 254 of December 30, 2004, the Authority forElectricity and Gas introduced mechanisms that aim to controlmarket power in order to avoid unjustified price increases on theElectricity Exchange (so-called IPEX) determined by dominantpositions of producers. In case of any anomalous occurrence, asshown by indicators, the remuneration of electricity sold by theinfringing producer will be automatically changed and will notcorrespond to the marginal price at the IPEX, but to the pricesoffered by this producer at each individual plant. Furthermore,for the following 30 days, said producer will be obliged to sellall its production on the IPEX at a constant price, thus changingits offer strategies. After claims filed by other operators, therelevant sanctions have recently been annulled by the RegionalAdministrative Court of Lombardia.

Article 11 of Legislative Decree No. 79/1999 obliges importersand producers of electricity from non renewable sources exceeding100 gigawatthour/year to inject a given proportion of electricityfrom renewables into the power grid or to purchase equivalentGreen Certificates (renewable obligation). Green Certificates areissued by the Italian System Operator for the first eight yearsof operation of renewable-energy power plants. The share ofelectricity produced from renewable sources has been set at 2% ofelectricity produced from non renewable sources. LegislativeDecree No. 387/2003 increased this amount by 0.35 percentagepoints per year from 2004 to 2006 and attributed to the Ministerof Productive Activities the power to establish further increasesof this minimum amount for the 2007-2009 and 2010-2012 periods,in agreement with the Minister of the Environment and theConferenza Unificata. The Minister was expected to issue thedecree containing the relevant thresholds before December 31,2004 and 2007, respectively, but at the moment operators arestill waiting for the decree concerning the 2004-2007 period.This obligation may not be applied to the electricity producedthrough cogeneration plants.

The Authority for Electricity and Gas with Decision No.42/2002, amended by Decision No. 71/2004 and No. 201/2004,defined the conditions for the acknowledging of co-generation tocertain forms of electricity production. A decree of the Ministerof Industry of November 11, 1999 stated that producers are tofile a request for this acknowledgement to the Gestore della Retedi Trasmissione Nazionale SpA ("GRTN"). With a judgmentof April 12, 2005, the Regional Administrative Court of Lombardiarejected the claim filed by EniPower against relevant criteriaset out by the Authority for Electricity and Gas, under whichelectricity production is deemed as "cogenerative" (andmay thus enjoy the legislative benefits), as well as the decisionof the GRTN that denied the nature of cogeneration production forthe combined production of electricity and heat of Eni’spower stations at Livorno, Ravenna and Brindisi. Presently, therejection of such claim by the Regional Administrative Courtobliges the company to purchase so called green certificates tocover production from these plants in 2003; however, EniPower iscurrently evaluating the opportunity to appeal the RegionalAdministrative Court’s decision to the Council of State.

> 
*Storage of natural gas*

The right to store natural gas in depleted fields in Italy isexercised pursuant to concessions granted by the Ministry ofProductive Activities (formerly Ministry of Industry). BeforeDecree No. 164 came into force, only entities already holding aconcession to exploit a hydrocarbon deposit were entitled toreceive a concession to store natural gas, which is granted bythe Ministry of Productive Activities. The initial duration of aconcession is 20 years, with the possibility of obtaining at mosttwo ten-year extensions if they complied with the storageprograms and other obligations deriving from said concession asper Law No. 239/2004. After the expiration of a concession, newstorage or production concessions on the same field may begranted through competitive auctions. Pursuant to Decree No. 625,unused storage capacity can be made available to third parties,subject to the approval of the Ministry, on a negotiated basis.Until December 31, 1996, Eni had the exclusive right to storenatural gas in depleted fields in the Exclusive Area. Decree No.625 eliminated this exclusive right, while granting Eni the rightto obtain upon application storage concessions effective fromJanuary 1, 1997 that would preserve the rights vested with Eniduring the regime of exclusivity (based on current storageactivities or certain statutory conditions). Eni obtained the tenstorage concessions which it had applied for.

The most important aspects of Decree No. 164 concerningproduction and storage activities performed by Eni are thefollowing: (i) it favors the development of domestic natural gasreserves; (ii) storage is to be carried out by a separate companynot operating in other gas activities (such as Stoccaggi GasItalia SpA) or by companies which only engage in transmission anddispatching, provided the accounts of these two activities areclearly separated from the accounts of storage. Existing storageconcessions are subject to the Decree. Their original term wasconfirmed and includes relevant production concessions; (iii) theneed for strategic storage in Italy is defined explicitly; theburden of strategic storage is imposed upon companies importingfrom non-EU countries, which have to provide a strategic storagecapacity in Italy corresponding to 10% of the amount of naturalgas imported each year; (iv) holders of storage concessions arerequired to provide storage capacity for domestic production, forstrategic use and for modulation to eligible users withoutdiscriminations, where technically and economically viable; (v)modulation storage costs are charged to shippers which have toprovide modulation services adequate to the requirements of finalcustomers; (vi) storage tariffs criteria are determined by theAuthority for Electricity and Gas in order to ensure a properreturn on capital employed, taking into account the typical riskinherent in upstream activities, as well as volumes stored forensuring peak supplies and provides incentives to capitalexpenditure for the upgrading of the system; (vii) in thetransitional period until the publication of the Authority’sdecision, storage companies determine and publish their owntariffs, and (viii) the Authority for Electricity and Gas has toestablish the criteria and priority of access most storageoperators have to include in their storage codes.

In compliance with the provisions of Article 21 of Decree No.164/2000, on October 21, 2001 all storage activities carried outwithin the Eni Group were conferred to Stoccaggi Gas Italia SpA,which holds ten storage concessions.

With Decision No. 26 dated February 27, 2002, the Authorityfor Electricity and Gas determined tariff criteria for naturalgas storage for the first regulated period (from April 1, 2002 toMarch 31, 2006) on the basis of the costs of the service, plus aweighted average pre-tax rate of return of 8.33%. Tariffs areadjusted through a price cap mechanism that takes into accountinflation and a productivity recovery of 2.75% per year. Thetariff structure for modulation consists of two fixed elements,one based on the annual capacity used (space occupied in thereservoir) and one based on maximum output capacity demand forone day in the year, as well as a variable element calculated onthe basis of the quantities entering and leaving the field. Onthe basis of these criteria on March 18, 2002, Stoccaggi GasItalia SpA presented its suggested tariffs for cyclicalmodulation, upstream and strategic storage services for the firstregulatory period. The Authority for Electricity and Gas rejectedStoccaggi Gas Italia proposal and set storage tariffs for thefirst regulatory period with Decision No. 49 of March 26, 2002.In 2002, Stoccaggi Gas Italia appealed against both decisions tothe Regional Administrative Court of Lombardia in order to obtaintheir cancellation. The Regional Administrative Court ofLombardia repealed Stoccaggi Gas Italia’s appeal withdecision of September 29, 2003. Stoccaggi Gas Italia appealed tothe Council of State against this decision on February 3, 2004.Pending the proceeding, Stoccaggi Gas Italia is currentlyapplying the tariffs set by the Authority for Electricity andGas.

Decree No. 625, as amended by Decree 164, provides for theholders of storage concessions to keep storage capacity availablefor upstream, strategic and modulation storage functions for thenational natural gas system.

In implementation of Decree 164, the Decree of the Minister ofProductive Activities of September 26, 2001 defined the criteriafor the determination and use of strategic storage. Theutilization of natural gas volumes held under strategic storagebecomes mandatory in case of interruption or reduction of importsfrom non-EU countries due to technical and unpredictable causes,in case of emergency on the national gas network, in case ofwinters colder than those expected by the Authority forElectricity and Gas in its periodic statements concerning thedetermination of modulation obligations for seasonal consumptionpeaks.

On March 14, 2002, the Authority for Electricity and Gasissued a consultation document containing criteria relating tothe storage code that storage companies have to propose. Theconsultation document, among other things, suggests: (i) apreference order in assigning storage capacity which favorsnatural gas transport companies, natural gas distributioncompanies as defined by Decree No. 164 Article 18, eligiblecustomers and other natural gas companies of members States ofthe European Union and non-members; (ii) mechanisms to assignscarce storage capacity (competitive bid, pro quota or first comefirst served); and (iii) contents of the storage code, amongwhich access criteria to storage services and criteria ofutilization of storage service.

 

> 
***Refining and    Marketing of Petroleum Products***

*Refining* Under Decree No. 112, companies that seek toestablish refining operations in Italy or to expand the capacityof existing refining operations must obtain an operatingconcession from the relevant Region, while companies that seek tobuild or operate new plants that do not increase refiningcapacity must obtain an authorization from the relevant Region.

*Service Stations* Decree No. 32 of February 11, 1998, asamended by Legislative Decree No. 348 of September 8, 1999 andLaw Decree No. 383 of October 29, 1999, significantly changedItalian regulation of service stations. The Decree replaces thesystem of concessions granted by the Ministry of Industry,regional and local authorities with an authorization granted bycity authorities. Legislative Decree No. 112/1998 confers thepower to grant concessions for the construction and operation ofservice stations on highways to Regions. Decree No. 32 alsorequires that contracts between license holders and servicestation operators have a duration of not less than six years andbe drafted in accordance with arrangements agreed by the relevanttrade group of license holders and the union representatives forthe service station operators. Decree No. 32 also provides for:(i) the testing of compatibility of existing service stationswith local planning and environmental regulations and with thoseconcerning traffic safety to be performed by city authorities;(ii) upon the closure of at least 7,000 service stations, theoption to extend by 50% the opening hours (currently 52 hours perweek) and a generally increased flexibility in scheduling openinghours; (iii) simplification of regulations concerning the sale ofnon-oil products and the permission to perform simple maintenanceand repair operations at service stations; (iv) establishment ofa fund for the restructuring of the sales network, in partfinanced through a contribution, in the 1998-2000 period. In2002, the fund received new financings: the decree of theMinister of Productive Activities of August 7, 2003, implementingLaw No. 237 of December 12, 2002, defined the amount of euro0.0003 and euro 0.0001 for each liter of automotive fuel(gasoline, diesel fuel and LPG) sold in 2002 in the ordinarydistribution network to be paid by authorization holders andservice station managers, respectively. The latest payment datewas set at December 31, 2003; (v) the opening up of the logisticssegment by permitting third party access to unused storagecapacity for petroleum products; and (vi) measures designed toincrease competition on the market for LPG for residential,industrial and agricultural users. With the goal of renewing theItalian distribution network, Law No. 57/2001 provides that theMinistry of Productive Activities is to prepare guidelines forthe modernization of the network, and the Regions shall followthose guidelines in the preparation of regional plans. The Decreewas issued on October 31, 2001 and established the criteria forthe closing down of incompatible stations, the approval of theplan, the renewal of the network, the opening up of new stationsand the regulations of the operations of service stations onmatters such as automation, working hours and non oil activities.

*Petroleum Product Prices* Petroleum product prices werecompletely deregulated in May 1994 and are now freely establishedby operators. Oil and gas companies periodically report theirrecommended prices to the Ministry of Productive Activities andservice station operators, and such recommendations areconsidered by service station operators in establishing retailprices for petroleum products. With Ministerial Decree datedFebruary 16, 2000, an entity was established that supports theMinistry of Productive Activities in monitoring trends indomestic and international prices of oil and oil products.Furthermore, in order to avoid initiatives inhibitingcompetition, Law No. 57/2001 provides the compliance with EURegulation No. 2790/1999 concerning "verticalagreements" on economic relations between operators in thisarea. Management believes that these developments will not haveany significant impact on Eni’s operations.

*Compulsory Stocks* According to Legislative Decree ofJanuary 31, 2001, No. 22 ("Decree 22/2001") enactingEuropean Directive No. 98/1993 (which regulates the obligation ofmember states to keep a minimum amount of stocks of crude oiland/or petroleum products) compulsory stocks, must be at leastequal to the quantities required by 90 days of consumption of theItalian market (net of oil products obtained by domesticallyproduced oil). In order to satisfy the agreement with theInternational Energy Agency (Law No. 883/1977), Decree 22/2001increased the level of compulsory stocks to reach at least 90days of net import, including a 10% deduction for minimumoperational requirements. Decree 22/2001 states that compulsorystocks are determined each year by a decree of the Minister ofProductive Activities based on domestic consumption data of theprevious year, defining also the amounts to be held by each oilcompany on a site-by-site.

Decree No. 32 of February 11, 1998 established an entityresponsible for the maintenance and management of this compulsorystock whose main tasks are to: (i) distribute stocks on thenational territory according to available storage sites andconsumption levels; (ii) meet the demand for refined products incase of crisis; (iii) guarantee storage volumes to operators; and(iv) record demand for refined products in the various areas ofItaly. The Agency has been created on June 14, 2001; its by-lawshad been approved with a Ministerial Decree of January 29, 2001and its operating regulation has been approved on May 20, 2003 bythe general meeting of the Agency’s members. The Minister ofProductive Activities with a decree dated January 7, 2003,defined the parameters for determining the available capacity ofstorage and transmission of mineral oils.

In 2004, Eni owned on average 7.0 million tonnes of oilproducts inventories, of which 5.0 million relating to"compulsory stocks" as required by Italian law. Thebalance is composed of oil products which cannot be used to meetcompulsory stock requirements; that is 1.0 million tonnes relatedto operating inventories (including 0.2 million tonnes of oilproducts contained in facilities and pipelines), 0.8 millionrelated to oil products contained in ships and 0.2 millionrelated to specialty products.

Eni’s compulsory stocks are held in terms of crude oil(34%), light and medium distillates (38%), fuel oil (21%) andother products (7%). They are located throughout the Italianterritory in both refineries (73%) and storage sites (27%).

Eni also held natural gas for strategic reserve purposes inits storage business, as established by Decree No. 164. Thestrategic reserves of gas are defined as "stock destined tomeet situations of deficit/decrease of supply or crisis of thegas system". The Ministry of Productive Activitiesdetermines quantities and usage criteria of such reserves. As ofDecember 31, 2004 Eni held approximately 180 billion standardcubic feet of strategic reserves of natural gas.

 

> 
***Competition***

Like all Italian companies, Eni is subject to Italian and EUcompetition rules. EU competition rules are set forth in Articles81 and 82 of the Treaty of Rome as amended by the Treaty ofAmsterdam dated October 2, 1997 and entered into force on May 1,1999 ("Article 81" and "Article 82",respectively being the result of the new denomination of formerArticles 85 and 86) and EU Merger Control Regulation No. 4064 of1989 ("EU Regulation 4064"). Article 81 prohibitscollusion among competitors that may affect trade among memberstates and that has the object or effect of restrictingcompetition within the EU. Article 82 prohibits any abuse of adominant position within a substantial part of the EU that mayaffect trade among member states. EU Regulation 4064 sets certainlimits for cross-border transactions, above which enforcementauthority rests with the European Commission and below whichenforcement is carried out by national competition authorities,such as the Antitrust Authority in the case of Italy. On May 1,2004, a new regulation of the European Council came into force(No. 1/2003) which substitutes regulation No. 17/1962 on theimplementation of the rules on competition laid down in Articles81 and 82 of the Treaty. In order to simplify the proceduresrequired of undertakings in case of concentration, the newregulation substitutes the obligation to inform the Commissionwith a declaration that such concentration does not infringe theTreaty. In addition, the burden of proving an infringement ofArticle 81(1) or of Article 82 of the Treaty shall rest on theparty or the authority alleging the infringement. The undertakingor association of undertakings claiming the benefit of Article81(3) of the Treaty shall bear the burden of proving that theconditions of that paragraph are fulfilled. The regulationdefines the functions of Authorities guaranteeing competition inMember States and the powers of the Commission and of nationalcourts. The competition authorities of the Member States shallhave the power to apply Articles 81 and 82 of the Treaty inindividual cases. For this purpose, acting on their owninitiative or on a complaint, they may take the followingdecisions:

| • |   | requiring that an        infringement be brought to an end,                                                      |
|--------|--------|------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                             |
| • |   | ordering interim measures,                                                                                       |
|   |   |                                                                                                             |
| • |   | accepting commitments,                                                                                           |
|   |   |                                                                                                             |
| • |   | imposing fines, periodic        penalty payments or any other penalty provided for in        their national law. |

National courts shall have the power to apply Articles 81 and82 of the Treaty. Where the Commission, acting on a complaint oron its own initiative, finds that there is an infringement ofArticle 81 or of Article 82 of the Treaty, it may: (i) requirethe undertakings and associations of undertakings concerned tobring such infringement to an end; (ii) order interim measures;(iii) make commitments offered by undertakings to meet theconcerns expressed to them by the Commission binding on theundertakings; and (iv) find that Articles 81 and 82 of the Treatyare not applicable to an agreement for reasons of Communitypublic interest.

Eni is also subject to the competition rules established bythe Agreement on the European Economic Area (the "EEAAgreement"), which are analogous to the competition rules ofthe Treaty of Rome and apply to competition in the EuropeanEconomic Area (which consists of the EU and Norway, Iceland andLiechtenstein). These competition rules are enforced by theEuropean Commission and the European Free Trade Area SurveillanceAuthority.

In addition, Eni’s activities are subject to Law No. 287of October 10, 1990 (the "Antitrust Law"). Inaccordance with the EU competition rules, the Antitrust Lawprohibits collusion among competitors that restricts competitionwithin Italy and prohibits any abuse of a dominant positionwithin the Italian market or a significant part thereof. However,the Antitrust Authority may exempt for a limited periodagreements among companies that otherwise would be prohibited bythe Antitrust Law if such agreements have the effect of improvingmarket conditions and ultimately result in a benefit forconsumers. The Antitrust Authority has intervened on the basis ofthe Antitrust Law in several instances, particularly in order toprohibit the imposition of discriminatory tariffs in thetelecommunications, railway and air transport sectors, amongothers.

 

 

##### Table of Contents

**Property, Plant and Equipment**

Eni has freehold and leasehold interests in real estate innumerous countries throughout the world, but no one individualproperty is material to Eni as a whole. See "Exploration& Production" above for a description of Eni’sreserves and sources of crude oil and natural gas.

 

##### Table ofContents

**Organizational Structure**

The significant subsidiaries, associated undertakings andjoint ventures of the Eni Group controlled directly or indirectlyby Eni at December 31, 2004 and included in the scope ofconsolidation, as well as Eni’s percentage of equity capitalor joint venture interest (rounded to the nearest whole number)are set forth in the table below. The principal country ofoperation is generally indicated by the company’s country ofincorporation or by its name.

 

| **Company/Undertaking**                                                                                           | **Country of        Incorporation** | **%**  |
|-------------------------------------------------------------------------------------------------------------------|-------------------------------------|--------|
| *Exploration &        Production*                                                                             |                                |   |
| Stoccaggi Gas Italia SpA                                                                                          | Italy                               | 100    |
| Eni Oil Algeria Ltd                                                                                               | the Netherlands                     | 100    |
| Eni Angola Exploration BV                                                                                         | the Netherlands                     | 100    |
| Agip Caspian Sea BV                                                                                               | the Netherlands                     | 100    |
| Eni Congo SA                                                                                                      | the Netherlands                     | 100    |
| Eni Dación BV                                                                                                | the Netherlands                     | 100    |
| Eni Exploration BV                                                                                                | the Netherlands                     | 100    |
| Eni Indonesia Ltd                                                                                                 | the United Kingdom                  | 100    |
| Eni Iran BV                                                                                                       | the Netherlands                     | 100    |
| Agip Karachaganak BV                                                                                              | the Netherlands                     | 100    |
| Eni Lasmo Plc                                                                                                     | the United Kingdom                  | 100    |
| Eni LNS Ltd                                                                                                       | the United Kingdom                  | 100    |
| Eni North Africa BV                                                                                               | the Netherlands                     | 100    |
| Agip Oil Ecuador BV                                                                                               | the Netherlands                     | 100    |
| Eni Petroleum Co Inc                                                                                              | USA                                 | 100    |
| Eni UK Ltd                                                                                                        | the United Kingdom                  | 100    |
| Ieoc Production BV                                                                                                | the Netherlands                     | 100    |
| NAOC Nigerian Agip Oil Co        Ltd                                                                              | Nigeria                             | 100    |
| Eni Norge A/S                                                                                                     | Norway                              | 100    |
|                                                                                                              |                                |   |
| *Gas & Power*                                                                                                 |                                |   |
| Snam Rete Gas SpA                                                                                                 | Italy                               | 50     |
| Società Italiana per il Gas        pA                                                                        | Italy                               | 100    |
| Distribuidora de Gas Cuyana        SA                                                                             | Argentina                           | 46     |
| Gas Brasiliano Distribuidora        SA                                                                            | Brazil                              | 100    |
| Greenstream BV                                                                                                    | the Netherlands                     | 75     |
| Inversora de Gas Cuyana SA                                                                                        | Argentina                           | 76     |
| Tigáz Rt Tiszántúli        Gázszolgáltátó Részvénytársaság | Hungary                             | 50     |
| EniPower SpA                                                                                                      | Italy                               | 100    |
|                                                                                                              |                                |   |
| *Refining & Marketing*                                                                                        |                                |   |
| AgipRete SpA                                                                                                      | Italy                               | 100    |
| AgipFuel SpA                                                                                                      | Italy                               | 100    |
| Ecofuel SpA                                                                                                       | Italy                               | 100    |
| Eni Portugal Investment SpA                                                                                       | Italy                               | 100    |
| Agip Deutschland GmbH                                                                                             | Germany                             | 100    |
| Agip Ecuador SA                                                                                                   | Ecuador                             | 100    |
| Agip España SA                                                                                               | Spain                               | 100    |
| Agip Française SA                                                                                            | France                              | 100    |
| American Agip Co Inc                                                                                              | USA                                 | 100    |
|                                                                                                              |                                |   |
| *Petrochemicals*                                                                                                  |                                |   |
| Polimeri Europa SpA                                                                                               | Italy                               | 100    |
| Dunastyr Polystyrene        Manufacturing Co Ltd                                                                  | Hungary                             | 100    |
| Polimeri Europa Benelux SA                                                                                        | Belgium                             | 100    |
| Polimeri Europa Elastomères        France SA                                                                 | France                              | 100    |
| Polimeri Europa UK Ltd                                                                                            | the United Kingdom                  | 100    |
|                                                                                                              |                                |   |
| *Oilfield Services        Construction and Engineering*                                                           |                                |   |
| Saipem SpA                                                                                                        | Italy                               | 43     |
| Snamprogetti SpA                                                                                                  | Italy                               | 100    |
| CEPAV (Consorzio Eni per        l’Alta Velocità) Uno                                                    | Italy                               | 50     |
| Saipem SA                                                                                                         | France                              | 43     |
|                                                                                                              |                                |   |
| *Other Activities*                                                                                                |                                |   |
| Syndial SpA - Attività        Diversificate                                                                  | Italy                               | 100    |
| EniTecnologie SpA                                                                                                 | Italy                               | 100    |
| Sieco SpA                                                                                                         | Italy                               | 100    |
| Tecnomare - Società per lo        Sviluppo delle Tecnologie Marine SpA                                       | Italy                               | 57     |
|                                                                                                              |                                |   |
| *Corporate and financial        companies*                                                                        |                                |   |
| Eni International BV                                                                                              | the Netherlands                     | 100    |
| Eni Coordination Center SA                                                                                        | Belgium                             | 100    |
| Società Finanziaria Eni SpA        - Enifin                                                                  | Italy                               | 100    |
| Società Finanziamenti        Idrocarburi - Sofid-SpA                                                         | Italy                               | 100    |

 

##### Table of Contents

**Item 5. OPERATING AND FINANCIAL REVIEW ANDPROSPECTS**

> 
*The information in this item should be read together    with the Key Information presented in Item 3 and the    Consolidated Financial Statements and related Notes thereto    included in Item 18*

**Executive Summary**

In 2004, Eni’s net income totalled euro 7.3 billion, anincrease of euro 1.7 billion over 2003 (up 30.2%) due mainly to apositive operating income performance (up euro 2.9 billion)especially in its core oil business. Eni’s operating incomeof euro 12.5 billion is euro 1.7 billion higher than the previousrecord of 2000. In 2004, Eni’s operating income was alsobenefited by the change in the petrochemical business whichgenerated income after many years of losses.

Leverage12went from0.48 at December 31, 2003 to 0.31 at December 31, 2004.

Macro-economic conditions contributed to the improvement inresults. The average price of Brent in 2004 was 38.2dollars/barrel (up 32.5% over 2003). The effect of the increasein oil prices was offset in part by the depreciation of thedollar over the euro (down 10%). The euro price of Brent onlyincreased by 20.5%, thereby creating a comparative disadvantageto European companies as compared to those companies whosefunctional currency is the US dollar.

In the Exploration & Production segment, hydrocarbonproduction available for sale averaged 1,586 KBOE/d increasing by50 KBOE/d over 2003 (up 3.3%). Eni’s proved reserves ofhydrocarbons at December 31, 2004 totalled 7,218 million boe,slightly decreasing over December 31, 2003 (down 0.7%). Thereserve replacement ratio was 91%. The average reserve life indexwas 12.1 years (12.7 in 2003).

In the Gas & Power segment, despite an increasinglycompetitive environment with increasing regulatory constraints,sales of natural gas (84.5 billion cubic meters) increased by 6.1billion cubic meters over 2003 (up 7.8%). Sales of electricity(13.8 TWh) increased by 8.3 TWh over 2003 (up 150%) due to thefull year of commercial operations of the first combined cyclegeneration unit and the start-up of the second and third units atthe Ferrera Erbognone power plant, as well as the start-up of newgeneration capacity at the Ravenna power plant.

In the Refining & Marketing segment, Eni continued theupgrading process of its refining system aimed at increasingefficiency, conversion rate and product quality of Eni whollyowned refineries. In marketing Eni continued the process ofupgrading its distribution network in Italy; in Europe Eni builton the growth strategy implemented in selected European areas(mainly in Spain, South-East France and Central Europe). Retailand wholesale sales of refined products (28.8 million tonnes)increased by 760,000 tonnes over 2003 (up 2.7%).

In 2004, capital expenditure amounted to euro 7.5 billion. Ofthis 94% was directed to the Exploration & Production, Gas& Power and Refining & Marketing businesses and concernedlarge projects aimed at supporting growth and the long-termsustainability of the business. The principal projects were:

| • |   | the development of the Wafa        and Bahr Essalam fields in Libya, the first one started        production in August 2004 and the second expected to        start-up in mid-2005;                                                                                                                                                          |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the development of fields in        Iran where Eni is operator;                                                                                                                                                                                                                                                                              |
| • |   | participation in the        development of the oil fields in the Kizomba A and B        areas in the deep waters of Angola, the first one started        production in August 2004 and the second is expected to        start-up in late 2005;                                                                                               |
| • |   | development of the Kashagan        field in the Kazakh offshore;                                                                                                                                                                                                                                                                             |
| • |   | upgrade and maintenance of        Eni’s natural gas transport and distribution        network;                                                                                                                                                                                                                                          |
| • |   | the completion of the        Greenstream gasline, which started operations in October        and when fully operational, will carry to Italy 8 billion        cubic meters of natural gas per year (4 billion net to        Eni), already sold to third parties under long-term        contracts with terms of up to approximately 20 years; |
| • |   | the continuation of the plan        for power generation capacity build-up;                                                                                                                                                                                                                                                                  |
| • |   | the construction of the tar        gasification plant at the Sannazzaro refinery, actions on        refineries and the upgrade of Eni’s fuel        distribution network.                                                                                                                                                               |

 

> 
***Margin***13

Margin: The difference between the average selling price anddirect acquisition cost of a finished product or raw materialexcluding other production costs (e.g., refining margin, marginon distribution of natural gas and petroleum products or marginof petrochemicals products). Margin trends reflect the tradingenvironment and are, to a certain extent, a gauge of industryprofitability.

 

> 
***Trading environment***

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

| Average price of Brent dated crude oil (1)                | 24.98 |   | 28.84 |   | 38.22 |
|-----------------------------------------------------------|-------|--------|-------|--------|-------|
| Average        price in euro of Brent dated crude oil (2) | 26.41 |   | 25.50 |   | 30.72 |
| Average EUR/USD exchange rate (3)                         | 0.946 |   | 1.131 |   | 1.244 |
| Average        European refining margin (4)               | 0.80  |   | 2.65  |   | 4.02  |
| EURIBOR – three-month euro rate % (3)                | 3.3   |   | 2.3   |   | 2.1   |
|                                                      |       |   |       |   |       |

----

|   |   |                                                                                                                                                 |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | In US dollars        per barrel. Source: Platt’s Oilgram.                                                                                       |
| (2)    |   | Source: Eni's        calculations.                                                                                                                   |
| (3)    |   | Source:        European Central Bank.                                                                                                                |
| (4)    |   | In US dollars        per barrel. FOB Mediterranean Brent dated crude oil.        Source: Eni calculations based on Platt’s Oilgram        data. |

Eni’s results of operations and the year-to-yearcomparability of its financial results are affected by a numberof external factors which exist in the industry environment,including changes in oil, natural gas and refined productsprices, industry-wide movements in refining and petrochemicalmargins and fluctuations in exchange rates and interest rates.Changes in weather conditions from year to year can influencedemand for natural gas and some petroleum products, thusaffecting results of operations of the natural gas business and,to a lesser extent, of the refining and marketing business. See"Item 3 – Risk Factors." The trading environmentwas generally favorable in 2004. However the favorable impact ofhigher hydrocarbon prices and refining margins compared to 2003was partly offset by the depreciation of the US dollar versus theeuro. Natural gas demand in Italy increased by approximately fourpercentage points over 2003 driven by strong growth in thethermoelectric segment. Natural gas margins in Italy decreasedwith respect to 2003 due to negative trading conditions, relatingin particular to the lower appreciation of the euro over the USdollar compared to 2003 and the impact of the increasinglycompetitive pressure in the domestic natural gas market. In 2004,refining margins increased sharply due to strong demand forrefined products, reflecting in part a supply shortage of mediumdistillates in the European area in connection with refineriesstandstills in order to adapt medium distillates specificationsto new environmental standards set by the European Unioneffective in 2005. Margins on distribution of refined products inEurope were reduced by high oil prices as marketing profitcenters were unable to pass onto to final customers the fullincrease in international prices of refined products.Petrochemical product margins rebounded somewhat from thedepressed levels of 2003.

 

> 
***Key consolidated financial data***

| (million        euro) |   |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|--------|----------|--------|----------|--------|----------|
|                  |   |   |          |   |          |   |          |

| Net sales from operations                                                                                 |             |   | 47,922 |   | 51,487 |   | 58,382 |
|-----------------------------------------------------------------------------------------------------------|------------------|--------|--------|--------|--------|--------|--------|
| Operating        income                                                                                   |             |   | 8,502  |   | 9,517  |   | 12,463 |
| Net income                                                                                                |             |   | 4,593  |   | 5,585  |   | 7,274  |
| Net cash        provided by operating activities                                                          |             |   | 10,578 |   | 10,827 |   | 12,362 |
| Capital expenditure                                                                                       |             |   | 8,048  |   | 8,802  |   | 7,503  |
| Investments(1)                                                                                            |             |   | 1,366  |   | 4,255  |   | 316    |
| Shareholders’ equity including minority        interest                                              |             |   | 28,351 |   | 28,318 |   | 32,466 |
| Net        borrowings(2)                                                                                  |             |   | 11,141 |   | 13,543 |   | 10,228 |
| Net income per share                                                                                      | (euro per share) |   | 1.20   |   | 1.48   |   | 1.93   |
| Dividend        per share                                                                                 | (euro per share) |   | 0.750  |   | 0.750  |   | 0.900  |
| Net borrowings to total shareholders’        equity ratio including minority interests (leverage)(2) |             |   | 0.39   |   | 0.48   |   | 0.31   |
|                                                                                                      |             |   |        |   |        |   |        |

----

|   |   |                                                                                                                                                                                                                                                                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | This item        refers mainly to the acquisition of net equity of other        companies and acquired net borrowings. In 2003, it also        includes the outlay for the tender offer for Italgas        shares (euro 2,569 million).                                         |
| (2)    |   | For a        discussion of the usefulness of and a reconciliation of        these non-GAAP financial measures with the most directly        comparable GAAP financial measures see "Liquidity        and capital resources – Financial conditions"        below. |

 

##### Table of Contents

**Critical Accounting Estimates**

The consolidated financial statements of Eni and the relatedNotes have been prepared in accordance with Eni Group accountingpolicies which are in accordance with accounting principlesprescribed by Italian law and supplemented by the accountingprinciples issued by the Consiglio Nazionale dei DottoriCommercialisti e dei Ragionieri (C.N.D.C.R.) or, in the absencethereof and if applicable, the International Accounting StandardsBoard (I.A.S.B.). In the absence of indications in saidprinciples, specific criteria for hydrocarbon exploration andproduction applied internationally have been followed(collectively "Italian GAAP").

Italian GAAP varies in certain significant respects fromgenerally accepted accounting principles applied in the UnitedStates ("U.S. GAAP"). For a summary of the significantdifferences between Italian accounting principles and U.S. GAAPthat are relevant to Eni, see "Summary of DifferencesBetween Italian accounting principles and U.S. GAAP" belowand Notes No. 27, 28 and 29 to the Consolidated FinancialStatements. Note No. 29 to the Consolidated Financial Statementsprovides certain additional disclosures required under U.S. GAAP.

The preparation of these consolidated financial statementsrequires management to apply accounting methods and policies thatare based on difficult or subjective judgments, estimates basedon past experience and assumptions determined to be reasonableand realistic based on the related circumstances. The applicationof these estimates and assumptions affects the reported amountsof assets and liabilities and the disclosure of contingent assetsand liabilities at the balance sheet date and the reportedamounts of income and expenses during the reporting period.Actual results may differ from these estimates given theuncertainty surrounding the assumptions and conditions upon whichthe estimates are based. Summarized below are the accountingestimates that require the more subjective judgment of ourmanagement. Such assumptions or estimates regard the effects ofmatters that are inherently uncertain and for which changes inconditions may significantly affect the results reported in theconsolidated financial statements. In particular, the accountingmethods and policies based on these assumptions and estimatesaffect the recognition of assets and liabilities in the balancesheet and revenues and expenses in the income statement, as wellas net income, stockholders equity and various financialstatements ratios. However cash flows and liquidity are notaffected by such accounting policies and estimates.

 

> 
***Oil and Gas Activities***

Costs associated with the acquisition of mineral rights,including reserves purchased in connection with such acquisition,are capitalized. Mineral rights can also include explorationpermits, among other items. Exploration permits are amortized ona straight-line basis over the expected period of benefit.Capitalized costs associated with proved reserves are amortizedon a Unit-of-Production (UOP) basis, while capitalizedacquisition costs related to all other reserves are not amortizeduntil classified as proved. Costs for the acquisition of unprovedproperty are reassessed at least annually in order to verifywhether the carrying amount may be recoverable in future years(see "Impairment of Assets" below). Costs associatedwith exploratory activities for oil and gas producing propertiesare expensed as incurred for Italian GAAP financial reportingpurposes. Capitalized costs related to abandoned explorationdrilling programs are expensed. For a discussion on theaccounting of costs for exploratory well under U.S. GAAP seebelow.

Costs incurred in development activities (acquisition ofconcessions, drilling of wells and their completion beforeproduction, as well as plant and equipment necessary forproduction, etc.) are capitalized and amortized on a UOP basis.Costs related to unsuccessful developmental wells are expensedimmediately as loss on disposal.

Eni regularly accrues costs expected to be incurred withrespect to eventual well abandonment, including costs associatedwith site restoration, on a UOP basis.

Engineering estimates of the Company’s oil and gasreserves are inherently uncertain; the accuracy of any reserveestimate is a function of the quality of available data andengineering and geological interpretation and judgement. Thereare authoritative guidelines regarding the engineering criteriathat have to be met before estimated oil and gas reserves can bedesignated as "proved". Proved reserves are theestimated volumes of crude oil, natural gas and gas condensates,liquids and associated substances which geological andengineering data demonstrate with reasonable certainty to berecoverable in future years from known reservoirs under existingeconomic and operating conditions. Proved reserves include: (i)developed proved reserves: amounts of hydrocarbons that areexpected to be retrieved through existing wells, facilities andoperating methods; and (ii) undeveloped proved reserves: amountsof hydrocarbons that are expected to be retrieved following newdrilling and facilities. Proved reserves do not include probableor possible reserves. See also "Item 3 – Risk Factors– Uncertainties in estimates of oil and natural gasreserves".

Results of drilling, testing and production after the date ofthe estimate may require substantial upward and downwardrevision. In addition changes in oil and natural gas prices couldhave an effect on the value of Eni’s proved reserves.Accordingly, the estimated reserves could be materially differentfrom the quantities of oil and natural gas that ultimately willbe recorded.

Despite the inherent imprecision in these engineeringestimates, estimated proved reserves are used in determiningdepreciation and depletion expenses and impairment expense.Depreciation rates on oil and gas assets using the UOP basis aredetermined from the ratio between the amount of hydrocarbonsextracted in the year and proved developed reserves existing atthe year-end increased by the amounts extracted during the year.Therefore, assuming all other variables are held constant, anincrease in estimated proved reserves decreases depreciation,depletion and amortization expense. On the contrary, a decreasein estimated proved reserves increases depreciation, depletionand amortization expense. The UOP rate is then applied to thecosts capitalized.

Also, estimated proved reserves are used to calculate futurecash flows from oil and gas operations properties, which serve asan indicator in determining whether a property impairment is tobe carried out or not. The larger the volumes of estimatedreserves, the less likely the property is impaired.

 

> 
***Accounting for Suspended Well Costs under U.S. GAAP***

Under U.S. GAAP costs for exploratory wells are initiallycapitalized pending the determination of whether the well hasfound proved reserves. If proved reserves are found, thecapitalized costs of drilling the well are reclassified totangible assets and amortized on a UOP basis. If proved reservesare not found, the capitalized costs of drilling the well arecharged to expense. However, successful exploratory efforts are,in many cases, not declared to be proved until after an extensiveand lengthy evaluation period has been completed. These issueswere addressed by the FASB staff in its FSP FAS 19-1, publishedin April 2005, amending FAS 19, "Financial Accouting andReporting by Oil and Gas Producing Companies". Under theprovisions of FSP FAS 19-1, companies in the oil and gas industryare allowed to continue capitalization of an exploratory wellafter the completion of drilling when: (a) the well has found asufficient quantity of reserves to justify completion as aproducing well; and (b) the enterprise is making sufficientprogress assessing the reserves and the economic and operatingviability of the project. If either condition is not met or if anenterprise obtains information that raises substantial doubtabout the economic or operational viability of the project, theexploratory well would be assumed to be impaired, and its costs,net of any salvage value, would be charged to expense. FSP FAS19-1 provided a number of indicators necessary to demonstratesufficient progress was being made in assessing the reserves andeconomic viability of the project. Among these indicators are forinstance: (i) costs are being incurred to assess the reserves andtheir potential development; (ii) existence (or activenegotiations) of sales contracts with customers for oil andnatural gas; and (iii) existence of firm plans, establishedtimetables or contractual commitments, which may include seismictesting and drilling of additional exploratory wells.Notwithstanding the application of the above mentioned indicatorsthe determination of whether an exploratory well should remaincapitalized after the completion of drilling still requires highdegree of judgement on the part of management in assessingwhether the company is making sufficient progress assessing thereserves and the economic and operating viability of a givenproject and hence in deciding to continue capitalization of costsrelated to exploratory wells that have found reserves that cannotbe recognized as proved when drilling is completed.

 

> 
***Impairment of Assets***

Fixed assets and intangible assets are written down wheneverevents and changes in circumstances indicate that the carryingamount may not be recoverable. Conditions that could cause anasset to become impaired include lower-than-forecasted commoditysales prices, changes in the Group’s business plans or asignificant adverse change in the local or national businessclimate. The amount of an impairment charge is the excess of anassets carrying amount over its estimated fair value. Theestimated fair value usually is based on the present values ofexpected future cash flows using assumptions commensurate withthe risks involved in the asset group. The expected future cashflows used for impairment reviews are based on judgmentalassessments of future production volumes, prices and costs,considering available information at the date of review.According to Italian GAAP, when the circumstances causing animpairment cease to exist, Eni reverses previously recordedimpairment charges net of depreciation.

For oil and natural gas properties, the expected future cashflows are estimated based on developed and non developed provedreserves including, among other elements, the cost for closureand abandonment of wells, production taxes and the costs to beincurred for the reserves yet to be developed. The estimatedfuture level of production is based on assumptions about futurecommodity prices, lifting and development costs, field declinerates, market demand and supply, economic regulatory climates andother factors.

 

> 
***Asset Retirement Obligations***

Eni has significant obligations to remove tangible equipmentand restore land or seabed once operations are terminated.Removal and restoration obligations are primarily associated withplugging and abandoning wells and removal and disposal ofoffshore oil and gas platforms around the world. The estimatedundiscounted costs, net of salvage value, of dismantling andremoving these facilities are accrued over the productive life ofthe asset. Estimating the future asset removal costs is difficultand requires management to make estimates and judgements becausemost of the removal obligations are many years in the future andcontracts and regulations often have vague descriptions of whatconstitutes removal. Asset removal technologies and costs areconstantly changing, as well as political, environmental, safetyand public relations considerations. Future changes in assetremoval technologies and costs as well as political,environmental, safety and public relation considerations couldhave a material impact of financial statements. Further,management estimates and assumptions are required in theevaluation of asset retirement obligations when reconcilingItalian GAAP to U.S. GAAP. Under U.S. GAAP, SFAS 143 requiresentities to record the fair value of a liability for an assetretirement obligations in the period when it is incurred(typically at the time the asset is installed at the productionslocation). When the liability is initially recorded, thecapitalized costs of the related fixed assets will be increasedby an equal corresponding amount. Over time, the liabilities areincreased for the change in their present value each period, andthe initial capitalized costs are depreciated over the usefullives of the related assets. The recognized asset retirementobligations liability amounts are based upon future retirementcost estimates and incorporate many assumptions such as expectedrecoverable quantities of crude oil and natural gas, time toabandonment, future inflation rates and the risk-free rate ofinterest adjusted for the Company's credit costs.

 

> 
***Business Acquisitions***

Accounting for the acquisition of a business requires theallocation of the purchase price to various assets andliabilities of the acquired business. For most assets andliabilities, purchase price allocation is accomplished byrecording the asset or liability at its estimated fair value. Themost difficult estimations of individual fair values are thoseinvolving property, plant and equipment and identifiableintangible assets. We use all available information to make thesefair value determinations and, for major business acquisitions,typically engage an outside appraisal firm to assist in the fairvalue determination of the acquired long-lived assets.

 

> 
***Goodwill***

Eni capitalizes goodwill and amortizes it over its usefuleconomic life, which is not to exceed 20 years from the date ofacquisition. The assessment of useful economic life involvesmanagement making judgments and assumptions over the nature ofthe acquired business, the economic environment in which itoperates, and the period of time over which the value of thebusiness is expected to exceed the value of assets. Differentassumptions and judgments may lead to a different amortizationcharge being recognized in income during the period. Under U.S.GAAP goodwill is not amortized, instead it is subjected to anannual impairment test. This annual impairment test includes twosteps, firstly it is determined whether the fair value of thereporting unit, which holds a portion or all of the goodwill,exceeds the reporting unit's carrying value (inclusive ofgoodwill). If the fair value of the reporting unit exceeds thecarrying value no further action is required, however, if thereporting unit's carrying value exceeds it's fair value a secondstep is required. Step two of the test is to determine anestimated fair value for the goodwill. This is done by allocatingthe fair value of the reporting unit amongst its assets andliabilities to determine an indirect estimated fair value ofgoodwill. If the assessed fair value of goodwill is lower thanthe carrying amount an impairment charge is recognized for thedifference between the two. Central to the annual impairment testfor goodwill is the determination of estimated fair valueamounts. Management most commonly estimates fair values bydiscounting future estimates of cash flows, therefore, theoutcome of the impairment test is sensitive to future cash flowestimates and changes thereto and the selection of the rate atwhich to discount the future cash flow estimates.

 

> 
***Environmental Liabilities***

Together with other companies in the industries in which itoperates, Eni is subject to numerous EU, national, regional andlocal environmental laws and regulations concerning its oil andgas operations, productions and other activities, includinglegislation that implements international conventions orprotocols. See also "Item 4 – EnvironmentalMatters".

Environmental expenditures are made in order to prevent,reduce, repair or control the environmental impact of productionactivities. Reserves for environmental contingencies areestablished when it becomes probable or certain that a liabilityhas been incurred and the amount can be reasonably estimated.

Although management, considering the actions already taken,the insurance policies to cover environmental risks and provisionfor risks accrued, does not expect any material adverse effectupon Eni’s results of operations and financial position as aresult of its compliance with such laws and regulations, therecan be no assurance that there will not be a material adverseimpact on Eni’s results of operations and financial positiondue to: (i) the possibility of as yet unknown contamination; (ii)the results of ongoing surveys; (iii) the possible effect offuture environmental legislations and rules; (iv) the effect ofpossible technological changes relating to future remediation;and (v) the possibility of litigation and the difficulty indetermining Eni’s liabilities, if any, as against otherpotentially responsible parties with respect to such litigationand the possible insurance recoveries.

 

> 
***Contingencies***

In addition to accruing the estimated costs for assetretirement obligation and environmental liabilities, Eni accruesfor all probable and estimable contingencies. These othercontingencies are primarily related to litigation and tax issues.Determining appropriate amounts for accrual is a complexestimation process that includes subjective judgements. Enireviews these contingencies on at least a quarterly basis todetermine if new accruals need to be recorded or if adjustmentsto existing accruals need to be made.

 

> 
***Recent Accounting Pronouncements***

See Note 29 to the Consolidated Financial Statements forinformation about recent accounting pronouncements and Recentdevelopments below for a discussion of the introduction ofInternational Financial Reporting Standards.

 

##### Table of Contents

**Results of Operations**

> 
***Three Years ended December 31, 2004***

The table below sets forth a summary of Eni’s incomestatement for the periods indicated. All line-items included inthe table below are derived from consolidated financialstatements prepared in accordance with Italian GAAP.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Net sales from operations                                  | 47,922  |   |   | 51,487  |   |   | 58,382  |   |
|------------------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
| Other        income and revenues(1)                        | 1,080   |   |   | 913     |   |   | 1,298   |   |
|                                                       |         |        |   |         |        |   |         |        |
| Total revenues                                             | 49,002  |   |   | 52,400  |   |   | 59,680  |   |
| Operating        expenses                                  | (34,996 | )      |   | (37,732 | )      |   | (42,356 | )      |
| Depreciation, amortization and writedowns                  | (5,504  | )      |   | (5,151  | )      |   | (4,861  | )      |
|                                                       |         |        |   |         |        |   |         |        |
| Operating income                                           | 8,502   |   |   | 9,517   |   |   | 12,463  |   |
|                                                       |    |   |   |    |   |   |    |   |
| Net financial income (expense)                             | (167    | )      |   | (154    | )      |   | (95     | )      |
| Net income        (expense) from investments               | 43      |   |   | (17     | )      |   | 229     |   |
| Income before extraordinary income and income        taxes | 8,378   |   |   | 9,346   |   |   | 12,597  |   |
| Net        extraordinary income (expense)(2)               | (29     | )      |   | 49      |   |   | (56     | )      |
|                                                       |         |        |   |         |        |   |         |        |
| Income before income taxes                                 | 8,349   |   |   | 9,395   |   |   | 12,541  |   |
| Income        taxes                                        | (3,127  | )      |   | (3,241  | )      |   | (4,653  | )      |
|                                                       |    |   |   |    |   |   |    |   |
| Income before minority interest                            | 5,222   |   |   | 6,154   |   |   | 7,888   |   |
| Minority        interest                                   | (629    | )      |   | (569    | )      |   | (614    | )      |
|                                                       |         |        |   |         |        |   |         |        |
| Net income                                                 | 4,593   |   |   | 5,585   |   |   | 7,274   |   |
|                                                       |         |        |   |         |        |   |         |        |

----

|   |   |                                                                                                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Includes,        among other things, contract penalties, income from        contract cancellations, gains on disposal of mineral        rights and other fixed assets, compensation for damages        and indemnities and other income. |
| (2)    |   | Gross of        income tax.                                                                                                                                                                                                              |

 

Revenues from sales of products and services are recognizedupon transfer of title or completion of service. In particular,revenues are recognized:

| • |   | for petroleum products sold        to retail distribution networks, generally upon delivery        to the service stations; for all the other sales,        generally, upon shipment; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | for natural gas when the        natural gas leaves Eni’s distribution network and is        delivered to the customer;                                                           |
| • |   | for crude oil, generally        upon shipment;                                                                                                                                        |
| • |   | for chemicals and all other        sales, generally upon shipment.                                                                                                                    |

In all instances where revenue is recognized upon shipment,all risk of loss is transferred to the buyer upon shipment.

Revenues from natural gas and crude oil production fromproperties in which Eni has a working interest together withother producers are recognized based on actual quantitiesproduced and sold on Eni’s behalf (sales method).Differences between Eni’s net working interest volume andactual production volumes are not significant.

Revenues related to long-term construction contracts arerecognized using the percentage-of-completion method measured onthe cost-to-cost basis. Long-term construction contractsdenominated in currencies other than euro are translated into theeuro using the exchange rate of the day the percentage ofcompletion is evaluated with the purchaser or using the exchangerate of the day advances are paid; long-term constructioncontracts not yet accepted by the purchaser are translated usingthe year-end exchange rate; the same criteria is used for thecorresponding hedging derivatives. Provisions for anticipatedlosses on long-term contracts are recorded in full when suchlosses become evident. Revenues related to amounts in excess ofthe original contract price due to the incurrence ofunanticipated additional costs (i.e., Eni claims against thirdparties), are recognized when it is probable that the claim willresult in additional contract revenue and the amount of the claimcan be reasonably estimated.

Costs are recognized when therelated goods and services are sold, consumed or allocated, orwhen their future useful lives cannot be determined.

Eni is a party to certain Production Sharing Agreementswhereby taxes are settled by joint venture partners which arestate-owned entities, in the name and on behalf of Eni out ofEni’s share of oil and gas production. The company recordssuch income taxes owed by Eni but paid on its behalf in revenuesand income tax expense.

The table below sets forth certain income statement items as apercentage of net sales from operations for the periodsindicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

| Operating expenses                               | 73.0% |   | 73.3% |   | 71.0% |
|--------------------------------------------------|-------|--------|-------|--------|-------|
| Depreciation,        amortization and writedowns | 11.5% |   | 10.0% |   | 8.1%  |
| Operating income                                 | 17.7% |   | 18.5% |   | 20.9% |
|                                             |       |   |       |   |       |

*2004 compared to 2003* Eni’s net income in 2004 waseuro 7,274 million with a euro 1,689 million increase over 2003(up 30.2%), due primarily to a positive operating incomeperformance (up euro 2,946 million) registered in particular inEni’s core oil business, offset in part by higher incometaxes (euro 1,412 million). The petrochemical business alsogenerated operating income after several years of losses. Theincrease in net income was also caused by: (i) an increase in netincome from investments (euro 246 million) due to higher incomeearned by certain Eni’s affiliates and lower losses oncertain investments; (ii) lower financial charges (a decrease ofeuro 59 million). Net extraordinary expense increased by euro 105million due to the recognition of higher loss contingenciesrelating environmental remediation in Eni’s Petrochemicaland Refining & Marketing segments and guarantees given in thedivestment of certain businesses in the Refining & Marketingsegments, as well as, lower extraordinary income, the effects ofwhich were partly offset by a euro 519 million gain on the saleof a 9.054% interest in Snam Rete Gas.

*2003 compared to 2002* Eni’s net income in 2003 waseuro 5,585 million, with a increase of euro 992 million over2002, up 21.6%, due essentially to a positive operating incomeperformance (up euro 1,015 million) related to an increase inhydrocarbon production sold and in natural gas volumes sold,higher international oil prices (Brent up 15.5%) and refiningmargins in dollars, whose effects were offset in part by the19.6% decline of the dollar over the euro, which had an estimatednegative impact on operating income of euro 1,100 million. Theincrease in net income was also caused by: (i) a reduction inminority interest in net income resulting from the tender offerfor Italgas shares (euro 124 million); and (ii) higher netextraordinary income (euro 78 million), related in particular tothe effect of the settlement of a dispute with Edison SpAconcerning the Enimont joint venture (euro 200 million). Thesepositive factors were partly offset by higher income taxes (euro114 million).

 

> 
***Analysis of the line items of the income statement:***

> 
***a) Total Revenues***

*Net sales from operations*

Eni’s total revenues were euro 59,680, 52,400 and 49,002million in 2004, 2003 and 2002, respectively. Total revenuesconsist of net sales from operations and other income andrevenues. Eni’s net sales from operations amounted to euro58,382, 51,487 and 47,922 million in 2004, 2003, and 2002,respectively, and its other income and revenues totalled euro1,298, 913, and 1,080, respectively, in these periods.

The table below sets forth,for the periods indicated, the net sales from operationsgenerated by each of Eni’s business segments includingintersegment sales, together with consolidated net sales fromoperations.

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Exploration & Production                   | 12,877  |   |   | 12,746  |   |   | 15,349  |   |
|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
| Gas &        Power                         | 15,297  |   |   | 16,067  |   |   | 17,258  |   |
| Refining & Marketing                       | 21,546  |   |   | 22,148  |   |   | 26,094  |   |
| Petrochemicals                                 | 4,516   |   |   | 4,487   |   |   | 5,417   |   |
| Oilfield Services Construction and Engineering | 4,546   |   |   | 6,306   |   |   | 6,494   |   |
| Other        activities (1)                    | 1,449   |   |   | 1,178   |   |   | 1,279   |   |
| Corporate and financial companies (1)          | 586     |   |   | 700     |   |   | 851     |   |
| Consolidation        adjustment (2)            | (12,895 | )      |   | (12,145 | )      |   | (14,360 | )      |
|                                           |         |        |   |         |        |   |         |        |
|                                           | 47,922  |   |   | 51,487  |   |   | 58,382  |   |
|                                           |         |        |   |         |        |   |         |        |

----

|   |   |                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------|
| (1)    |   | Beginning in        2003 Eni’s activities have been grouped by segment        differently: |

|   |   | - |   | Syndial        (former EniChem) was included in the "Other        activities" segment, which includes all Eni        companies not included in specific segments (such as,        among others, EniData, Sieco, Tecnomare, EniTecnologie,        Eni Corporate University, AGI); |
|--------|--------|---|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | - |   | the new        "Corporate and financial companies" segment was        created, which includes Eni Corporate, Sofid and the        financial companies formerly included in the "Other        activities" segment.                                                      |

|   |   | In addition        following its merger into Eni in 2004, EniData SpA which        managed Eni’s IT activities, formerly included in        "Other activities", is now included in        "Corporate and financial companies".                                                                                                                                                                                                                                               |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Data for 2002        and 2003 have been reclassified accordingly, in order to        allow for a homogeneous comparison.                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (2)    |   | Intersegment        sales are included in net sales from operations in order        to give a more meaningful indication as to the volume of        the activities to which sales from operations by segment        may be related. The most substantial intersegment sales        are recorded by the Exploration & Production segment.        See Note 24 to the Consolidated Financial Statements for        a breakdown of intersegment sales by segment for the        three reported years. |

 

*2004 compared to 2003*Eni’s net sales fromoperations for 2004 totalled euro 58,382 million, with anincrease of euro 6,895 million over 2003, up 13.4%, dueprincipally to higher oil prices in dollars, higher refinedproduct and petrochemical prices and higher volumes sold inEni’s main operating segments, the effects of which werepartially offset by the impact of the depreciation of the dollarover the euro (approximately euro 1,100 million).

Revenues generated by the Exploration & Production segment(euro 15,349 million) increased by euro 2,603 million, up 20.4%,due principally to higher prices realized in dollars (oil up30.3%, natural gas up 9.3%) and higher hydrocarbon productionsold (20.3 million boe, up 3.6%) the effects of which werepartially offset by the appreciation of the euro over the dollar.

Revenues generated by the Gas & Power segment (euro 17,258million) increased by euro 1,191 million, up 7.4%, dueprincipally to increased volumes sold of natural gas (3.94billion cubic meters, up 5.7%) excluding own consumption, andelectricity (8.30 terawatthour, up 149.5%), the effects of whichwere offset in part by lower natural gas prices related to thenatural gas competitive and regulatory environment, as well as tothe appreciation of the euro over the dollar.

Revenues generated by the Refining & Marketing segment(euro 26,094 million) increased by euro 3,946 million, up 17.8%,principally due to higher international prices for refinedproducts and to higher volumes sold (3.11 million tonnes, up6.2%), the effects of which were offset in part by theappreciation of the euro over the dollar.

Revenues generated by the Petrochemical segment (euro 5,417million) increased by euro 930 million, up 20.7%, due mainly to a20.8% increase in the average selling prices of products.

Revenues from the Oilfield Services, Construction andEngineering segment (euro 6,494 million) increased by euro 188million, up 3%, mainly due to increased activity levels.

Revenues of Corporate and financial companies (euro 851million), which essentially consists of invoices for servicesprovided to other group segments, increased by euro 151 million,up 21.6%, due mainly to the concentration, in this segment, ofactivities generating overhead expenses and relating to theheadquarters of Rome, San Donato Milanese and Genova (inparticular these activities relate to real estate rentals andmaintenance, business support and human resources services), aswell as IT communication and other services. Until 2003, costsrelated to these activities and services had been recognized bycompanies and divisions of Eni.

 

*2003 compared to 2002*Eni’s net sales fromoperations for 2003 totalled euro 51,487 million, with anincrease of euro 3,565 million compared to 2002, up 7.4%, duemainly to increased hydrocarbon production sold and increasednatural gas volumes sold, as well as higher activity levels inthe Oilfield Services, Construction and Engineering segment. Thisincrease was due also to higher prices of products in all Enisegments, largely offset by the appreciation of the euro over thedollar, which had an impact of about euro 1.9 billion.

Revenues generated by the Exploration & Production segment(euro 12,746 million) declined by euro 131 million, down 1%, dueessentially to the appreciation of the euro over the dollar,lower storage tariffs (see Operating Income) and the transfer ofthe natural gas trading contracts (1.70 billion cubic meters in2002) to the Gas & Power segment with effect from January 1,2003. These negative factors were partially offset by higherhydrocarbon production sold (32.9 mmBOE, up 6.3%) and higherprices in dollars realized on hydrocarbons (oil up 16.6%, naturalgas up 15.8%).

Revenues generated by the Gas & Power segment (euro 16,067million) increased by euro 770 million, up 5%, due essentiallyto: (i) increased natural gas volumes sold in primarydistribution (4.68 billion cubic meters, up 7.7%; of which 1.5billion cubic meters related to the contracts managed in 2002 bythe Exploration & Production segment); (ii) higher averageprices for natural gas, related to the trends of certainoil-based parameters to which natural gas prices are indexed,offset in part by the declines related to the appreciation of theeuro over the dollar and to contract renewals (in particular withwholesalers). These positive factors were partially offset by thechange in the sales mix related to the higher share of sales inthe rest of Europe due to the ceilings on Italian sales imposedby Legislative Decree No. 164/2000.

Revenues generated by the Refining & Marketing segment(euro 22,148 million) increased by euro 602 million, up 2.8%,essentially due to higher international prices for refinedproducts (prices of gasoline and diesel fuel were up 18.9% and24.4%, respectively) and to higher resales of oil (4.0 milliontonnes, up 15%), these effects were offset in part by theappreciation of the euro over the dollar, by a decline in salesto petrochemical industries and other sales in Italy (a total of2.05 million tonnes), also due to lower product availabilityrelated to the contribution of the Priolo refinery to ErgRaffinerie Mediterranee Srl in October 2002 and the standstillsof the Gela refinery and lower wholesale sales (0.29 milliontonnes, in particular of fuel oil).

Revenues generated by the Petrochemical segment (euro 4,487million) decreased by euro 29 million, down 0.6%, due mainly tolower volumes sold (down 4.1%), partially offset by the 4.8%increase in the average selling prices of products (in particularin basic petrochemicals).

Revenues from the Oilfield Services, Construction andEngineering segment (euro 6,306 million) increased by euro 1,760million, up 38.7%, due to increased activity levels, also relatedto the purchase in July 2002 of Bouygues Offshore (now Saipem SA)in the oilfield services and construction area.

Revenues generated by the Other activities segment (euro 1,178million) decreased by euro 271 million, down 18.7% due mainly tothe decline registered at Syndial as a consequence ofclosure/sale of businesses.

Revenues generated by Corporate and financial companies (euro700 million) increased by euro 114 million, up 19.5%, dueessentially to the invoicing of expenses to other Eni segmentsfollowing the centralization of IT, telecom, personnel managementand goods and service purchase activities by Eni Corporate.

 

> 
*Other income and revenues*

*2004 compared to 200.* Other income and revenues (euro1,298 million) increased by euro 385 million due mainly to highergains on the disposal of assets (euro 413 million in 2004, euro109 million in 2003) related mainly to the divestment of provedand unproved property in the Exploration & Production segment(euro 371 million).

 

> 
***b) Operating Expenses***

The table below sets forth the components of Eni’soperating expenses for the periods indicated.

 

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Purchases, services and other    | 31,893 |   | 34,566 |   | 39,092 |
|----------------------------------|--------|--------|--------|--------|--------|
| Payroll        and related costs | 3,103  |   | 3,166  |   | 3,264  |
|                             |        |   |        |   |        |
| Operating expenses               | 34,996 |   | 37,732 |   | 42,356 |
|                             |        |   |        |   |        |

*2004 compared to 2003* Operating expenses (euro 42,356million) increased by euro 4,624 million compared to 2003, up12.3%, due mainly to: (i) higher prices for oil-based andpetrochemical feedstocks and for natural gas; (ii) higher volumesof natural gas purchased and higher activity levels in theOilfield Services, Construction and Engineering segment; (iii)higher volumes of petroleum products purchased for resale in theRefining & Marketing segment; and (iv) higher provisions tothe site restoration and abandonment reserve in the Exploration& Production segment (euro 182 million). These increases werepartially offset by the effect of the appreciation of the euroover the dollar, also in relation to the conversion of financialstatements denominated in currencies other than the euro.

Payroll and related costs (euro 3,264 million) increased byeuro 98 million, up 3.1%, mainly due to an approximately 4.8%increase in unit labor cost in Italy and higher activity levelsin the Oilfield Services, Construction and Engineering segmentoutside Italy. These effects were offset in part by the declinerelated to the divestment of the 100% interest in Agip do BrasilSA, a refined product and LPG distribution company, the declinein the average number of employees in Italy (approximately 1,300persons), and the effect of the conversion of financialstatements denominated in currencies other than the euro.

 

*2003 compared to 2002* Operating expenses (euro 37,732million) increased by euro 2,736 million compared to 2002, up7.8% due mainly to: (i) higher natural gas volumes purchased byprimary distribution; (ii) higher supply costs in dollars ofnatural gas and oil-based and petrochemical feedstocks, whoseeffects were offset in part by the depreciation of the dollarover the euro; and (iii) higher activity levels in the OilfieldService, Construction and Engineering segment, also related tothe purchase of Bouygues Offshore. These negative factors wereoffset in part by the effect of the conversion of financialstatements denominated in currencies other than the euro andstreamlining and efficiency improvement measures.

Payroll and related costs (euro 3,166 million) increased byeuro 63 million, up 2%, mainly due to an approximately 2.7%increase in unit labor cost in Italy and higher activity levelsin the Oilfield Services, Construction and Engineering segmentrelated to the purchase of Bouygues Offshore. These effects wereoffset in part by an approximately 1,800 decline in the averagenumber of employees in Italy, resulting from the streamlininginitiatives undertaken and from the sale of businesses, and theeffect of the conversion of financial statements denominated incurrencies other than the euro.

An expense of euro 6 million related to stock grants andoptions granted in 2003 to managers of Eni, Saipem SpA and SnamRete Gas SpA was included in payroll costs. The cost of grantedoptions was determined based on their fair value (see "Notesto the Consolidated Financial Statements - Note 2 - Summary ofsignificant accounting and reporting policies - Change inaccounting principles"). The difference between the bookvalue and the fair value of shares issued in the stock grant planresulted in a euro 3 million devaluation of treasury sharesallocated to the stock grant plan. This devaluation wasrecognized as a loss on investments.

 

> 
***c) Depreciation, Amortization and Writedowns***

The table below sets forth a breakdown of depreciation,amortization and writedowns by business segment for the periodsindicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Exploration & Production(1)                  | 3,552 |   | 3,133 |   | 3,021 |
|--------------------------------------------------|-------|--------|-------|--------|-------|
| Gas &        Power                           | 417   |   | 533   |   | 572   |
| Refining & Marketing                         | 490   |   | 493   |   | 465   |
| Petrochemicals                                   | 125   |   | 125   |   | 107   |
| Oilfield Services Construction and Engineering   | 267   |   | 271   |   | 251   |
| Other        activities                          | 48    |   | 51    |   | 44    |
| Corporate and financial companies                | 63    |   | 104   |   | 106   |
|                                             |       |   |       |   |       |
| Total of        depreciation and amortization    | 4,962 |   | 4,710 |   | 4,566 |
| Writedowns                                       | 542   |   | 441   |   | 295   |
|                                             |       |   |       |   |       |
| Depreciation,        amortization and writedowns | 5,504 |   | 5,151 |   | 4,861 |
|                                             |       |   |       |   |       |

----

|   |   |                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Exploration        expenditures of euro 491, 632 and 865 million are        included in these amounts relative to the years 2004,        2003 and 2002, respectively. |

 

*2004 compared to 2003*Depreciation, amortization andwritedown charges (euro 4,861 million) decreased by euro 290million compared to 2003, down 5.6%. Depreciation andamortization charges (euro 4,566 million) declined by euro 144million due the decline registered in particular in theExploration & Production segment (euro 112 million) due tocurrency translation effects, lower exploration costs and loweramortization of exploration bonuses (euro 169 million on aconstant exchange rate basis), offset only in part by higherdevelopment amortization charges (euro 246 million on a constantexchange rate basis) related to higher production and expenditureaimed at maintaining production levels in mature fields in Italy,Egypt, the United Kingdom and Indonesia. Amortization charges ofthe Gas & Power segment increased by euro 39 million, due inparticular to new power generation units at Ferrera Erbognone andRavenna.

Writedowns (euro 295 million) concerned essentially theimpairment of proved and unproved property in the Exploration& Production segment (euro 266 million). In 2003, writedowns(euro 441 million) concerned mainly proved and unproved property(euro 227 million) and petrochemical plants (euro 122 million).

Amortization of goodwill arising from recently purchasedcompanies (Italgas, Bouygues Offshore and Lasmo) amounted to euro106 million. Amortization of goodwill of purchased companiesaccounted for under the equity method (euro 124 million, inparticular Galp Energia, GVS and Unión Fenosa Gas) is recordedunder "net income from investments". The overall effectof goodwill amortization amounted to euro 230 million.

 

*2003 compared to 2002* Depreciation, amortization andwritedown charges (euro 5,151 million) decreased by euro 353million compared to 2002, down 6.4%. Depreciation andamortization charges (euro 4,710 million) declined by euro 252million due to the decline registered in particular in theExploration & Production segment (euro 419 million) relatedto the effect of the appreciation of the euro over othercurrencies in the conversion of financial statements ofsubsidiaries denominated in currencies other than the euro andlower exploration costs (euro 145 million on a constant exchangerate basis), offset in part by higher development amortizationcharges related to higher production (euro 245 million). Thisdecline was offset in part by the increases registered in: (i)the Gas & Power segment (euro 116 million) due mainly to thewritedown of the difference between the purchase cost of Italgasshares acquired in a tender offer and the underlying net bookvalue (euro 91 million); and (ii) the Corporate and financialcompanies segment (euro 41 million) due essentially to therecognition in the income statement of the cost of the Eni SlurryTechnology project (euro 45 million in 2003, euro 12 million in2002). Depreciation and amortization charges in the Refining& Marketing segment were substantially unchanged: the effectsof the contribution of the Priolo refinery in October 2002 (see"Item 4 – Refining") were offset by the comingonstream of new capital expenditure in the upgrade of Eni’sdistribution network and the purchase of service stations in therest of Europe and higher depreciation and amortization chargeson highway service stations due to the adjustment of their usefullives to the residual life of concessions.

Writedowns (euro 441 million) declined by euro 101 million andconcerned essentially the impairment of assets: (i) in theExploration & Production segment (euro 227 million) inparticular in the United Kingdom, Pakistan and the United States;(ii) in the Petrochemical segment (euro 122 million); (iii) inthe Other activities segment (euro 57 million); and (iv) in thenatural gas distribution business in Brazil (euro 30 million).The amortization of the difference between the purchase price andthe net book value of recently purchased companies (Italgas,Bouygues Offshore and Lasmo) not allocated to assets/liabilitiesamounted to euro 102 million. Including also the amortization ofthe goodwill of purchased companies accounted for under theequity method (euro 119 million in the aggregate, including inparticular Galp Energia, GVS and Unión Fenosa Gas) recognized inthe income statement under the item balance of net income andexpense from investments, the overall effect of goodwillamortization amounted to euro 221 million.

 

> 
***d) Operating Income by Segment***

The table below sets forth Eni’s operating income bybusiness segment for the periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Exploration & Production                   | 5,175 |   |   | 5,746 |   |   | 8,017  |   |
|------------------------------------------------|-------|--------|--------|-------|--------|--------|--------|--------|
| Gas &        Power                         | 3,244 |   |   | 3,627 |   |   | 3,463  |   |
| Refining & Marketing                       | 321   |   |   | 583   |   |   | 965    |   |
| Petrochemicals                                 | (126  | )      |   | (176  | )      |   | 271    |   |
| Oilfield Services Construction and Engineering | 298   |   |   | 311   |   |   | 260    |   |
| Other        activities                        | (214  | )      |   | (293  | )      |   | (244   | )      |
| Corporate and financial companies              | (196  | )      |   | (281  | )      |   | (269   | )      |
|                                           |       |        |   |       |        |   |        |        |
| Operating        income                        | 8,502 |   |   | 9,517 |   |   | 12,463 |   |
|                                           |       |        |   |       |        |   |        |        |

The table below sets forth, for each of Eni’s principalbusiness segments, operating income as a percentage of suchsegment’s net sales from operations (including intersegmentsales) for the periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

| Exploration & Production                   | 40.2% |   |   | 45.1% |   |   | 52.2% |   |
|------------------------------------------------|-------|--------|--------|-------|--------|--------|-------|--------|
| Gas &        Power                         | 21.2% |   |   | 22.6% |   |   | 20.1% |   |
| Refining & Marketing                       | 1.5%  |   |   | 2.6%  |   |   | 3.7%  |   |
| Petrochemicals                                 | (2.8% | )      |   | (3.9% | )      |   | 5.0%  |   |
| Oilfield Services Construction and Engineering | 6.6%  |   |   | 4.9%  |   |   | 4.0%  |   |
|                                           |       |        |   |       |        |   |       |        |

 

***Exploration & Production*** Operating incomeamounted to euro 8,017 million increasing by euro 2,271 millioncompared to 2003, up 39.5%, due to: (i) higher average realizedprices in dollars (oil up 30.3%, natural gas up 9.3%); (ii)higher hydrocarbon production sold (20.3 million boe, up 3.6%);(iii) the recognition of net gains on the sale of assets, as partof Eni’s mineral right portfolio rationalization program(euro 334 million); and (iv) lower exploration costs and loweramortization of exploration bonuses (euro 169 million on aconstant exchange rate basis). These positive factors were offsetin part by: (i) the effect (approximately euro 890 million) ofthe appreciation of the euro over the dollar (up 10%); (ii)higher production costs and amortization related to higherproduction and capital expenditure aimed at maintainingproduction levels in mature fields; and (iii) higher provisionsto the site restoration and abandonment reserve (euro 182million).

Operating income in 2003 amounted to euro 5,746 millionincreasing by euro 571 million compared to 2002, up 11%, duemainly to: (i) an increase in average realization prices indollars (oil up 16.6%; natural gas up 15.8%); (ii) increasedhydrocarbon production sold (32.9 mmBOE, up 6.3%); (iii) lowerexploration costs (euro 145 million, assuming no variations inexchange rates) and lower asset writedowns (euro 105 million);and (iv) lower costs related to synergies obtained, streamliningand efficiency improvement actions. These positive factors wereoffset in part by: (i) the appreciation of the euro over thedollar; (ii) the effect of the application of tariffs imposed bythe Authority for Electricity and Gas with decisions No. 26/2002and No. 49/2002 for storage services rendered to the Gas &Power segment (in 2002 pending the outcome of Eni’s claim,services were paid according to earlier tariffs – see"Item 4 – Exploration & Production – Storageactivities"); and (iii) the fact that in 2002 gains on thesale of assets were recorded for euro 92 million as part ofEni’s portfolio streamlining program.

 

***Gas & Power*** Operating income in 2004amounted to euro 3,463 million, a euro 164 million decreasecompared to 2003, down 4.5%, due mainly to: (i) lower margins onnatural gas sales, due also to the lower appreciation of the euroover the dollar in 2004 as compared to 2003; (ii) lower tariffsfor natural gas distributed through local distribution networks;(iii) the negative impact of a different mix for natural gassales; and (iv) higher net operating expense (euro 49 million),related in particular to lower release of redundant riskreserves. These negative factors were offset in part by: (i) a5.74 billion cubic meter increase in natural gas volumes sold, up8%, also driven by an increase in volumes supplied to Eni’selectricity generation business (own consumption), as well as anincrease in volumes distributed through local distributionnetworks; (ii) higher results in natural gas transport activitiesoutside Italy due to the tariff review process and in natural gastransmission in Italy, due also to the reimbursement of the firstinstallment paid to the Sicilia Region in 2002 following theestablishment of a new tax under Regional Law No. 2 of March 26,2002 (euro 11 million) see "Note 23 to the ConsolidatedFinancial Statements – Legal Proceedings"; and (iii)the fact that in the fourth quarter of 2003 the writedown ofnatural gas distribution assets in Brazil was recorded (euro 30million). Operating income earned by the electricity generationbusiness increased by 331% principally due to higher productionsold (8.30 terawatthour, up 149.5%).

Operating income in 2003 amounted to euro 3,627 million,increasing by euro 383 million over 2002, up 11.8%, due mainlyto: (i) increased volumes sold in primary (4.68 billion cubicmeters, up 7.7%) and secondary distribution outside Italy (0.65billion cubic meters, up 17.2%), whose effects were offset inpart by a change in the sales mix due to a higher share of salesin Europe related to the compliance with the ceilings set onsales in Italy by Legislative Decree No. 164/2000; (ii) highermargins in primary distribution, essentially related to theimproved price environment due to the appreciation of the euroover the dollar, whose effects were offset in part by the renewalof contracts, and higher margins in secondary distribution; (iii)the fact that in 2002 a euro 40 million expense was recorded as abalance of the payment of an environmental tax levied by theSicilia Region (euro 86 million; in December 2002 Eni suspendedthe payments; see Note 23 to the Consolidated FinancialStatements – Legal Proceedings), as well as writedowns ofassets in secondary distribution in Argentina (euro 28 million)and a euro 74 million income relating to tariff adjustments for2001 resulting from Decision No. 122/2002 of the Authority forelectricity and gas in secondary distribution; (iv) lowerwritedowns (euro 35 million) in natural gas distributionactivities in Brazil; and (v) lower costs related to streamliningand efficiency improvement actions. These positive factors wereoffset in part by: (i) the amortization of the difference betweenthe purchase cost of Italgas shares acquired in a tender offerand the underlying net book value (euro 91 million); (ii) lowerincome related to the reversal of risk reserves (euro 67million); and (iii) the decline in the operating income generatedby electricity generation activities (euro 19 million) dueessentially to start-up costs, the planned maintenance standstillof the Taranto plant and the writedown of transmission lines atRavenna and Gela (euro 4 million). The increase in operatingincome generated by the start-up of the first 390 megawatts unitat the Ferrera Erbognone power station was offset by the changein sales mix and higher costs of fuels.

 

***Refining & Marketing*** Operating income in2004 amounted to euro 965 million, a euro 382 million increasecompared to 2003, up 65.5%, due essentially to: (i) higherrefining margins (the margin on Brent was up 1.37 dollars/barrel)enhanced by the effect of an increase in the differential betweenthe prices of light crudes and products and heavy crudes and fueloil, which favored Eni’s refining system, characterized by ahigh conversion capacity. The effects of this increase wereoffset in part by the effect of the appreciation of the euro overthe dollar; (ii) higher intake processing on own account (2.25million tonnes, up 6.4%) in Italy, also due to fewer maintenancestandstills at wholly-owned refineries, and in the rest ofEurope; (iii) increased volumes sold on retail markets in therest of Europe (0.45 million tonnes, up 14.9%) following thepurchase of service stations in Spain, Germany and France in2003; and (iv) higher sales margins on wholesale markets. Thesepositive factors were offset in part by a decline in distributionmargins on retail markets in Italy and the rest of Europe,related to the increase in international refined product priceswhich was not fully reflected in selling prices, and higherroyalties paid to highway companies in Italy.

Operating income in 2003 amounted to euro 583 million, a euro262 million increase compared to 2002, up 81.6%, due essentiallyto: (i) improved results in refining activities related mainly toa recovery in refining margins (Brent margin was up 1.9dollars/barrel), whose effects were offset in part by theappreciation of the euro over the dollar; (ii) higher operatingresults in marketing in Italy and the rest of Europe; (iii) lowercosts resulting from streamlining and efficiency improvementactions; and (iv) the release of the LIFO reserve related towithdrawals from stocks (euro 37 million), whose effects wereoffset in part by the fact that in 2002 stocks were revaluatedfor euro 13 million. These positive factors were offset in partby: (i) a decline in operating results in marketing activities inBrazil related to lower margins on LPG; (ii) lower processingrelated to standstills at the Taranto and Sannazzaro refineriesthat prevented the company from taking full advantage of improvedrefining conditions in the first quarter, and of the Gelarefinery, offset only in part by higher processing at theMilazzo, Venice and Taranto refineries in the second half of theyear; and (iii) the recording of higher charges for environmentalrisks (euro 25 million).

 

***Petrochemicals*** In 2004, operating incomeamounted to euro 271 million (compared to a euro 176 millionoperating loss in 2003); the euro 447 million improvement was duemainly to: (i) an increase in margins, in particular in basicpetrochemicals (cracker margin) related to a better trend inprices than in the cost of oil-based feedstocks, which reflect apositive trend in demand, as well as an improved industrial andsales performance; (ii) the fact that in 2003 plant writedownswere recognized for euro 122 million (euro 3 million in 2004);and (iii) a profit on stocks15 ofeuro 39 million.

In 2003, operating losses amounted to euro 176 million, anincrease of euro 50 million compared to 2002, up 39.7%, due to:(i) lower volumes sold (down 4.1%), in particular in basicpetrochemicals; (ii) lower product margins, in particular inpolymers, related to an increase in the cost of monomers thatcould not be transferred to sale prices due to a weak demand andstrong competitive pressure; and (iii) the fact that in 2002inventories were revalued for euro 23 million in relation withincreased sale prices. These negative factors were offset in partby lower asset writedowns and lower costs related to streamliningand efficiency improvement actions.

 

***Oilfield Services Construction and Engineering***Operating income in 2004 totalled euro 260 million, a euro 51million decline over 2003, down 16.4%. Engineering registered anoperating loss amounting to euro 33 million, as compared to anoperating income of euro 7 million in 2003, due to the lowerprofitability of certain contracts. Oilfield services andconstruction recorded an operating income of euro 293 million,with a euro 11 million decline, following lower results inparticular in: (i) the Onshore construction area, due to thecompletion of relevant contracts in Kazakhstan (Karachaganakfield), Saudi Arabia and Nigeria, whose effects were offset inpart by the start-up of a new contract in Sakhalin in Russia; and(ii) the Offshore construction and LNG areas, due to lowerprofitability of contracts. These negative factors were offset inpart by improved results in the Offshore drilling area due toincreased utilization rate of certain vessels and the Leased FPSOarea, due essentially to a contract for the recovery of oil fromthe tanks of the Prestige tanker, that sunk off the coast ofGalicia in November 2002.

Operating income in 2003 totalled euro 311 million, of whicheuro 304 million related to oilfield services and construction,with a euro 13 million increase over 2002, up 4.4%.

Operating income of oilfield services and constructionincreased slightly compared to 2002 (euro 2 million). Thepositive factors contributing to this increase were: (i) theincreased contribution of Bouygues Offshore, purchased in July2002 (euro 83 million after the writedown of euro 21 million ofthe difference between purchase price and net equity); (ii) anincrease in activity levels in the Offshore construction area dueto the start-up of relevant contracts in Libya (laying of theGreenstream gasline and development of the Bahr Essalam field)and in Nigeria (development of the Erha and Yoho B fields); and(iii) higher profitability of some contracts in the Onshoreconstruction area. These positive factors were offset in part by:(i) the completion in 2002 of the Blue Stream contract; and (ii)lower results in the Offshore drilling area as a consequence ofwork performed on the Scarabeo 5 and 7 vessels and the limiteduse of the Scarabeo 6 vessel.

Engineering**activities recorded an operating incomeamounting to euro 7 million as compared to an operating loss ofeuro 4 million in 2002. The euro 11 million improvement wasrelated to higher activity levels. Including in operating incomethe results of activities operated in joint venture, which arerecorded as income from investments, operating income in 2003amounted to euro 34 million (euro 23 million in 2002).

 

***Other activities*** This area recorded operatinglosses of euro 244 million with a euro 49 million improvementcompared to 2003 (down 16.7%), related in particular to SyndialSpA (euro 42 million) due to: (i) lower asset writedowns (euro 38million); (ii) lower fixed costs (euro 14 million) related tostreamlining; (iii) higher margins on the sale of products (euro11 million). These positive factors were partly offset by: (i)the fact that in 2003 gains from the disposal of assets wererecorded of euro 13 million; (ii) higher expense (euro 7 million)related to an accident involving the Porto Torres dock.

In 2003, this segment recorded operating losses of euro 293million with a euro 79 million increase compared to 2002, up36.9%, due in particular to higher losses of Syndial SpA (euro102 million), related essentially to the sale of industrialservices at Brindisi, Ferrara, Priolo and Ottana and to theshutdown of the caprolactam plant at Porto Marghera and theacrylonitril plants at Assemini and Gela. Management expects thepositive effects of the divestments and closures to be recognizedin 2004 lower costs of staff and operating structure.

 

***Corporate and financial companies*** This segmentrecorded operating losses of euro 269 million, decreasing by euro12 million compared to 2003, due essentially to a betterperformance of Padana Assicurazioni SpA, whose effects wereoffset in part by a higher operating loss of Eni Corporate due tohigher R&D costs (euro 27 million) related in part to thebeginning of new projects (euro 8 million) offset only in part bylower IT costs (euro 12 million).

In 2003, this segment recorded operating losses of euro 281million, with a euro 85 million loss compared to increase 2002,up 43.4%, due essentially to the costs incurred on Eni SlurryTechnology project (EST project – see "Item 4 –Research and Development") and higher amortization anddepreciation charges related to the purchase of software licenses(overall euro 45 million) and the centralization of IT, telecom,personnel management and goods and service purchase activities,expenses that are only partially invoiced by Eni Corporate to Enibusiness segments.

 

> 
***e) Net Financial    Expense***

The table below sets forth a breakdown of Eni’s netfinancial expense for the periods indicated:

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Net financial expense                                            | (259   | )      |   | (270   | )      |   | (139 | )      |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|------|--------|
| Income on        operating financing receivables and tax credits | 122    |   |   | 116    |   |   | 108  |   |
| Foreign exchange difference, net                                 | (30    | )      |   |   |   |   | (2   | )      |
| Risk        reserve provision                                    |   |   |   |   |   |   | (62  | )      |
|                                                             |        |        |   |        |        |   |      |        |
|                                                             | (167   | )      |   | (154   | )      |   | (95  | )      |
|                                                             |        |        |   |        |        |   |      |        |

 

*2004 compared to 2003*Net financial expense (euro 95million) decreased by euro 59 million compared to 2003, down38.3%, due in particular to lower interest rates on Europeanmarkets (Euribor down an average of 0.2 percentage points) andlower average net borrowings16.These positive factors were offset in part by a provisionrecorded in risk reserves of euro 62 million, related to the saleto British Telecom Plc of the financing receivable from Albacom(Eni’s interest 35%) for euro 87 million. See "Item 4– Other Activities".

 

*2003 compared to 2002* Net financial expense (euro 154million) decreased by euro 13 million compared to 2002, down7.8%, due in particular to lower interest rates on Europeanmarkets (Euribor down one percentage point from 2003) and oninternational markets (Libor down 0.6 percentage points from2003) as well as the effect of exchange rates on the conversionof financial statements of subsidiaries denominated in currenciesother than the euro and lower negative exchange differences (euro30 million). These positive factors were offset in part by anincrease of approximately euro 3.8 billion in average netborrowings.

 

> 
***f) Net Income from Investments***

*2004 compared to 2003* Net income from investmentsamounted to euro 229 million (as compared to a net expense ofeuro 17 million in 2003) and represented the balance of income ofeuro 311 million and expense of euro 82 million. Income concernedessentially: (i) Eni’s share of income of subsidiariesaccounted using the equity method (euro 199 million), inparticular in the Gas & Power segment (euro 109 millionincluding Trans Austria Gasleitung GmbH of euro 32 million,Transmediterranean Pipelines Co Ltd of euro 19 million, AziendaEnergia e Servizi Torino SpA of euro 19 million and Trans EuropaNaturgas Pipeline GmbH of euro 11 million), Oilfield Services,Construction and Engineering segment (euro 50 million) andRefining & Marketing segment (euro 35 million); (ii)dividends received from subsidiaries and affiliates accounted forat cost (euro 72 million, including euro 48 million of which byNigeria LNG Ltd – Eni’s interest 10.4%); and (iii)gains on disposals (euro 36 million) concerning in particular thesale of a 2.33% interest in Nuovo Pignone Holding SpA (euro 23million) and a 50% interest in Finifast Srl in the Refining &Marketing segment (euro 3 million). Expenses included Eni’sshare of losses of subsidiaries and affiliates, relating inparticular to Albacom SpA (euro 41 million), affiliates in theExploration & Production segment (euro 27 million, includingDiscovery Producer Services Llc for euro 8 million, GeopromtransLlc for euro 5 million and Caspian Pipeline Consortium for euro 4million), Galp Energia SGPS SA (euro 5 million, affected by theamortization of the euro 107 million difference between purchasecost and net book value) and Unión Fenosa Gas SA (euro 3million, affected by the amortization of the difference betweenpurchase cost and net book value – euro 10 million).

The euro 246 million improvement in net income frominvestments (from a euro 17 million expense to a euro 229 millionincome) was due to: (i) lower losses recognized by Albacom(Eni’s interest 35%) of euro 87 million; (ii) improved netincome Blue Stream (Eni’s interest 50%), Galp Energia(Eni’s interest 33.34%) and Unión Fenosa Gas (Eni’sinterest 50%) for a total of euro 61 million; and (iii) higherdividends received (euro 50 million) in particular from NigeriaLNG.

 

*2003 compared to 2002* Net expense on investmentsamounted to euro 17 million (net income of euro 43 million in2002) and represented the balance of expense of euro 278 millionand income of euro 261 million. Expenses included Eni’sshare of losses of subsidiaries accounted for using the equitymethod and Eni’s share of impairment of the net book valueof subsidiaries accounted for at cost, relating in particular toAlbacom SpA (euro 128 million), Galp Energia SGPS SA (euro 29million resulting from the amortization of euro 107 million ofthe difference between purchase cost and net equity the effectsof which were offset in part by Eni's share of Galp results fromoperations), Blue Stream Pipeline Co BV (euro 25 million: Eniexpects to recover this loss in future years on the basis of theagreements entered into with the shippers, and other subsidiariesin the Exploration & Production (euro 61 million) andOilfield Services, Construction and Engineering (euro 4 million)segments. Income concerned essentially: (i) Eni’s share ofincome of subsidiaries accounted for using the equity method(euro 180 million), in particular in the Gas & Power (euro108 million), Oilfield Services, Construction and Engineering(euro 41 million) and Refining & Marketing segments (euro 28million); (ii) dividends received by subsidiaries accounted forat cost (euro 22 million); and (iii) gains from disposal (euro 39million) essentially related to the sale of Eni’s 20% stakein Inca International SpA and 50% in Epoxital Srl in the Otheractivities segment (overall euro 36 million).

 

> 
***g) Net Extraordinary Expense***

The table below sets forth Eni’s extraordinary income andextraordinary expense for the periods indicated. All line-itemsincluded in the following table are derived from consolidatedfinancial statements prepared in accordance with Italian GAAP.Under U.S. GAAP, these items would not appear as extraordinaryexpense.

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Gains on disposals                                                                   | 257    |   |   | 290    |   |   | 661    |   |
|--------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Other        extraordinary income                                                    | 112    |   |   | 273    |   |   | 44     |   |
|                                                                                 |        |        |   |        |        |   |        |        |
|      Extraordinary        income                            | 369    |   |   | 563    |   |   | 705    |   |
|                                                                                 |        |        |   |        |        |   |        |        |
| Restructuring        costs:                                                          |   |   |   |   |   |   |   |   |
|      Provisions for        risks and contingent liabilities | (157   | )      |   | (248   | )      |   | (601   | )      |
|      Writedowns        of fixed assets                      | (55    | )      |   | (66    | )      |   | (20    | )      |
|      Cost of redundancy        incentives                   | (114   | )      |   | (116   | )      |   | (54    | )      |
|                                                                                 |        |        |   |        |        |   |        |        |
|      Total        restructuring costs                       | (326   | )      |   | (430   | )      |   | (675   | )      |
| Other extraordinary expense                                                          | (72    | )      |   | (84    | )      |   | (86    | )      |
|                                                                                 |        |        |   |        |        |   |        |        |
|      Extraordinary        expense                           | (398   | )      |   | (514   | )      |   | (761   | )      |
|                                                                                 |        |        |   |        |        |   |        |        |
| Net extraordinary income (expense)                                                   | (29    | )      |   | 49     |   |   | (56    | )      |
|                                                                                 |        |        |   |        |        |   |        |        |

 

*2004 net extraordinary income* Gains on disposalsamounted to euro 661 million and concerned principally: (i) thesale of a 9.054% stake of the share capital of Snam Rete Gas SpAto Mediobanca SpA (euro 519 million); (ii) the divestment ofEni’s 100% interest in Agip do Brasil SA, a companyoperating in the area of distribution of refined products and LPG(euro 94 million); (iii) the divestment of the waste disposalbusiness in Ravenna (euro 27 million); and (iv) the divestment ofservice stations in the Refining & Marketing segment (euro 12million).

Charges and provisions for risks and contingent liabilities ofeuro 601 million concerned essentially: (i) environmental chargesof Syndial SpA (euro 162 million) and in the Refining &Marketing segment (euro 141 million); (ii) an increase in thereserve for risks and liabilities in the amount of euro 91million representing the estimated expense related to Eni’sparticipation in Oil Insurance Ltd, due to changes in theaccident rate over the past five years (strongly affected by theexceptionally high number of accidents that occurred in 2004: theIvan hurricane in the Gulf of Mexico, the fire at the El Temsahplatform in the Egyptian offshore) which will be paid in the nextfive years; (iii) charges for contingent liabilities related todivestments carried out in the Refining & Marketing segment(euro 64 million); (iv) an increase in the reserve for risks andliabilities in connection with a tax claim in Angola (euro 39million) and restructuring charges (euro 14 million) related tothe process of portfolio rationalization in the United Kingdom inthe Exploration & Production segment; and (v) restructuringcharges relating to decommissioned sites of Syndial SpA (euro 20million).

Redundancy incentives amounted to euro 54 million and relateto the following segments: Refining & Marketing (euro 20million), Corporate and financial companies (euro 11 million),Gas & Power (euro 10 million) and Petrochemicals (euro 6million).

Writedowns and losses on disposal for euro 20 millionconcerned essentially the writedown of the solvent manufactureplant in Fornovo, due to the reorganization of activities (euro18 million).

 

*2003 net extraordinary income*Net extraordinary incomeamounted to euro 49 million (net expense of euro 29 million in2002) and represented the balance of extraordinary income of euro563 million and extraordinary expense of euro 514 million. Incomeconcerned essentially: (i) gains on disposals from the sale ofservice stations and real estate in the Refining & Marketingsegment (euro 237 million) and the sale of the marine tankeractivities and real estate in the Gas & Power segment (euro52 million); (ii) the settlement paid by Edison SpA in relationwith the Enimont dispute (euro 200 million); and (iii) therelease of redundant risk reserves (euro 47 million, of whicheuro 38 million in the Other activities segment, concerningdisposals, restructuring and future expense). Expense concernedessentially: (i) provisions for risks and contingencies of euro248 million, in particular charges related to compliance withenvironmental laws and regulations in the Other activities (euro82 million) and Refining & Marketing segments (euro 51million) and costs expected to be incurred for thedecommissioning of inactive sites in the Other activities segment(euro 48 million); (ii) redundancy incentives of euro 116 millionin particular in the Petrochemicals, Refining & Marketing,Oilfield Services, Construction and Engineering and Gas &Power segments; and (iii) writedowns and losses (euro 66 million)related in particular to the expiry of certain highwayconcessions for service stations (euro 35 million) and thewritedown of the Baytown (USA) elastomer plant in thePetrochemical segment (euro 11 million).

See Note 27 to the Consolidated Financial Statements for adiscussion of the different criteria used under Italian GAAP andU.S. GAAP for determining extraordinary items.

 

> 
***h) Taxes***

Beginning in 2004 Eni is allowed to determine its income taxesfor Italian tax purposes on the basis of a consolidated incomebefore income taxes ("National Consolidated taxreturn") which includes income (or loss) before income taxesof Eni SpA and certain Italian subsidiaries as provided for byLegislative Decree No. 344 of December 2003 for the reform of thetax law. Under the new Italian tax law Eni SpA is able to offsetfully income earned by certain subsidiaries against lossesrecognized by other subsidiaries. Further benefits include, amongothers, the elimination of certain limits to the deductibility offinancial charges, the exemption from fiscal burden of dividendsreceived by certain subsidiaries and the ability to carry outcontributions in kind and divestment among involved subsidiariesunder a neutral fiscal regime.

 

*2004 compared to 2003*Income taxes (euro 4,653 million)increased by euro 1,412 million, up 43.6%, principally due tohigher income before taxes (euro 3,146 million) and the fact thatin 2003 deferred tax assets of euro 701 million were recognizedin connection with the revaluation of assets provided for by the2004 Italian budget law (euro 414 million) and the alignment ofthe tax value of Stoccaggi Gas Italia SpA’s assets to theirbook value, as well as the elimination of certain favorable taxprovisions. These negative factors were offset in part by therecognition of deferred tax assets concerning the temporarydifference between the tax value and the book value of: (i)natural gas inventory owned by Stoccaggi Gas Italia SpA (euro 259million)17; (ii) reserve for losscontingencies and asset writedown of Syndial (euro 135 million),as now this company is included in Eni’s NationalConsolidated tax return. In prior years deferred tax assets onthis reserve could not be recognized due to management’sassessment that there was no reasonable expectation of theirrealization through the generation of taxable income in theSyndial business; and (iii) exploration costs fully amortizedwhen incurred of Agip Caspian Sea BV due to the approval of thedevelopment plan of the Kashagan field by the Kazakh authorities(euro 88 million). Exemption of gains from the sale of interestsfrom corporate income tax and the one percentage point reductionin statutory tax rate on income before taxes (from 34 to 33%)contributed to the reduction of income taxes payable.

In 2004 the effective tax rate was 37.1% compared with astatutory tax rate of 38.5%, calculated by applying a 33% taxrate (Ires) to income before taxes and a 4.25% tax rate (Irap) tothe net value of production as provided for by Italian laws. The1.4 percentage points difference between the statutory and theeffective tax rate is due mainly to the following factors: (i) a4.1 percentage points reduction due to the effects of theapplication of favorable Italian tax laws; (ii) a one percentagepoints reduction due to the positive impact of the application ofthe National Consolidated tax return; and (iii) a one percentagepoints reduction due to a permanent timing difference concerningmainly the gain recognized on the sale of a 9.054% interest inSnam Rete Gas. These positive factors were partly offset by afive percentage points increase due to the higher rate of taxesapplicable to the income before income taxes of certain foreignsubsidiaries.

 

*2003 compared to 2002* Income taxes (euro 3,241 million)increased by euro 114 million compared to 2002, due to a euro1,046 million increase in income before taxes, to theexpiry/reduction of certain tax incentives and lower benefitsrelated to the release of the reserve for anticipatedamortization. These negative factors were offset in part by: (i)the effect of the revaluation of assets, provided for by theItalian budget law for 2004, which had a positive balance of euro414 million net of a tax charge of euro 412 million as a resultof the application of a special rate provided for by such budgetlaw instead of the statutory tax rate otherwise applicable; (ii)the recording of deferred tax assets related to the temporarydifference between the recorded value of assets of Stoccaggi GasItalia SpA and their value for tax purposes, following theadjustment made by the company in May 2003 (euro 287 million)18; (iii) the fact that in 2002 thereserve for deferred taxes was increased in relation to the 10percentage points increase in corporate taxes for oil companiesin the United Kingdom (from 30 to 40%) with a euro 215 millioneffect; and (iv) a 2 percentage points reduction in corporate tax(Irpeg) in Italy.

In 2003, the effective tax rate was 34.5% compared with astatutory tax rate of 39.9%, calculated by applying a 34% taxrate (Irpeg) to income before taxes and a 4.25% tax rate (Irap)to the net value of production as provided for by Italian laws.The 5.4 percentage points difference between the statutory andthe effective tax rate is due to the following factors: (i) a12.5 percentage points reduction due to the effects of theapplication of favorable tax laws (particularly, theaforementioned Italian budget law for 2004 and Law No. 448 ofDecember 28, 2001; and (ii) a 7.4 percentage points increase dueto the higher rate of taxes applicable to the income beforeincome taxes of certain foreign subsidiaries.

 

> 
***i) Minority Interest***

*2004 compared to 2003* Minority interest (euro 614million) concerned essentially Snam Rete Gas SpA (euro 489million) and Saipem SpA (euro 114 million). The euro 45 millionincrease compared to 2003 was due in particular to the increasein minority interest in Snam Rete Gas following to the sale of9.054% of its share capital.

 

*2003 compared to 2002* Minority interest (euro 569million) concerned in particular Snam Rete Gas SpA (euro 427million) and Saipem SpA (euro 112 million). The euro 60 milliondecline compared to 2002 was due essentially to the effect of thetender offer for Italgas shares (euro 124 million).

 

##### Table of Contents

**Liquidity and Capital Resources**

The table below sets forth the principal components of Eni'schange in cash and cash equivalent for the periods indicated.

 

 

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Net income before minority interest                                                                                                               | 5,222      |   |   | 6,154      |   |   | 7,888      |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------|--------|------------|--------|--------|------------|--------|
|      *Adjustments        to reconcile to cash generated from operating income        before changes in working capital:* |       |   |   |       |   |   |       |   |
|      •        Amortization and depreciation and other non-monetary        items                                     | 5,682      |   |   | 5,493      |   |   | 5,245      |   |
|      •        Net gains on disposals of assets                                                                      | (152       | )      |   | (35        | )      |   | (374       | )      |
|      • Dividends,        interest, extraordinary income (expense) and income taxes                                  | 3,305      |   |   | 3,268      |   |   | 4,935      |   |
|                                                                                                                                              |            |        |   |            |        |   |            |        |
| Net cash        generated from operating income before changes in working        capital                                                          | 14,057     |   |   | 14,880     |   |   | 17,694     |   |
| Changes in working capital related to operations                                                                                                  | (510       | )      |   | (465       | )      |   | (564       | )      |
|                                                                                                                                              |            |        |   |            |        |   |            |        |
| Dividends        received, taxes paid, interest and extraordinary        income/expense (paid) received during the year                           | (2,969     | )      |   | (3,588     | )      |   | (4,768     | )      |
|                                                                                                                                              |            |        |   |            |        |   |            |        |
|      **Net cash        provided by operating activities**                                                                | **10,578** |   |   | **10,827** |   |   | **12,362** |   |
| Capital        expenditure                                                                                                                        | (8,048     | )      |   | (8,802     | )      |   | (7,503     | )      |
| Investments (1)                                                                                                                                   | (1,315     | )      |   | (985       | )      |   | (316       | )      |
| Disposals                                                                                                                                         | 935        |   |   | 650        |   |   | 1,543      |   |
| Other cash flow related to capital expenditure,        investments and divestments                                                                | (101       | )      |   | 1,079      |   |   | 356        |   |
| Changes in        short and long-term financial debt                                                                                              | 3,736      |   |   | 1,629      |   |   | (3,619     | )      |
| Dividends paid and changes in minority interests        and reserves                                                                              | (3,846     | )      |   | (5,933     | )      |   | (3,165     | )      |
| Effect of        change in consolidation scope and exchange differences                                                                           | (64        | )      |   | (107       | )      |   | (17        | )      |
|                                                                                                                                              |            |        |   |            |        |   |            |        |
|      **Change in cash        and cash equivalent for the year**                                                          | **1,875**  |   |   | **(1,642** | **)**  |   | **(359**   | **)**  |
|                                                                                                                                              |            |        |   |            |        |   |            |        |
| Cash and        cash equivalent at the beginning of the year                                                                                      | 1,390      |   |   | 3,265      |   |   | 1,623      |   |
| Cash and cash equivalent at year end                                                                                                              | 3,265      |   |   | 1,623      |   |   | 1,264      |   |
|                                                                                                                                              |            |        |   |            |        |   |            |        |

----

|   |   |                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------|
| (1)    |   | This item        refers mainly to the acquisition of equity of other        companies. |

 

The table below sets forththe principal components of Eni's change in net borrowings(2)for the periods indicated.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Net cash generated from operating income before        changes in working capital                                       | 14,057     |   |   | 14,880     |   |   | 17,694     |   |
|-------------------------------------------------------------------------------------------------------------------------|------------|--------|--------|------------|--------|--------|------------|--------|
| Changes in        working capital related to operations                                                                 | (510       | )      |   | (465       | )      |   | (564       | )      |
| Dividends received, taxes paid, interest and        extraordinary income/expense (paid) received during the        year | (2,969     | )      |   | (3,588     | )      |   | (4,768     | )      |
|                                                                                                                    |            |        |   |            |        |   |            |        |
| Net cash        provided by operating activities                                                                        | 10,578     |   |   | 10,827     |   |   | 12,362     |   |
| Capital expenditure                                                                                                     | (8,048     | )      |   | (8,802     | )      |   | (7,503     | )      |
| Investments                                                                                                             | (1,315     | )      |   | (985       | )      |   | (316       | )      |
| Disposals                                                                                                               | 935        |   |   | 650        |   |   | 1,549      |   |
| Other cash        flow related to capital expenditure, investments and        divestments                               | (319       | )      |   | 1,110      |   |   | 82         |   |
| Net borrowings(2) of acquired        companies                                                                          | (267       | )      |   | (692       | )      |   |       |   |
| Net        borrowings(2) of divested companies                                                                          | 39         |   |   | 1          |   |   | 279        |   |
| Exchange differences on net borrowings and other        changes                                                         | 990        |   |   | 1,422      |   |   | 27         |   |
| Dividends        paid and changes in minority interests and reserves                                                    | (3,846     | )      |   | (5,933     | )      |   | (3,165     | )      |
|                                                                                                                    |            |        |   |            |        |   |            |        |
| **Change in net borrowings**(2)                                                                                         | **(1,253** | **)**  |   | **(2,402** | **)**  |   | **(3,315** | **)**  |
|                                                                                                                    |            |        |   |            |        |   |            |        |
| Net        borrowings(2) at the beginning of the year                                                                   | 9,888      |   |   | 11,141     |   |   | 13,543     |   |
| Net borrowings(2) at year end                                                                                           | 11,141     |   |   | 13,543     |   |   | 10,228     |   |
|                                                                                                                    |            |        |   |            |        |   |            |        |

----

|   |   |                                                                                                                                                                                                                                                                |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    |   | Net        borrowings is a non-GAAP financial measure. For a        discussion of the usefulness of net borrowings and its        reconciliation with the most directly comparable GAAP        financial measures see "Financial condition"        below. |

 

> 
***Analysis of Certain Components of Eni’s Change    in Net Borrowings:***

> 
***a) Cash generated from Operating Income before    Changes in Working Capital***

Cash generated from operating income before changes in workingcapital totalled euro 17,694 million, euro 14,880 million andeuro 14,057 million in 2004, 2003 and 2002, respectively.

In 2004, income before minority interests has been adjusted totake into account depreciation, amortization and other non-cashitems (euro 5,245 million). Adjustments concerned primarilydepreciation and amortization of tangible and intangible assets(euro 4,566 million) and writedowns of fixed assets andinvestments (euro 235 million).

In 2003, income before minority interests has been adjusted totake into account depreciation, amortization and other non-cashitems (euro 5,493 million). Adjustments concerned primarilydepreciation and amortization of tangible and intangible assets(euro 4,710 million) and writedowns of fixed assets andinvestments (euro 586 million).

 

> 
***b) Changes in Working Capital related to Operations***

Net working capital related to operations increased by euro564 million, euro 465 million and euro 510 million in 2004, 2003and 2002, respectively.

In 2004, the increase in net working capital (euro 564million) was mainly due to a euro 1,013 million increase in tradeaccounts receivable due essentially to: higher prices in dollarsof oil and refined products and higher volumes sold in the mainoperating segments, the effects of which were offset in part bythe depreciation of the dollar over the euro. The increaserelated in particular to the Gas & Power segment (euro 274million), the Petrochemical segment (euro 250 million), theExploration & Production segment (euro 214 million) and theRefining & Marketing segment (euro 117 million).

This factor was partly offset by an increase in the euro valueof trade accounts payable (euro 403 million).

In 2003, the increase in net working capital (euro 465million) was mainly due to a euro 682 million increase in tradeaccounts receivable due essentially to: (i) increased volumes ofnatural gas and oil products sold and the fact that the paymentdeadlines of certain relevant natural gas supply invoices(approximately euro 230 million) matured in the first days of2004; and (ii) higher activity levels in the Oilfield Services,Construction and Engineering segment. This factor was partlyoffset by an increase in the euro value of trade accountspayable.

 

> 
***c) Dividends, Interest, Taxes and Extraordinary    Expense***

Dividends, interest, taxes and extraordinary expense paid(which is net of amounts received) totalled euro 4,768 million,euro 3,588 million and euro 2,969 million in 2004, 2003 and 2002,respectively.

In 2004, dividends received, interest, extraordinary income(expense) and income taxes paid (euro 4,768 million) concernedprimarily the payment of income taxes.

In 2003, dividends received, interest, extraordinary income(expense) and income taxes paid (euro 3,588 million) concernedprimarily the payment of income taxes.

 

> 
***d) Capital Expenditure and Investing Activities***

Capital expenditure totalled euro 7,503 million, euro 8,802million and euro 8,048 million in 2004, 2003 and 2002,respectively. The euro 1,299 decrease from 2004 to 2003 was dueto a euro 769 million reduction, or 13.5%, in the Exploration andProduction business due principally to the impact of the 10%appreciation of the euro over the US dollar and a euro 314million decrease, or 17.8% in the Gas & Power business due tothe completion of the Greenstream underwater pipeline project.

The euro 754 million increase from 2003 to 2002 was due mainlyto a euro 445 million increase in the Gas & Power segment, toa euro 180 million increase in the Refining & Marketingsegment, and a euro 66 million increase in the Exploration &Production segment, partly offset by decreases in all other Enisegments.

Investments (including net borrowings acquired) totalled euro316 million, euro 1,677 million and euro 1,366 million in 2004,2003 and 2002, respectively. In 2003, investments concernedprimarily the purchase of 100% of Fortum Petroleum (euro 909million), of 50% of Unión Fenosa Gas (euro 442 million), as wellas the purchase of majority stakes in natural gas distributioncompanies in Hungary (euro 68 million).

 

> 
***e) Disposals***

Disposals (including net debt discharged) totalled euro 1,828million, euro 651 million and euro 974 million in 2004, 2003 and2002, respectively.

In 2004, disposals (euro 1,828 million, including netborrowing discharged of euro 279 million) concerned primarily:(i) the Gas & Power segment (euro 676 million), related tothe sale of shares representing 9.054% of the share capital ofSnam Rete Gas SpA to Mediobanca SpA (euro 650 million) and otherassets (euro 26 million); (ii) the Exploration & Productionsegment (euro 576 million) related in particular to interests inthe North Sea, Italy, Azerbaijan, Gabon and Mauritania within theprogram of rationalization of mineral assets (euro 548 million)and other minor assets (euro 28 million); (iii) the Refining& Marketing segment (euro 414 million) related to thedivestment of the 100% interest in Agip do Brasil SA, a companyactive in distribution and marketing of refined products and LPG(euro 365 million), the sale of service stations (euro 17million) and other minor assets (euro 32 million); (iv) the OtherActivities and Corporate and financial companies segments (euro106 million) related to the sale of the waste disposal businessin Ravenna (euro 49 million), the sale of a 2.33% stake in NuovoPignone Holding SpA (euro 28 million) and other minor assets(euro 29 million); and (v) the Petrochemical segment (euro 46million) related in particular to the sale of the elastomerBaytown plant (euro 30 million) and of other minor assets (euro16 million).

In 2003, disposals (euro 651 million) concerned essentially:(i) the Refining & Marketing segment (euro 293 million)essentially related to the sale of service stations in Italy(euro 216 million) and real estate and other minor assets (euro77 million); (ii) the Exploration & Production segment (euro140 million), mainly related to the sale of interests inhydrocarbon fields in the North Sea within the rationalizationprocess of its mineral right portfolio; (iii) the OtherActivities segment (euro 95 million) related in particular to thesale of 20% of Inca International SpA and 50% of Epoxital(overall euro 44 million), the liquidation of Conserv Inc (euro25 million) and the sale of real estate and minor assets (euro 26million); and (iv) the Gas & Power segment (euro 86 million)related to the sale of the marine tanker business (euro 52million) and of real estate and minor assets (euro 34 million).

 

> 
***f) Dividends paid and changes in minority interests    and reserves***

In 2004, dividends paid and changes in minority interest andreserves (euro 3,165 million) related mainly to the payment ofdividends for the fiscal year 2003 by Eni SpA for a total amountof euro 2,828 million (corresponding to euro 0.750 per share orUS dollar 4.56 per ADS converted at the Noon Buying Rate of 1euro = 1.217 US dollar as at the payment date of June 24, 2004)and the payment of dividends by Snam Rete Gas SpA (euro 195million) and Saipem SpA (euro 37 million) and the purchase of4.23 million Eni shares within the share buy-back program (euro70 million).

In 2003, dividends paid and changes in minority interest andreserves (euro 5,933 million) related to the tender offer onItalgas shares (euro 2,569 million), the payment of dividends forfiscal year 2002 by Eni SpA for a total amount of euro 2,833million (corresponding to euro 0.750 per share or US dollar 4,29per ADS converted at the Noon Buying Rate of 1 euro = 1.1429 USdollar as at the payment date of June 26, 2003), the purchase of23.94 million Eni shares within the share buy-back program (euro329 million) and the payment of dividends by Snam Rete Gas SpA(euro 126 million), Saipem SpA (euro 36 million) and otherconsolidated subsidiaries (euro 16 million).

##### Table of Contents

**Financial Condition**

Eni evaluates its financial condition by reference to"net borrowings", which is a non-GAAP financialmeasure. Eni calculates net borrowings as total finance debt(short-term and long-term debt) derived from its consolidatedfinancial statements prepared in accordance with Italian GAAPless: cash, cash equivalent and certain very liquid investmentsnot related to operations including among others, non-operatingfinancing receivables and securities not related to operations.Non operating financing receivables consists of amounts due toEni’s financing subsidiaries from banks and other financinginstitutions and amounts due to other subsidiaries from banks forinvesting purposes and deposits in escrow. Securities not relatedto operations consist primarily of government and corporatesecurities.

Management believes that net borrowings is a useful measure ofEni’s financial condition as it provides an indication ofthe soundness of Eni capital structure and of how Eni’soperating assets are financed. In addition, management utilizesthe ratio of net borrowings to total shareholders’ equityincluding minority interest (leverage) to evaluate Eni’sfinancial structure, to analyze whether the ratio between financedebt and shareholders’ equity is well balanced according toindustry standards and to track management’s short-term andmedium-term targets. Management constantly monitors trends in netborrowings and trends in leverage in order to optimize the use ofinternally-generated funds vs. funds from third parties. Themeasure calculated in accordance with Italian GAAP that is mostdirectly comparable to net borrowings is total debt (short-termand long-term debt). The measure calculated in accordance withItalian GAAP that is most directly comparable to leverage is theratio of finance debt to shareholders’ equity (includingminority interest). Eni’s presentation and calculation ofnet borrowings and leverage may not be comparable to that ofother companies.

The tables below set forth the calculations of net borrowingsand leverage for the periods indicated and their reconciliationto the most directly comparable GAAP measure.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2003** |   | **2004** |
|--------|----------|--------|----------|
|   |          |   |          |

|   | **Short-term** |   | **Long-term** |   | **Total** |   | **Short-term** |   | **Long-term** |   | **Total** |
|--------|----------------|--------|---------------|--------|-----------|--------|----------------|--------|---------------|--------|-----------|
|   |                |   |               |   |           |   |                |   |               |   |           |

|   | **(million        euro)** |
|--------|---------------------------|

| **Finance debt (short-term and long-term debt)** | **7,918** |   |   | **8,336** |   |   | **16,254** |   |   | **5,051** |   |   | **7,674** |   |   | **12,725** |   |
|--------------------------------------------------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Cash and        cash equivalent                  | (1,623    | )      |   |      |   |   | (1,623     | )      |   | (1,264    | )      |   |      |   |   | (1,264     | )      |
| Securities not related to operations             | (781      | )      |   | (2        | )      |   | (783       | )      |   | (796      | )      |   | (1        | )      |   | (797       | )      |
| Non        operating financing receivables       |      |   |   | (240      | )      |   | (240       | )      |   |      |   |   | (240      | )      |   | (240       | )      |
| Other, net                                       | (65       | )      |   |      |   |   | (65        | )      |   | (196      | )      |   |      |   |   | (196       | )      |
|                                             |           |        |   |           |        |   |            |        |   |           |        |   |           |        |   |            |        |
| **Net        Borrowings**                        | **5,449** |   |   | **8,094** |   |   | **13,543** |   |   | **2,795** |   |   | **7,433** |   |   | **10,228** |   |
|                                             |           |        |   |           |        |   |            |        |   |           |        |   |           |        |   |            |        |

 

|   | **As of December 31,** |
|--------|------------------------|
|   |                        |

|   | **2003** |   | **2004** |
|--------|----------|--------|----------|
|   |          |   |          |

| Shareholders’ equity including minority        interests as per Eni’s consolidated financial        statements prepared in accordance with Italian GAAP                    | **28,318** |   |   | **32,446** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------|--------|------------|--------|
| *Ratio        of finance debt to total shareholders’ equity        including minority interests*                                                                                | *0.57*     |   |   | *0.39*     |   |
| *Less: ratio of cash, cash equivalent and        certain liquid investments not related to operations to        total shareholders’ equity including minority        interests* | *(0.09*    | *)*    |   | *(0.08*    | *)*    |
| *Ratio        of net borrowing to total shareholders’ equity        including minority interests (leverage)*                                                                    | *0.48*     |   |   | *0.31*     |   |
|                                                                                                                                                                                 |            |        |   |            |        |

In 2004, net borrowings amounted to euro 10,228 million, aeuro 3,315 million decrease over December 31, 2003. Debts andbonds amounted to euro 12,725 million, of which 5,051 wereshort-term (including the portion of long-term debt due withintwelve months for euro 936 million) and 7,674 were medium andlong-term. In particular bonds amounted to euro 5,331 million(euro 4,793 million at December 31, 2003). Short-term andlong-term debt of euro 12,725 million was denominated 63% ineuro, 24% in US dollars, 10% in pound sterling and 3% in othercurrencies.

In 2003, net borrowings amounted to euro 13,543 million, aeuro 2,402 million increase over December 31, 2002. Debts andbonds amounted to euro 16,254 million, of which 7,918 wereshort-term (including the portion of long-term debt due withintwelve months for euro 490 million) and 8,336 were medium andlong-term. In particular bonds amounted to euro 4,793 million(euro 3,518 million at December 31, 2002). Short-term andlong-term debt of euro 16,254 million was denominated 60% ineuro, 32% in US dollars, 4% in pound sterling and 4% in othercurrencies.

 

> 
***Short-term debt***

In 2004, short-term debt of euro 4,115 million (excluding theportion of long-term debt due within twelve months) decreased byeuro 3,313 million over 2003. The surplus of cash provided byoperating activities less financial requirements for capitalexpenditure and dividend payment was employed to reduceshort-term debt. The average interest rate of Eni’sshort-term debt was 2.13% and 2.49% for the years ended December31, 2003 and 2004, respectively.

On December 31, 2004 Eni maintained committed and uncommittedunused short-term lines of credit with various domestic andforeign banks for euro 5,304 and 7,771 million, respectively(euro 4,647 million and euro 4,799 million, respectively, atDecember 31, 2003). These agreements provide for interest chargesbased on prevailing market conditions. Commission fees on unusedlines of credit are not significant.

 

> 
***Long-term debt***

In 2004, long-term debt of euro 8,610 million decreased byeuro 216 million over 2003.

Eni entered into financing arrangements with the EuropeanInvestment Bank, relating to bank debt that requires maintenanceof certain financial ratios generally based on Eni’sconsolidated financial statements or of a rating not inferior toA - (S&P) and A3 (Moodys). At December 31, 2003 and 2004, theamount of short and long-term debt subject to restrictivecovenants was euro 865 million and euro 1,104 million,respectively (of which, euro 300 million relating to rating).Furthermore, Saipem SpA entered into financing arrangements withbanks for euro 300 million that require maintenance of certainfinancial ratios generally based on Saipem’s consolidatedfinancial statements. As of December 31, 2004 Eni and Saipem werein compliance with the covenants contained in the financingarrangements.

Ordinary bonds of euro 5,331 million concern primarily notesissued by Eni in its Euro Medium Term Notes program for a totalof euro 4,296 million and other ordinary bonds for a total ofeuro 1,035 million.

The weighted average interest rate on Eni’s long-termdebt (including current maturities) at December 31, 2004 wasapproximately 4.21% (4.13% at December 31, 2003).

 

> 
***Capital Expenditure by Segment***

The table below sets forth a breakdown, by segment, of capitalexpenditure.

|   | **Year ended December 31,** |
|--------|-----------------------------|
|   |                             |

|   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **(million        euro)** |
|--------|---------------------------|

| Exploration & Production                   | 5,615 |   | 5,681 |   | 4,912 |
|------------------------------------------------|-------|--------|-------|--------|-------|
| Gas &        Power                         | 1,315 |   | 1,760 |   | 1,446 |
| Refining & Marketing                       | 550   |   | 730   |   | 669   |
| Petrochemicals                                 | 145   |   | 141   |   | 99    |
| Oilfield Services Construction and Engineering | 233   |   | 278   |   | 209   |
| Other        activities                        | 119   |   | 70    |   | 48    |
| Corporate and financial companies              | 71    |   | 142   |   | 120   |
|                                           |       |   |       |   |       |
| Total                                          | 8,048 |   | 8,802 |   | 7,503 |
|                                           |       |   |       |   |       |

 

In 2004, capital expenditure in the Exploration &Production segment amounted to euro 4,912 million, decreasing byeuro 769 million over 2003, down 13.5%.

Capital expenditure of the Exploration & Productionsegment concerned primarily development expenditure (euro 4,369million, euro 4,969 million in 2003) mainly directed outsideItaly (euro 3,991 million): in particular in Libya (the Wafa andBahr Essalam project), Iran (the South Pars project, phases 4 and5), Angola (fields in Block 15), Kazakhstan, Egypt, Nigeria andNorway.

Development expenditure in Italy (euro 378 million) concernedin particular the continuation of the drilling program and workfor plant and infrastructure in Val d’Agri and sidetrack andinfilling activities in mature areas. Exploration expenditureamounted to euro 499 million (euro 635 million in 2003), of whichabout 90% was directed outside Italy. Outside Italy explorationconcerned in particular the following countries: Egypt, theUnited States, Nigeria, Norway, Indonesia and Kazakhstan. InItaly essentially the onshore of Sicily and Central Italy.Further euro 17 million (Eni’s share) were expensed byaffiliates for exploration projects in Saudi Arabia, Russia andSpain. Expenditure for capital goods amounted to euro 44 million.

In 2003, capital expenditure in the Exploration &Production segment amounted to euro 5,681 million, increasing byeuro 66 million over 2002, up 1.2%.

Expenditure for developmentand capital goods totalled euro 5,015 million of which 91% wasoutside Italy. Development expenditure outside Italy concernedfields in Libya, Iran, Angola, Nigeria, Egypt and Kazakhstan.Development expenditure in Italy referred in particular to thecontinuation of construction of plant and infrastructure in theVal d’Agri.

Exploration expenditure amounted to euro 635 million, of which91% outside Italy. Outside Italy exploration concerned mainlyKazakhstan, Egypt, Norway, the United States, Nigeria and Angola;in Italy mainly the offshore of the Ionian and Adriatic Sea, thedeep waters of the Sicily Channel and onshore areas inCentral-Southern Italy and Sicily.

In 2004, capital expenditure in the Gas & Power segmenttotalled euro 1,446 million, decreasing by euro 314 million over2003, down 17.8%, and related mainly to: (i) development andmaintenance of Eni’s natural gas transportation network inItaly (euro 553 million); (ii) the continuation of theconstruction of combined cycle power plants (euro 451 million) inparticular at Brindisi, Ferrara, Ferrera Erbognone, Mantova andRavenna; (iii) development and maintenance of Eni’s naturalgas distribution network in Italy (euro 168 million); and (iv)the completion of the Greenstream gasline (euro 159 million) thatstarted operations in October.

In 2003, capital expenditure in the Gas & Power segmenttotalled euro 1,760 million, increasing by euro 445 million over2002, up 33.8%, and related mainly to: (i) the program forbuilding combined cycle power stations (euro 542 million), inparticular the Ferrera Erbognone, Brindisi and Mantova powerstations; (ii) the construction of the Greenstream pipeline (euro460 million) for the transmission of natural gas from Libyanfields to Sicily; (iii) development and maintenance of Eni’sprimary gas transmission network in Italy (euro 434 million); and(iv) extension and maintenance of the secondary natural gastransmission network in Italy (euro 292 million).

In 2004, capital expenditure in the Refining & Marketingsegment amounted to euro 669 million, decreasing by euro 61million compared to 2003, down 8.4%, and concerned essentially:(i) refining and logistics (euro 420 million), in particular theconstruction of the tar gasification plant at the Sannazzarorefinery, efficiency improvement actions and adjustment ofautomotive fuel characteristics to new European specifications;(ii) the upgrade of the refined product distribution network inItaly (euro 164 million); and (iii) the upgrade of the refinedproduct distribution network and the purchase of service stationsin the rest of Europe (euro 69 million, of which 20 millionrelated to construction of new stations and purchases inparticular in Germany, Spain and France).

In 2003, capital expenditure in the Refining & Marketingsegment amounted to euro 730 million, increasing by euro 180million over 2002, up 32.7%, and concerned: (i) refining andlogistics (euro 291 million) aimed in particular at maintainingplant efficiency and measures taken to comply with health, safetyand environmental standards and regulations; (ii) distribution ofrefined products in the Italian network (euro 177 million) inparticular for the restructuring, upgrade, construction andpurchase of new service stations (euro 95 million) and measurestaken to comply with safety, health and environmental standardsand regulations (euro 15 million); (iii) activities outside Italy(euro 248 million) concerning primarily the purchase of servicestations in Germany, Spain and France; and (iv) LPG (euro 11million) and IT (euro 3 million). Total expenditure on compliancewith regulations on health, safety and the environment amountedto euro 79 million (11% of the total).

In 2004, capital expenditure in the Petrochemicals segmentamounted to euro 99 million, decreasing by euro 42 million over2003, down 29.8%, and concerned in particular actions forimproving the efficiency of plants and streamlining (euro 58million) and actions for environmental protection and forcomplying with safety and environmental regulations (for a totalof euro 41 million).

In 2003, capital expenditure in the Petrochemicals segmentamounted to euro 141 million, with a decrease of euro 4 millionover 2002, down 2.8% and concerned in particular actions forcomplying with safety and environmental regulations (euro 65million) and actions for improving the efficiency of the Prioloand Porto Marghera crackers (euro 27 million).

In 2004, capital expenditure in the Oilfield Services,Construction and Engineering segment amounted to euro 209million, decreasing by euro 69 million over 2003, down 24.8%, andconcerned mainly: (i) the construction and upgrade of logisticalsupport means in Kazakhstan, Angola and Nigeria; (ii) thecompletion of interventions on the semi-submersible platformsScarabeo 3 and Scarabeo 4, on the Perro Negro 3 jack-up and onthe Castoro 8 pipelaying vessel; and (iii) the purchase of plantand equipment required for the Sakhalin project in Russia.

In 2003, capital expenditure in the Oilfield Services,Construction and Engineering segment amounted to euro 278million, increasing by euro 45 million over 2002, up 19.3%.Capital expenditure in oilfield services and construction (euro261 million) concerned: (i) the completion of the Mystras FPSOthat will operate on the Okono/Opkoho fields in Nigeria; (ii) thecompletion of the conversion of Maxita into the new Saipem 3000field development ship; and (iii) the completion of the upgradeof the semisubmersible drilling platform Scarabeo 7 in order toadjust it to a new contract.

 

##### Table of Contents

**Recent Developments**

Eni has previously published its first quarter results for2005 which has been prepared in accordance with the evaluationand measurement criteria contained in the International FinancialReporting Standards (IFRS) issued by the International AccountingStandard Board (IASB) and adopted by the European Commissionaccording to the procedure set forth in Article 6 of the EuropeanRegulation (CE) No. 1606/2002 of the European Parliament andEuropean Council of July 19, 2002 (see below). In order to allowfor comparison, Eni restated its 2004 first quarter results asrequired by IFRS and the Italian body which supervises Italianlisted companies (CONSOB).

In the first quarter of 2005 oil prices continued their upwardtrends with the spot price for Brent, a benchmark crude oil,above the level of 40 US dollar/barrel due to strong demand forrefined products in the United States, China and India, reducedspare capacity on part of OPEC and geopolitical developments.Refining margins almost doubled with respect to the first quarter2004, on average the euro appreciated against the dollar.

In the April-May 2005 two-month period the spot price of Brentcrude averaged around 50 US dollar per barrel backed by strongdemand and geopolitical developments. Refining margins rosesharply due to strong demand for gasoline. The euro retreatedsomewhat from the highs recorded in December 2004 and January2005; management expects trends in exchange rates to adverselyimpact Eni's results of operations in 2005.

The table below sets forth certain indicators of some of theseexternal factors for the periods indicated:

|   | **Three months        ended March 31,** |   | **Two months        April-May,** |
|--------|-----------------------------------------|--------|----------------------------------|
|   |                                         |   |                                  |

|   | **2004** |   | **2005** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |

| Average price of Brent dated crude oil(1)             | 31.95 |   | 47.50 |   | 35.53 |   | 50.19 |
|-------------------------------------------------------|-------|--------|-------|--------|-------|--------|-------|
| Average        price in euro of Brent dated crude oil | 25.56 |   | 36.23 |   | 29.63 |   | 39.15 |
| Average EUR/USD Exchange rate(2)                      | 1.250 |   | 1.311 |   | 1.199 |   | 1.282 |
| Average        European refining margin(3)            | 2.21  |   | 4.26  |   | 5.59  |   | 6.92  |
| EURIBOR – three-month euro rate %                | 2.1   |   | 2.1   |   | 2.1   |   | 2.1   |
|                                                  |       |   |       |   |       |   |       |

----

|   |   |                                                                                                                                                 |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | In US dollars        per barrel. Source: Platt’s Oilgram.                                                                                       |
| (2)    |   | Source:        European Central Bank.                                                                                                                |
| (3)    |   | In US dollars        per barrel. FOB Mediterranean Brent dated crude oil.        Source: Eni calculations based on Platt’s Oilgram        data. |

 

The discussion that follows compares Eni’s results ofoperations for the first quarter of 2005 prepared in accordancewith the evaluation and measurement criteria of IFRS toEni’s results of operations for the first quarter of 2004,originally prepared in accordance with Italian GAAP, which wererestated in accordance with IFRS for comparability.

Eni’s net income for the first quarter 2005 increased by22.2% over the first quarter of 2004 due principally to a 39.2%increase in operating income, partly offset by higher incometaxes. The increase in Eni's operating income was recorded inparticular in the following segments:

| • |   | Exploration & Production        (up 55.3%) related essentially to higher realizations and        higher production volumes sold, partly offset by the        depreciation of the dollar over the euro;                                                                                                                                                                                               |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Petrochemicals related        essentially to higher margins of products and improved        efficiency of operations;                                                                                                                                                                                                                                                                                    |
| • |   | Refining & Marketing (up        115%) related essentially to higher profit on stock (see        below), in connection with higher prices of oil and        refined products, and higher refining margins, whose        effects were offset in part by lower processing at the        Gela refinery following the damage caused by a sea storm        to the docking infrastructure in December 2004. |

Eni’s net sales from operations (revenues) for the firstquarter of 2005 increased by 20.1% over the first quarter of 2004principally due to higher volumes sold in Eni’s mainoperating segments, the effects of which were partially offset bythe negative impact of the 4.9% depreciation of the dollar overthe euro.

The depreciation of the euro over other currencies, inparticular the US dollar (as of March 31, 2005 the EUR/USDexchange rate was down 4.8% over December 31, 2004) determinedwith respect to 2004 year-end an increase in the book value ofnet capital employed, of net equity and of net borrowings.

Net borrowings as of March 31, 2005 declined by 26.8% comparedto December 31, 2004, due to cash flow generated by operatingactivities, influenced also by seasonality factors, the effectsof which were offset in part by financial requirements forcapital expenditure and investment and the impact of theconversion of financial statements of subsidiaries denominated incurrencies other than the euro.

In the first quarter of 2005 hydrocarbon production increasedby 4.6% as compared to the first quarter of 2004.

Natural gas sales (included gas consumed by Eni and Eni'sshare of sales of its affiliates) increased by 3.1% as comparedto the first quarter of 2004. Electricity production soldincreased by 98% as compared to the first quarter of 2004.

The most relevant recent developments occurring after December31, 2004 are the following:

| • |   | starting in 2005 Eni, whose        shares are listed on a regulated market of a Member State        of the European Union, is required to prepare its interim        and annual consolidated financial statements in        accordance with International Financial Reporting        Standards (IFRS). For a qualitative discussion of the        main impacts of IFRS on Eni’s financial statements        see the paragraph "Qualitative discussion of the        impact of IFRS on Eni’s financial statements"        below;                                                                                                                                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | on March 31, 2005 the        Company exercised its pre-emptive right, along with the        other partners, to purchase in proportion to their        respective work interest the 16.67% share of North        Caspian Sea PSA ("PSA") previously held by        British Gas. Following these transactions, 50% of this        acquired interest was sold to the Kazakh national company        Kazmunagaz. Similarly, the other partners in PSA sold 50%        of their acquired portion of the 16.67% so that on        completion Kazmunagaz held a 8.335% interest in PSA.        Eni’s interest increased by 1.85% from 16.67% to        18.52% at a cost of US dollar 200 million; |
| • |   | in April 2005 Eni concluded        the sale procedure of a 90% interest in Italiana Petroli        (IP) with a call-and-put option for the remaining 10% to        be exercised in the second half of 2010. The transaction        is subject to the approval of the Italian Antitrust        Authority and will entail cash proceeds of euro 186        million for 100% of the shares when finalized. In 2004,        IP sold 2.6 billion liters of fuels with an average        throughput of 896,000 liters; at year end IP’s        network included 2,915 service stations, of these        approximately 2,700 were leased;                                                                   |
| • |   | Eni Shareholders’        Meeting of May 27, 2005 resolved to extend the Eni share        buy-back program for a further 18 month period starting        on May 27, 2005. The Eni share buy-back program initiated        in 2000, provides for the purchase of a maximum of 400        million Eni shares for an amount not higher than euro 5.4        billion.                                                                                                                                                                                                                                                                                                                                     |

 

##### Table of Contents

**Management Expectations of Operations**

The following are the forecasts for Eni’s key productionand sales metrics in 2005:

| • |   | in 2005 daily production of        hydrocarbons is forecasted to grow as compared to 2004 in        line with the planned compound average growth rate for        the 2004-2008 period (over 5%) which takes in account the        effects of the decline of mature fields. Increases will        be achieved outside Italy (in particular in Libya,        Angola, Iran, Algeria, Kazakhstan and Egypt) due to the        reaching of full production of fields started up in late        2004 and start-ups planned for 2005;                                                                                                                                                   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | volumes of natural gas sold        are expected to increase by 3% as compared to 2004 (84.45        billion cubic meters in 200419),        due to higher sales expected in markets in the rest of        Europe (up 10% in particular in Spain, Turkey, Germany        and France) on the basis of contracts already signed. In        Italy management expects a decline in natural gas sales        due to competitive pressure, the effect of which is        expected to be partly offset by an increase in sales to        Eni’s electricity generation business;                                                                                                      |
| • |   | electricity production sold        is expected to increase by about 50% as compared to 2004        (13.85 terawatthour in 2004) due to the initiation of new        generation capacity (about 3 gigawatt) at the Brindisi        and Mantova sites and the full commercial activity of the        units installed in 2004 at the Ravenna, Ferrera Erbognone        and Mantova plants. Growing production volumes of        electricity are expected to be absorbed by increasing        demand for electricity in Italy. At year-end total        installed generation capacity is expected to be        approximately 4.3 gigawatt (3.3 gigawatt at December 31,        2004); |
| • |   | refinery processing intake        on Eni’s account is expected to decline by        approximately 2% as compared to 2004 (37.68 million        tonnes in 2004) due to the impact on the first months of        2005 of lower processing at the Gela refinery following        the damage caused by a sea storm to the docking        infrastructure in December 2004. The capacity utilization        rate of Eni’s plants is expected to remain at 100%        (the same rate of 2004);                                                                                                                                                                                |
| • |   | sales of refined products on        the Agip branded network in Italy are expected to remain        stable as compared to 2004, despite a decline in domestic        consumption. In the rest of Europe the upward trend of        sales is expected to continue also due to planned        acquisitions.                                                                                                                                                                                                                                                                                                                                                                         |

 

In 2005 capital expenditure is expected to amount toapproximately euro 7.5 billion; about 96% of capital expenditurewill be made in the Exploration & Production, Gas & Powerand Refining & Marketing segments. The major projectsconcerned are: (i) in the Exploration & Production segment,the development of fields in Libya, Italy, Angola, Kazakhstan,Egypt and Nigeria, as well as exploration; (ii) in the Gas &Power segment, upgrade and maintenance of Eni’s natural gastransmission and distribution network in Italy, as well ascontinuation of the plan of power station construction; and (iii)in the Refining & Marketing segment, the completion of thetar gasification plant at the Sannazzaro refinery, the increasein efficiency and product quality and the upgrade of the fueldistribution network in Italy and the rest of Europe.

Overall in the next four year period management plans toinvest approximately euro 26.9 billion in new capitalexpenditure; over 90% of this new capital expenditure is plannedto be made in the Exploration & Production, Gas & Powerand Refining & Marketing segments. Key planned project are asfollows: (i) the development of proved reserves of hydrocarbonsin Angola, Kazakhstan, Italy, Nigeria, Egypt and Libya; (ii)exploration in selected areas; (iii) the upgrading of the Italiannatural gas transport and distribution networks; (iv) thecompletion of the construction of new electricity generationcapacity in Eni’s industrial sites of Brindisi, Mantova andFerrara; (v) interventions aimed at increasing the efficiency andthe flexibility of Eni refining system; and (vi) the upgradingand development of Eni Italian and European networks of servicestations for the marketing of petroleum products.

Management plans to cover financial requirements for capitalexpenditure and dividends by means of net cash provided byoperating activities. Management expects crude oil prices toremain high and volatile in the medium term. Accordinglymanagement has modified the methodology to assess financialsustainability; instead of evaluating cash flows at a given oilprice scenario, the company calculates the cash neutrality, i.e.the breakeven oil price at which net cash provided by operatingactivities equals the above mentioned financial requirements. Thecash neutrality is reached with a Brent crude oil of US dollar 20per barrel.

In order to evaluate the profitability of individual capitalexpenditure projects, management uses a long-term reference oilprice of US dollar 22 per barrel (in 2009 real terms). Theinternal rate of return of each project is compared to therelevant hurdle rate, differentiated by business segment andcountry of operation. These hurdle rates are calculated takinginto account Eni's average cost of capital, the country riskpremium and the business premium.

Management expects to maintain a leverage (ratio of netborrowings to shareholders’ equity) below the 0.40 ceilingfrom 2007 onwards. See the paragraph "Financialcondition" above, for a discussion of the importance ofleverage to Eni’s management.

In the next four-year period management plans to pay dividendsin line with dividends that will be paid in June 2005 for fiscalyear 2004 (0.90 euro per share corresponding to approximatelyeuro 3.4 billion). Beginning in 2005 management also plans tostart paying the dividend on a six-month basis. While thiscircumstance will not alter the overall amount of dividends thatwill be paid in future years, in 2005 it will result in apermanent increase in Eni’s net borrowings. See "Item 8– Dividend Policy" for more details on Eni’sdividend policy and the uncertainties and constraints to which itis subject.

Eni is experiencing some pricing pressure in its core naturalgas business in Italy as a consequence of increasing competitionand the need to sell volumes of natural gas purchased undertake-or-pay contracts to certain Italian natural gas operators inorder to comply with the mandatory ceilings provided for by theItalian regulatory system (see "Item 4 – Regulation ofthe Italian Natural Gas Market" and "Item 3 – RiskFactors"). Management expects Eni’s operating profit inyear 2005 to be affected by this trend in its natural gasbusiness. However, management expects that this negative factorwill be offset almost completely by the expected growth innatural gas sales in European markets and in electricityproduction sold, the expected benefits due to the integration ofEni marketing policy in natural gas and electricity generationbusinesses, cost savings deriving from planned efficiencyimprovement actions and higher tariffs in natural gas transportoutside Italy.

In the medium term, taking into account the mandatory ceilingsprovided for by the Italian regulatory system for natural gasoperators and the possibility of further regulatory constraints,developments in the supply and demand of natural gas in Italycould pose some risks to Eni's ability to fulfil its contractualobligations under take-or-pay contracts for the purchase ofnatural gas. Management will seek to manage Eni's growingavailability of natural gas under take-or-pay contracts whichcannot be sold in Italy by: (i) increasing sales in Europeannatural gas markets where Eni’s presence is established,thanks to supply contracts already signed and planned actions;(ii) entering new markets; and (iii) exploiting the growingimportance of natural gas spot markets (the so called continentalhubs for natural gas).

For a discussion of certain risks relating the impact of theevolution of Italian regulation of the natural gas sector onEni’s take-or-pay contracts see "Item 3 – RiskFactors – Liberalization of the Italian Natural GasMarket".

The expectations described above are subject to risks,uncertainties and assumptions associated with the oil and gasindustry, and economic, monetary and political developments inItaly and globally that are difficult to predict. There are anumber of factors that could cause actual results anddevelopments to differ materially, including, but not limited to,crude oil and natural gas prices; demand for oil and gas in Italyand other markets; developments in electricity generation; pricefluctuations; drilling and production results; refining marginsand marketing margins; currency exchange rates; general economicconditions; political and economic policies and climates incountries and regions where Eni operates; regulatorydevelopments; the risk of doing business in developing countries;governmental approvals; global political events and actions,including war, terrorism and sanctions; project delays; materialdifferences from reserves estimates; inability to find anddevelop reserves; technological development; technicaldifficulties; market competition; the actions of field partners,including the inability of joint venture partners to fund theirshare of operating or developments activities; industrial actionsby workers; environmental risks, including adverse weather andnatural disasters; and other changes to business conditions.

 

> 
***Off-Balance Sheet Arrangements***

Eni has entered into certain off-balance sheet arrangements,including derivative financial instruments, guarantees and othercommitments, as described in Note 23 to the ConsolidatedFinancial Statements. Eni's principal financial obligations,including commitments under take-or-pay or ship-or-pay clauses,are described under "Contractual Obligations" below.See the Glossary for a definition of take-or-pay or ship-or-payclauses.

Off-balance sheet arrangements comprise those arrangementsthat may potentially impact Eni’s liquidity, capitalresources and results of operations, even though sucharrangements are not recorded as liabilities under generallyaccepted accounting principles. Although off-balance sheetarrangements serve a variety of Eni’s business purposes, Eniis not dependent on these arrangements to maintain its liquidityand capital resources; nor is management aware of anycircumstances that are reasonably likely to cause the off-balancesheet arrangements to have a material adverse effect on thecompany’s financial condition, results of operations,liquidity or capital resources.

Eni has provided various forms of guarantees on behalf ofunconsolidated subsidiaries and affiliated companies, mainlyrelating to guarantees for loans, lines of credit and performanceunder contracts. In addition, Eni has provided guarantees on thebehalf of consolidated companies, primarily relating toperformance under contracts. These arrangements are described inNote 23 to the Consolidated Financial Statements.

 

> 
***Contractual Obligations***

The following table summarizes the principal financialobligations which are described in Item 18 – FinancialStatements – Note 11 and 23.

|   | **Total** |   | **2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **Thereafter** |
|--------|-----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------------|
|   |           |   |          |   |          |   |          |   |          |   |          |   |                |

|   | **(million        euro)** |
|--------|---------------------------|

| Long-term Debt                                                                                                                                                                                             | 8,610      |   | 936       |   | 1,495     |   | 1,122     |   | 314     |   | 966     |   | 3,777     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------|-----------|--------|-----------|--------|-----------|--------|---------|--------|---------|--------|-----------|
| Short-term        Debt                                                                                                                                                                                     | 4,115      |   | 4,115     |   |      |   |      |   |    |   |    |   |      |
| **Sub total**                                                                                                                                                                                              | **12,725** |   | **5,051** |   | **1,495** |   | **1,122** |   | **314** |   | **966** |   | **3,777** |
| Operating        leases relating to real estate rental in Italy                                                                                                                                            | 713        |   | 68        |   | 74        |   | 76        |   | 74      |   | 63      |   | 358       |
| Other Commitments (off balance sheet):                                                                                                                                                                     |       |   |      |   |      |   |      |   |    |   |    |   |      |
|      Take-or-pay                                                                                                                                                                  | 94,083     |   | 7,170     |   | 6,313     |   | 6,280     |   | 6,146   |   | 5,914   |   | 62,260    |
|      Ship-or-pay                                                                                                                                                                  | 9,370      |   | 500       |   | 480       |   | 500       |   | 510     |   | 520     |   | 6,860     |
|      Others        (1)                                                                                                                                                            | 479        |   | 226       |   | 43        |   | 43        |   | 13      |   | 13      |   | 141       |
|                                                                                                                                                                                                       |            |   |           |   |           |   |           |   |         |   |         |   |           |
| *     (1) Purchase        of Government Bond from employees                    (in        balance sheet as per U.S. GAAP)* | *183*      |   | *183*     |   |      |   |      |   |    |   |    |   |      |
| *          -        Memorandum of intent relating Marghera*                                                                                              | *90*       |   | *30*      |   | *30*      |   | *30*      |   |    |   |    |   |      |
| *          -        Memorandum of intent relating Val d'Agri*                                                                                            | *206*      |   | *13*      |   | *13*      |   | *13*      |   | *13*    |   | *13*    |   | *141*     |
|                                                                                                                                                                                                       |            |   |           |   |           |   |           |   |         |   |         |   |           |

"Other commitments" relating to natural gastake-or-pay and ship-or-pay contracts were calculated by applyingthe forecasted prices of energy or services in the long andmedium term market scenarios used by Eni for planning purposes tominimum take and minimum ship quantities. Management expectsamounts due under Eni take-or-pay and ship-or-pay contractualobligations in years subsequent to year 2009 will be roughly inline with the average amounts expected to be paid in the2005-2009 period. See "Item 4 – Gas & Power –Natural gas purchases" and "Item 3 – Risk Factors– Liberalization of the Italian Natural Gas Market" fora discussion of nature and importance of Eni’s take-or-paycontracts and the related risks from the evolving regulatoryenvironment that could negatively impact Eni’s results.

 

> 
***Liquidity Risk***

Eni’s financial operations are managed according to acentralized model where financial subsidiaries have specificroles and assignments. Eni’s Treasury Department coordinatesand controls all activities, defines objectives and constraintsin terms of financial structure, programs and risk management.

Liquidity risk is the risk that suitable sources of fundingfor the Group’s business activities may not be available.The Group has access to a wide range of funding at competitiverates through the capital markets and banks. The Group believesit has access to sufficient funding and has also both committedand uncommitted borrowing facilities to meet currentlyforeseeable borrowing requirements. See "Netborrowings" above.

 

> 
***Working Capital***

Management believes that, taking into account unutilizedmarket facilities, Eni has sufficient working capital for itsforeseeable requirements.

 

> 
***Credit Risk***

Credit risk is the potential exposure of the Group to loss inthe event of non-performance by a counterparty. The credit riskarising from the Group’s normal commercial operations iscontrolled by individual operating units within Group-approvedguidelines. In addition, as a result of its use of financial andcommodity instruments, including derivatives, to manage marketrisk, Eni has credit exposures through its dealings in thefinancial and specialized oil and gas markets. Eni controls therelated credit risk by entering into contracts only with highlycredit-rated counterparties and through credit approvals, limitsand monitoring procedures, and does not usually requirecollateral or other security. Counterparty credit validation,independent of the dealers, is undertaken before contractualcommitment. Eni has not experienced material non-performance byany counterparty.

 

> 
***Hedging***

The most important currencies for Eni are the euro and the USdollar. See "Item 3 – Risk Factors – ExchangeRates". Eni’s hedging policy is to minimize foreignexchange rate exposure through a policy of matching assets andliabilities where appropriate. Eni also uses forward exchangecontracts to hedge existing receivables and payables, includingdeposits and borrowings denominated in currencies other than thecurrency used in the relevant financial statements. At December31, 2004, the notional amount of forward exchange contracts waseuro 8,501 million (euro 6,165 million as of December 31, 2003)and the notional amount of purchased options was euro 91 million(euro 550 million as of December 31, 2003). Eni does not enterinto derivative transactions on a speculative basis.

Eni enters into commodity hedging contracts for the purpose ofreducing its exposure to changes in commodity prices inconnection with specific transactions, including, to a limitedextent, to mitigate the effects of petroleum price fluctuations.At December 31, 2004, Eni maintained for this purpose openderivative commodity contracts, the amounts of which were notmaterial.

Eni enters into various types of interest rate contracts(primarily interest rate swaps, forward rate agreements andinterest rate collars) to manage its interest rate risk, to lowerits funding costs and diversify its sources of funding and tominimize interest rate exposures arising from mismatches betweenassets and liabilities. At December 31, 2004, the notional amountof interest rate contracts was euro 5,696 million, of which euro5,663 million (euro 5,690 million as of December 31, 2003 relatedto swaps and euro 33 million related to collars. See Note 23 tothe Consolidated Financial Statements.

 

> 
***Research and Development***

For a description of Eni’s research and developmentoperations in 2004, see "Item 4 – Research andDevelopment".

 

 

##### Table of Contents

**Summary of Significant Differences BetweenItalian GAAP and U.S. GAAP**

Eni’s financial statements have been prepared inaccordance with Italian GAAP, which differs in certain respectsfrom U.S. GAAP. The significant differences between Italian GAAPand U.S. GAAP, as applied to Eni’s financial statements,are: A) consolidation policy; B) exploration & productionactivities; C) valuation of assets and subsequent revaluation; D)monetary revaluation of assets; E) deferred tax assets andliabilities; F) depreciation of fixed assets; G) intangibleassets; H) capitalized interest expense; I) derivatives; J) stockcompensation; K) stock issuance costs; L) marketable securities;M) costs related to site restoration and abandonment; N) treasuryshares; O) extraordinary income and expense; P) sales ofgovernment bonds; Q) reclassification of inventory; R)comprehensive income; S) earnings per share; T) guarantees; U)liabilities for redundancies. See Note 27 to the financialstatements for a more detailed discussion of the significantdifferences between Italian GAAP and U.S. GAAP that affectEni’s financial statements, and Note 28 to the financialstatements for a reconciliation of net income andshareholders’ equity between Italian GAAP and U.S. GAAP.

Consolidated operating income reconciled to U.S. GAAP was euro11,739 million, euro 9,215 million and euro 7,861 million in2004, 2003 and 2002, respectively, compared with consolidatedoperating income under Italian GAAP of euro 12,463 million, euro9,517 million and euro 8,502 million in those same years. Thesignificant effects on operating income by segment that arisefrom a reconciliation to U.S. GAAP are as follows: (i) in 2002,for the Oilfield Services, Construction and Engineering and Gas& Power segments the accounting for Saipem SpA and ItalgasSpA, including their subsidiaries, under the equity method forU.S. GAAP purposes, while the same entities are consolidated forItalian accounting principles purposes; in 2003 and 2004, for theOilfield Services, Construction and Engineering segment theaccounting for Saipem SpA, including its subsidiaries, under theequity method for U.S. GAAP purposes, while the same entities areconsolidated for Italian accounting principles purposes; (ii) forthe Exploration & Production segment, the recapitalization ofcertain oil and natural gas exploration and development coststhat were fully or differently amortized in the same period underItalian accounting principles; (iii) for all segments, the effectof asset impairments and revaluations; (iv) for all segments, theeffect of depreciation of monetary revaluation of assets; (v) forGas & Power segment, the effect of the use of different ratesof depreciation; (vi) for all segments, the elimination ofgoodwill amortization; (vii) for Gas & Power segment andstorage activity, differences in fair value assigned to assetsacquired in the purchase of a business; (viii) for all segments,the recapitalization of interest on debt that was incurred inorder to bring qualified assets to their intended use and wasexpensed in the year incurred; (ix) for all segments, the effectof stock grants and options awarded to employees; (x) for allsegments, the effect of stock issuance costs; (xi) in 2003 and2004, for the Exploration & Production segment, the effectrelated to site restoration and abandonment liabilities; (xii) in2002, for the Other activities segment, the effect related toreserves for contingencies; in 2003 and 2004, for the OilfieldServices and Engineering and Other activities segments, theeffect related to reserves for contingencies; and (xiii) for allsegments, the reclassification of restructuring costs intooperating expense as required by U.S. GAAP. See Note 27 to thefinancial statements for the "Summary of Differences BetweenItalian and U.S. GAAP" and Note 28 for a breakdown ofoperating income by segment under U.S. GAAP for the years 2002through 2004.

Net income reconciled to U.S. GAAP was euro 6,401 million,euro 6,296 million and euro 5,292 million in 2004, 2003 and 2002,respectively, compared with consolidated net income under Italianaccounting principles of euro 7,274 million, euro 5,585 millionand euro 4,593 million in those same years. In addition to theeffects discussed above, the reconciliation of consolidated netincome to U.S. GAAP was affected in all years presented: (i) bythe effect of the differences related to companies carried on theequity method; (ii) by the effect of deferred income taxes; and(iii) by the effect of derivative contracts. Furthermore in 2004,the reconciliation of consolidated net income to U.S. GAAP wasaffected by a downward adjustment of the gain on the sale of a9.054% interest in the subsidiary Snam Rete Gas due to anincrease of net book value of this subsidiary due to the use ofdifferent rates of depreciation for natural gas pipelines andother adjustment under U.S. GAAP.

 

> 
***Qualitative Discussion of the Impact of IFRS on    Eni’s Financial Statements***

Beginning in 2005 Eni, whose shares are listed on a regulatedmarket of a Member State of the European Union, is required toprepare its consolidated financial statements in accordance withIFRS. Eni has to prepare a balance sheet as of the transitiondate (January 1, 2004), which corresponds to the beginning of thefirst comparative period, that: (i) recognizes assets andliabilities defined as such by the new accounting standards; (ii)evaluates assets and liabilities with the values that would havebeen determined if the new accounting standards had been appliedfrom the initial recognition (retrospective application); and(iii) reclassifies items in accordance with IFRS.

The balance sheet as of December 31, 2003, which is thebalance sheet of the transition date or opening balance, thebalance sheet as of December 31, 2004 and the income statementfor year 2004 restated in accordance with IFRS and fully auditedwill be published in Eni‘s annual report for the year endingDecember 31, 2005. Effects of the new accounting standards onopening balances of assets and liabilities are to be recognizedunder shareholders’ equity, taking into account the fiscaleffect that is to be recognized under deferred tax assets orliabilities. On the basis of the exemptions provided by IFRS 1"First Adoption of International Financial ReportingStandards", Eni has chosen to not restate businesscombinations and has elected January 1, 2005 as the transitiondate for the first application of IAS 32 and IAS 39 related tothe evaluation of financial instruments, including derivatives.On the basis of the best information currently available,Eni’s management estimates that the main changes that willbe introduced in the restated balance sheet of Eni as of December31, 2003, the effects of which will be reflected in the restatedincome statement for the year ended December 31, 2004 and inEni’s balance sheet as of December 31, 2004 due to theapplication of IFRS, are as follows: balance sheet as of December31, 2004 due to the application of IFRS, are as follows:

> 
*1. Different useful lives of gas pipelines, compression    stations, distribution networks and other assets*

This change concerns essentially the natural gas transportpipelines, compression stations and distribution networks thatuntil 1999 were depreciated in accordance with Italian practiceapplying rates established by tax authorities (10%, 10% and 8%,respectively) both in statutory and consolidated financialstatements. In consolidated financial statements prepared inaccordance with U.S. GAAP, these assets were depreciated at a 4%rate, based on the international estimate of a 25-year longuseful life.

The useful life of gas pipelines, compression stations anddistribution networks was changed in 2000 following adetermination of tariffs for natural gas sale by the ItalianAuthority for Electricity and Gas which set the useful life ofgas pipelines at 40 years, that of compression stations at 25years and that of distribution networks at 50 years. Therefore,considering this change as a revision of previous estimates,starting in 2000 the value of these assets, net of amortizationreserves at December 31, 1999, was depreciated based on theirresidual useful life both under Italian and U.S. GAAP.

For the first application of IFRS, the adoption of theretrospective method requires the adoption of the new principlesas if they had historically been applied using the bestinformation available at the time. Therefore, the book value ofgas pipelines, compression stations and distribution networks atJanuary 1, 2004 will be restated recalculating amortizationutilizing until 1999 the internationally accepted rate of 25years and from 2000 onwards depreciating the residual valueaccording to the useful lives estimated by the Authority forElectricity and Gas.

Under Italian GAAP the book value of complex assets is dividedaccording to various tax categories on the basis of thedepreciation rate tables contained in a Decree of the Ministry ofEconomy and Finance. Under IFRS the components of a complex assetthat have different useful lives will be recorded separately inorder to be depreciated according to their useful life; landparcels that cannot be depreciated will be recorded separatelyeven when they are bought along with buildings.

This restatement will result in a material increase in fixedassets against shareholders’ equity and the reserve fordeferred taxation in the balance sheet as of December 31, 2003and a decrease in earnings for the year ended December 31, 2004.

> 
*2. Different recognition of deferred tax assets*

*2.1 Recognition of deferred tax assets on the revaluationof assets (Law 342/2000)* Under Italian GAAP deferred taxassets are recorded if recoverable with "reasonablecertainty".

Under IFRS deferred tax assets are recorded if their recoveryis more likely than not.

In 2000 Snam SpA, now merged into Eni SpA, revalued its assetsas permitted by Law 342/2000 aligning their book value to theirfair value. On this revaluation of depreciable assets Eni paid aspecial rate tax (19% instead of the statutory 34% rate), thusrecording a deferred tax asset. Eni’s transport assets wereconferred in 2001 to Snam Rete Gas SpA. The revaluation carriedout had no impact on Eni’s consolidated financialstatements; but a timing difference arose between the taxablevalue and the book value which led, in accordance with ItalianGAAP, to the recognition of a provision for deferred tax assetsthat amounted to euro 629 million at December 31, 2003,corresponding to 19%20 ofdepreciation estimated in the 2004-2007 plan on the deductibletiming difference.

Under IFRS, deferred taxes will be recognized on the entiretiming difference at the current statutory tax rate (37.25%).

The application of IFRS will result in an increase in deferredtax assets against shareholders’ equity in the balance sheetas of December 31, 2003 and a decrease in earnings for the yearended December 31, 2004 related to the "reversal"21 of deferred tax assets related tothe income statement share of depreciation for fiscal purposesthat is in excess of the depreciation of the useful life of therelevant assets.

*2.2 Recognition of deferred tax assets on Stogit’sinventories In 2003,*Stoccaggi Gas Italia SpA("Stogit"), applying Law 448/2001, realigned the fiscalvalue to the higher book value of assets received uponcontribution in kind. In the consolidated financial statementsthese assets were stated at their book value, this resulted in atiming difference over the fiscal values from which a deferredtax asset of euro 287 million was recognized in the consolidatedfinancial statements under Italian GAAP. A portion of the timingdifference concerns the inventories of natural gas; however, in2003 consolidated financial statements under Italian GAAP thedeferred tax asset related to the timing difference on naturalgas inventories was not recognized on the assumption that itsrecoverability was not reasonably certain at the end of theconcession, if not renewed.

The application of IFRS will result in an increase in deferredtax assets against shareholders’ equity in the balance sheetas of December 31, 2003 and a decrease in earnings for the yearended December 31, 2004 related to the reversal of deferred taxassets in connection to the circumstance that in 2004consolidated financial statements under Italian GAAP deferred taxassets on the timing difference on inventories were recognizedbecause Law 239/2004 allowed a determination of the year of therecoverability22.

*2.3 Other effects of the different recognition of deferredtax assets*The application of the more likely than notcriterion rather than that of the "reasonablecertainty" of recoverability of other deductible timingdifferences determined the recognition of deferred tax assets ofeuro against shareholders’ equity.

These deferred tax assets were recognized in the 2004consolidated financial statements under Italian GAAP because theconditions for their recognition were met; this will result in adecrease in earnings for the year ended December 31, 2004restated in accordance to IFRS.

> 
*3. Application of the weighted-average cost method    instead of LIFO*

Under Italian GAAP the cost of inventories may be determinedwith the weighted-average cost method or with the FIFO or LIFOmethods. Until 2004 Eni adopted the LIFO method, in itsevaluation of crude oil, natural gas and oil products inventoriesapplied on an annual basis.

IFRS does not allow the use of the LIFO method; it permits theFIFO method and the weighted-average cost.

The application of the weighted-average cost on a three-monthbasis in the evaluation of crude oil, natural gas and refinedproducts inventories will result in an increase in the value ofinventories against shareholders’ and to the deferred taxreserve in the balance sheet as of December 31, 2003 restated inaccordance to IFRS.

With the application of the LIFO method, changes in oil andrefined products prices have no impact on the evaluation ofinventories, that are affected only by declines in volumes. Withthe adoption of the weighted-average cost, changes in oil andrefined products prices will have a direct effect with therecognition of profit or loss on stock deriving from thedifference between the current cost of products sold and the costderiving from the application of the weighted-average costmethod.

This restatement will result in an increase in earnings forthe year ended December 31, 2004 related to an increase inprices.

> 
*4. Different criteria of capitalization of financial    charges*

Under Italian GAAP financial charges are capitalized whenincurred by the amount not financed by internally-generated fundsor contribution by third parties.

Under IFRS, when a relevant time interval is necessary untilthe capital good is ready for use, financial charges can becapitalized as an increase of the asset book value for the amountof financial charges that could have been saved if capitalexpenditure had not been made.

The application of this principle will result in an increasein the book value of fixed assets against shareholders’equity and the deferred tax provision in the balance sheet as ofDecember 31, 2003 and a decrease in earnings for the year endedDecember 31, 2004 (the effect of higher amortization is offsetonly in part by an increase in capitalized financial charges).

> 
*5. Different recognition of the reserve for    contingencies*

Under Italian GAAP the reserve for contingencies concernscosts and charges of a determined nature, whose existence iscertain or probable, but whose amounts or occurrence are notdeterminable at the period-end. The reserve for contingencies isstated on an undiscounted basis.

Under IFRS a provision to the reserve for contingencies ismade only if there is a current obligation considered"probable" as a consequence of events occurred beforeperiod-end deriving from legal or contractual obligations or fromactions or announcements of the company that determine validexpectations in third parties (implicit obligations), providedthat the amount of the liability can be reasonably determined.When the financial effect of time is significant and the date ofthe expense to clear the relevant obligation can be reasonablydetermined, the estimated cost is discounted on the basis of therisk-free rate of interest and adjusted for the company’scredit cost.

As for the provision to the reserve for redundancy incentives,IFRS require the preparation of a detailed formalizedrestructuring plan, indicating at least the activities,locations, categories and approximate number of employeesconcerned by the restructuring. The plan must be started-up orproperly communicated to the involved parties before period-end,generating the expectation that the company will meet itsobligations.

As for provisions for catastrophic risks, Padana AssicurazioniSpA, in application of rules imposed by the Minister of Industryon June 15, 1984, makes integrative provisions for the risk ofearthquakes, seaquakes, volcanic eruptions and similar events.These integrative provisions are not allowed by IFRS in absenceof a current obligation.

As for the reserve for periodic maintenance, under IFRS thesecosts are capitalized when incurred as a separate component ofthe asset and are depreciated according to their useful lives, asthey do not represent a current obligation.

As a consequence of the absence of a current obligation, theapplication of this principle will result in a reversal of thereserve for contingencies against shareholders’ equity, thedeferred tax reserve and a decrease in other assets referred tothe portion of re-insured risks in the balance sheet as ofDecember 31, 2003 and an increase in earnings for the year endedDecember 31, 2004.

> 
*6. Effect of the capitalization of costs for asset    retirement obligations*

Under Italian GAAP, site restoration and abandonment costs areallocated annually in a specific reserve so that the ratio of theallocations made and the amount of estimated costs equals thepercentage of depreciation of the relevant asset. In particular,in the Exploration & Production segment, the costs estimatedto be incurred at the end of production activities for the siteabandonment and restoration are accrued so that the ratio of thereserve and the amount of estimated costs correspond to the ratioof cumulative production at period-end and proved developedreserves at period-end plus cumulative production.

Under IFRS, estimated site restoration and abandonment costsare recorded in a specific reserve against the relevant asset;when the financial effect of time is relevant, the estimated costis recorded considering the present value of the costs to beincurred, calculated using a rate representative of thecompany’s credit cost. The cost assigned to the differentrelevant components of the asset is recognized in the incomestatement through the amortization process. The reserve, andconsequently the asset book value, is periodically adjusted toreflect the changes in the estimates of the costs, of the timingand of the discount rate.

The application of this principle will result in an increasein fixed assets, in shareholders’ equity, in the reserve fordeferred tax, and a decrease in the reserve for site abandonmentand restoration in the balance sheet as of December 31, 2003 andan increase in earnings for the year ended December 31, 2004.

> 
*7. Underlifting*

In the Exploration & Production segment joint ventureagreements regulate, among other things, the right of eachpartner to withdraw its own share of production volumes availablein the period.

Higher production volumes withdrawn as compared to net workinginterest volume determine the recognition of a credit by apartner who has withdrawn lower production volumes as compared toits net working interest volume.

Under Italian GAAP, this credit is evaluated on the basis ofproduction costs; under IFRS it is evaluated at current prices atperiod end.

The application of this principle will result in an increasein other assets against shareholders’ equity and the reservefor deferred tax in the balance sheet as of December 31, 2003 andan increase in earnings for the year ended December 31, 2004.

> 
*8. Write-off of the difference between nominal and    present value of deferred taxation in business combinations*

Under Italian GAAP the difference between the present value ofdeferred taxes included in the determination of the fair value ofnet assets acquired as part of a business combination and relateddeferred tax liabilities recognized at nominal value("difference") is recognized under the item"accrued assets".

Under IFRS this difference is recognized under"Goodwill"; however, in the event of the firstapplications goodwill can be adjusted only in case of specificcircumstances that are not relevant to Eni. This difference istherefore written off because it cannot be considered an assetunder IFRS.

The application of this principle will result in a decrease inshareholders’ equity against deferred tax assets in thebalance sheet as of December 31, 2003 and an increase in earningsfor the year ended December 31, 2004.

> 
*9. Adjustment of tangible and intangible assets*

*9.1 Intangible assets*Under Italian GAAP costs forextraordinary company transactions, costs for the start-up orexpansion of production activities and costs for theestablishment of a company or for issuance of capital stock canbe capitalized.

IFRS requires these costs to be charged against the incomestatement, except for establishment and issuance of capital stockof the parent company that is recognized as a decrease inshareholders’ equity net of the relevant fiscal effect.

Under Italian GAAP costs for software development can becapitalized under certain circumstances. IFRS pose more stringentconditions for their capitalization.

The application of these principles will result in a write-offof intangible assets against a decrease in shareholders’equity and the recognition of deferred tax assets in the balancesheet as of December 31, 2003 and an increase in earnings for theyear ended December 31, 2004.

*9.2 Revaluation of assets*Under Italian GAAPrevaluation of tangible assets is allowed under specific lawprovisions within the limit of their recovery value.

IFRS prohibit this kind of tangible asset revaluation.

The application of this principle will result in a decrease intangible assets against a decrease in shareholders’ equityand the recognition of deferred tax assets in the balance sheetas of December 31, 2003 and an increase in earnings for the yearended December 31, 2004. The decrease in tangible assets willtake into account the restatement of gains/losses on disposal onthe basis of the historical cost and the recalculation ofamortization up to December 31, 2003.

*9.3 Pre-development costs*Under Italian GAAP costsrelated to preliminary studies, researches and surveys aimed attesting different options for development of hydrocarbon fieldsare recognized under tangible assets.

Under IFRS these costs are considered exploration costs andare expensed when incurred.

The application of this principle will result in a write-offof capitalized pre-development costs against a decrease inshareholders’ equity and the recognition of deferred taxliabilities in the balance sheet as of December 31, 2003 and anincrease in earnings for the year ended December 31, 2004.

> 
*10. Employee benefits*

Under Italian GAAP employee termination benefits are accruedduring the period of employment of employees, in accordance withthe law and applicable collective labor contracts.

Under IFRS employee termination benefits (e.g., pensionpayments, life insurance payments, medical assistance afterretirement) are defined on the basis of post employment benefitplans that due to their mechanisms feature defined contributionsplans or defined benefit plans. In the first case, thecompany’s obligation consists in making payments to thestate or to a trust or a fund.

Plans with defined benefits are pension, insurance orhealthcare plans which provide for the company’s obligation,also in the form of implicit obligations (see paragraph 5 –"Different recognition of the reserve forcontingencies" earlier) to provide nonformalized benefits toits former employees23. Therelated discounted charges, determined with actuarial assumptions24, are accrued annually on the basisof the employment periods required for the granting of suchbenefits.

The application of thisprinciple will result in a decrease in shareholders’ equity,the recognition of deferred tax assets and a decrease in employeetermination indemnities against an increase in the reserve forcontingent losses, referred in particular to charges for medicalassistance granted upon termination and to pension plans outsideItaly, in the balance sheet as of December 31, 2003 and anincrease in earnings for the year ended December 31, 2004.

> 
*11. Effects on investments accounted for under the    equity method*

Joint ventures and affiliates are accounted for under theequity method. The application of IFRS to the 2003 balance sheetof these companies will result in a decrease in investmentsagainst shareholders’ equity in the balance sheet as ofDecember 31, 2003 and an increase in earnings for the year endedDecember 31, 2004, related essentially to the elimination of theamortization of goodwill (see paragraph 12.2 –"Amortization of goodwill" below).

> 
*12. Other changes in 2004 result under IFRS*

*12.1 Adjustment on gain from sale of a 9.054% interest inSnam Rete Gas*Due to the application of IFRS, netshareholders’ equity to be compared with the sale price fordetermining the gain on the sale of a 9.054% interest in SnamRete Gas carried out in 2004 will increase by a material amountrelated essentially to an increase in the book value of naturalgas pipelines (see paragraph 1 "Different useful lives ofgas pipelines, compression stations, distribution networks andother assets" above) and deferred tax assets (see paragraph2.1 "Different recognition of deferred tax" above)therefore resulting in a decrease in 2004 earnings restatedaccording to IFRS due to the lower gain as compared to ItalianGAAP.

*12.2 Amortization of goodwill*Under Italian GAAPgoodwill is amortized on a straight-line basis in the periods ofits expected utilization, provided it is no longer than fiveyears; in case of specific conditions related to the kind ofcompany the goodwill relates to, goodwill can be amortized for alonger period not exceeding 20 years.

Under IFRS goodwill cannot be amortized, but it is subject toa yearly evaluation in order to define the relevant impairment,if needed. The application of this principle will result in anincrease in 2004 earnings.

> 
*13. Changes in consolidation scope*

Italian GAAP allows for the line-by-line consolidation of anaffiliate on which the parent company exercises control at itsAnnual General Meeting due to a substantial ownership interestdespite the fact that the parent company does not hold themajority of voting rights. Under IFRS, and under U.S. GAAP, theseinvestments are accounted for under the equity method. Inapplication of this standard, Eni will exclude from consolidationSaipem SpA in which Eni held 43.29% of voting shares at December31, 2004 (42.94% of share capital). Saipem’s exclusion fromconsolidation will result in a decrease of total asset andminority interest and an increase of net borrowings related tothe net cash position of this business (loans provided from Groupfinancial companies are recorded under other assets andliabilities).

As for joint ventures, Italian GAAP and IFRS allow forconsolidation on a proportional basis or accounting under theequity method. Until 2004 for Italian GAAP reporting purposes Enihas been consolidating joint ventures in the Exploration &Production and Oilfield Services, Construction and Engineeringsegments on a proportional basis. From 2005, adopting the IFRSprinciple of consistent application of accounting criteria tosimilar situations and taking into account the fact that U.S.GAAP does not allow consolidation on a proportional basis, jointventures will be accounted for under the equity method. Theexclusion of joint ventures from consolidation will result in anincrease in total assets and in net borrowings in connection tothe fact that overall these companies have a net cash position.

In summary, according to management’s estimates theapplication of IFRS will result in a material increase inEni’s total asset and a slight increase in Eni's netborrowings as of December 31, 2003 and an approximately 3%reduction in 2004 net income.

 

##### Table of Contents

**Item 6. DIRECTORS, SENIOR MANAGEMENT ANDEMPLOYEES**

**Directors and Senior Management**

The Board of Directors of Eni SpA’s currently in officeconsists of nine members. The table below sets forth the names ofthe nine members of the Board of Directors, their positions, theyear when each was initially appointed as a Director and theirages. This Board of Directors was appointed by the OrdinaryShareholders’ Meeting held on May 27, 2005 for a three-yearperiod; it will therefore expire at the date of the GeneralShareholders’ Meeting approving Eni’s financialstatements for the financial year 2007.

 

| **Name**           |   | **Position**              |   | **Year        First Appointed to Board of Directors** |   | **Age** |
|--------------------|--------|---------------------------|--------|-------------------------------------------------------|--------|---------|
|                    |   |                           |   |                                                       |   |         |
| Roberto Poli       |   | Chairman                  |   | 2002                                                  |   | 67      |
| Paolo Scaroni      |   | Managing Director and CEO |   | 2005                                                  |   | 59      |
| Alberto Clô   |   | Director                  |   | 1999                                                  |   | 58      |
| Renzo Costi        |   | Director                  |   | 1996                                                  |   | 68      |
| Dario Fruscio      |   | Director                  |   | 2002                                                  |   | 68      |
| Marco Pinto        |   | Director                  |   | 2005                                                  |   | 43      |
| Marco Reboa        |   | Director                  |   | 2005                                                  |   | 50      |
| Mario Resca        |   | Director                  |   | 2002                                                  |   | 60      |
| Pierluigi Scibetta |   | Director                  |   | 2005                                                  |   | 44      |

 

While it remains a significant shareholder, the Ministry ofEconomy and Finance intends to continue to participate in thenomination and election of Eni’s Board of Directors in orderto protect its investment as a shareholder. During whateverperiod the Ministry of Economy and Finance remains a majorityshareholder, according to Italian law, as confirmed by DecisionNo. 466/1993 of the Corte Costituzionale (Constitutional Court),the Corte dei Conti (Court of Accounts) has the right and duty toexercise a role as financial controller of Eni’s operationsin order to protect the interest of the State as a shareholder.In order for the Court of Accounts to exercise such control, arepresentative of the Court of Accounts attends the meetings ofthe Board of Directors and the Board of Statutory Auditors of Eniwithout the right to vote and Eni has the obligation to send tothe Court of Accounts its financial statements together with thereports of the Board of Directors, the Board of StatutoryAuditors and its external auditors. The representative of theCourt of Accounts who attends the meetings of the Board ofDirectors and Board of Statutory Auditors of Eni is LuigiSchiavello (alternate Angelo Antonio Parente).

On the basis of Eni's By-Laws as amended on April 13, 2005,the Minister of Economy and Finance in agreement with theMinister of Productive Activities may appoint another member ofthe Board of Directors, with no voting rights.

On June 1, 2005 the new Board of Directors delegated to theChairman, Roberto Poli, powers for researching and promotingintegrated projects and strategic international agreements, andappointed Paolo Scaroni Managing Director and CEO, confirming thepowers already delegated to the previous Managing Director. 

Before May 27, 2005, Eni’ Board of Directors was composedof eight members. The table below sets forth the names of theeight members of the Board of Directors, their positions, theyear when each was initially appointed as a Director and theirages. This Board approved Eni's consolidated financial statementsfor the year 2004.

 

| **Name**                                 |   | **Position**              |   | **Year        First Appointed to Board of Directors** |   | **Age** |
|------------------------------------------|--------|---------------------------|--------|-------------------------------------------------------|--------|---------|
|                                          |   |                           |   |                                                       |   |         |
| Roberto Poli                             |   | Chairman                  |   | 2002                                                  |   | 67      |
| Vittorio Mincato                         |   | Managing Director and CEO |   | 1998                                                  |   | 69      |
| Mario Giuseppe Cattaneo                  |   | Director                  |   | 1998                                                  |   | 75      |
| Alberto Clô                         |   | Director                  |   | 1999                                                  |   | 58      |
| Renzo Costi                              |   | Director                  |   | 1996                                                  |   | 68      |
| Dario Fruscio                            |   | Director                  |   | 2002                                                  |   | 68      |
| Guglielmo Antonio Claudio        Moscato |   | Director                  |   | 2002                                                  |   | 69      |
| Mario Resca                              |   | Director                  |   | 2002                                                  |   | 60      |

 

On November 14, 2000 the Board of Directors of Eni appointedStefano Cao as General Manager of the Exploration &Production Division with those powers as determined by the Boardon the same date. Mr. Cao may be removed by the Board ofDirectors of Eni without cause.

On January 30, 2001 the Board of Directors of Eni appointedLuciano Sgubini as General Manager of the Gas & PowerDivision with those powers as defined by the Board on the samedate. Mr. Sgubini may be removed by the Board of Directors of Eniwithout cause.

On April 14, 2004 the Board of Directors of Eni appointedAngelo Taraborrelli as General Manager of the Refining &Marketing Division with those powers as defined by the Board onthe same date. Mr. Taraborrelli may be removed by the Board ofDirectors of Eni without cause. Mr. Taraborrelli replaced Mr.Callera, who has reached the retirement age.

The table below sets forth Eni SpA’s executive officersand the General Managers of Eni’s three divisions, theirpositions within Eni, the year they were appointed to suchpositions, their total years of service at Eni and their ages.The executive officers of Eni are appointed by the ManagingDirector of Eni and may be removed without cause.

 

| **Name**             |   | **Management Position**                                                           |   | **Year        First Appointed to Current Position** |   | **Total        Number of Year of Service at Eni** |   | **Age** |
|----------------------|--------|-----------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------|--------|---------|
|                      |   |                                                                                   |   |                                                     |   |                                                   |   |         |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Stefano Cao          |   | General Manager for the        Exploration & Production Division              |   | 2000                                                |   | 29                                                |   | 54      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Luciano Sgubini      |   | General Manager for the        Gas & Power Division                           |   | 2001                                                |   | 37                                                |   | 65      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Angelo Taraborrelli  |   | General Manager for the        Refining & Marketing Division                  |   | 2004                                                |   | 32                                                |   | 57      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Fabrizio D’Adda |   | The Group Senior Vice        President for Health Safety and the Environment      |   | 2002                                                |   | 37                                                |   | 63      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Amedeo Santucci      |   | The Group Senior Vice        President for Supply Operations                      |   | 2005                                                |   | 26                                                |   | 61      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Carlo Grande         |   | The Group Senior Vice        President for Legal Affairs                          |   | 1986                                                |   | 28                                                |   | 64      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Roberto Jaquinto     |   | The Group Senior Vice        President for Administration                         |   | 1992                                                |   | 43                                                |   | 63      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Marco Mangiagalli    |   | The Group Senior Vice        President for Finance                                |   | 1993                                                |   | 27                                                |   | 56      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Leonardo Maugeri     |   | The Group Senior Vice        President for Strategies and International Relations |   | 2000                                                |   | 11                                                |   | 41      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Eugenio Palmieri     |   | The Group Senior Vice        President for Public Affairs and Communication       |   | 2001                                                |   | 14                                                |   | 58      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Luigi Patron         |   | Chief Technology Officer                                                          |   | 2001                                                |   | 45                                                |   | 65      |
|                 |   |                                                                              |   |                                                |   |                                              |   |    |
| Renato Roffi         |   | The Group Senior Vice        President for Human Resources                        |   | 2000                                                |   | 34                                                |   | 58      |

 

The biographies of Eni’s directors and executive officersare set out below.

Roberto Poli was appointed Chairman of Eni SpA on May 30,2002. He is Chairman of the Board of Directors of Poli eAssociati SpA, a major consulting firm in the area of corporatefinance, business mergers and acquisitions, businessrestructuring. From 1966 to 1998 he was Professor of BusinessFinance at the Università Cattolica of Milan. He is Member ofthe Board of Directors of Fininvest SpA, Mondadori SpA, MerloniTermosanitari SpA, G.D. SpA and general partner of BrafinS.A.P.A. Has been Chairman of Rizzoli-Corriere della Sera SpA andPublitalia SpA.

Paolo Scaroni graduated at the Università Bocconi in Milanand obtained a master degree in business administration at theColumbia University in New York. After a few years as consultantwith McKinsey, in 1973 he joined the Saint Gobain Group, where heheld various managing positions in Italy and outside Italy, untilin 1976 he was appointed general manager of the "Vetropiano" division in Paris with the responsibility of managingall Saint Gobain’s international activities. From 1985 to1996 worked with Techint where he was appointed vice-presidentand managing director, following the privatization of SIV,Italimpianti and Dalmine. He joined Pilkington in 1996 and until2002 was managing director of the group’s head company inGreat Britain. From 2002 to 2005 he was managing director andgeneral manager of Enel. At present Mr. Scaroni is a director of"Il Sole 24 Ore" and Marzotto, member of the managingcommittee of Confindustria, chairman of Unindustria Venezia inItaly, while outside Italy is chairman of the Board of Directorsof Alliance UniChem, member of the Supervisory Board of ABN AMRO,and member of the Board of the Columbia University’sBusiness School.

Alberto Clô is a professor of Industrial Economy at theUniversity of Bologna, was Minister of Industry and Minister ofForeign Trade ad interim in 1995 and 1996. During the Italiansemester of presidency of the European Union was chairman of theCouncil of Ministers of Industry and Energy of the EuropeanUnion. In 1996 was awarded the title of Cavaliere di Gran Croceal Merito of the Republic of Italy. He is Member of the Board ofDirectors of GTP Holding, ASM Brescia SpA, De Longhi SpA,Italcementi SpA and Società Autostrade SpA. He is also Presidentof the Scientific Committee of Eni Corporate University.

Renzo Costi is an attorney and a consultant. He served asmagistrate from 1964 to 1968 and is currently Professor ofcommercial law at the University of Bologna. He was founder, andcurrently is co-director, of the magazines "GiurisprudenzaCommerciale", "Banca Impresa e Società" and"Banca, Borsa e titoli di credito". He is member of theBoard of Directors of Editrice Il Mulino SpA.

Dario Fruscio is a chartered accountant, public auditor andconsultant; he is currently Professor of Economy and Managementat the University of Pavia and taught at the Accademia Nazionaledella Guardia di Finanza of Bergamo.

Marco Pinto is a magistrate and notary and held variouspositions at Regional Administrative Courts and the Council ofState. He is a professor and dean of the department for economicsciences at the Scuola Superiore dell’economia e dellefinanze. Since 1994 is a legal counsel and head of thelegislative office of the Ministry of Economy and Finance. FromDecember 2004 to April 2005 he was head of the technicalsecretariat of the vice-president of the Council of Ministers. 

Marco Reboa is a chartered accountant and auditor. He is aprofessor at the Libero Istituto Universitario Carlo Cattaneo inCastellanza and author of essays of corporate governance,economic evaluation and financial statements. He is a member ofthe Board of Directors of Seat PG SpA, Interpump SpA, IMMSI SpA,Intesa Private Banking and Nextra SGR SpA. He is a statutoryauditor of Autogrill SpA and Galbani SpA.

Mario Resca is Chairman and Managing Director ofMcDonald’s Italia SpA and Chairman of Italia Zuccheri SpA(formerly Eridania SpA), of the American Chamber of Commerce inItaly and of Confimprese, National Board member of U.P.A. (Unionof Associated Advertising Operators), and Director of MondadoriSpA and Member of the Board of liquidators of Cirio Del MonteGroup in extraordinary administration. Is also chairman of theRMCH foundation for children. In 2002, was awarded the title ofCavaliere del Lavoro. After working for Chase Manhattan bank, wasappointed director of Biondi Finanziaria (Fiat Group), from 1976to 1991 was partner of Egon Zehnder, director of Lancome Italiaand of some companies of the RCS-Corriere della Sera Group andVersace Group. Is chairman of Finanziaria Sambonet SpA, KenwoodItalia SpA and founding member of Eric Salmon and Partners.

Pierluigi Scibetta is a chartered accountant and auditor andhas been director and auditor of various companies. In 2003, wasappointed director of the Istituto Superiore per la previdenza ela sicurezza sul lavoro, of the Gestore del Mercato Elettrico SpAand of ENEA. In 2004, was appointed director of Nucleco SpA. Is aprofessor of Energy Engineering at the University of Perugia.

Stefano Cao joined the Eni Group as a technical engineeractive mainly in offshore construction. He then became generalmanager, managing director and chairman of Saipem SpA, and is atpresent General Manager of Eni’s Exploration &Production Division.

Luciano Sgubini, mining engineer, was involved in hydrocarbonproduction activities of Agip SpA. He served various positions inthe Eni Group such as Vice President of Agip SpA, Chairman andCEO of Saipem SpA and Chairman of Snam SpA until he becameGeneral Manager of Eni’s Gas & Power Division. He is amember of the Board of Directors of many Eni Group companies.

Angelo Taraborrelli, graduated in law, joined the group asexpert in analysis evaluation and control of investments in theoil market. After the merger of AgipPetroli with Eni he wasappointed Deputy Chief Operating Officer of Eni SpA Refining& Marketing Division for Marketing Operations and on April14, 2004 he became General Manager of Eni’s Refining &Marketing Division replacing Gilberto Callera who retired.

Fabrizio D’Adda, mining engineer, joined the Eni Group in1968. He held various executive positions such as Vice Presidentof Snamprogetti SpA, Chairman of Saipem SpA, Chairman of EniChemSpA and Chairman of Polimeri Europa SpA. He is a member of theBoard of Directors and of the Executive Committee of Cefic andPresident of the Financial Committee of Cefic. He is also amember of the Executive Committee of Confindustria.

Amedeo Santucci, graduated in engineering, joined the Group in1979 and served various positions.

Carlo Grande, attorney at law, joined the Eni Group in 1977and has served as senior vice president for legal affairs since1986. He is a member of the Board of Directors of various EniGroup companies.

Roberto Jaquinto, a registered auditor, joined the Eni Groupin 1962 and served in various administrative managementpositions, until he became senior vice president foradministration and responsible for Eni financial reporting andaccounting. He is a member of the Board of Directors of many EniGroup companies.

Marco Mangiagalli worked for the Barclays Group and otherItalian merchant banks before joining the Eni Group. He is amember of the Board of Directors of various Eni companies. He isresponsible, among other things, for Eni’s treasuryoperations.

Leonardo Maugeri, after extensive academic experience acquiredalso outside Italy, joined the Eni Group in 1994, holding variouspositions mainly as counsel for strategic decisions. He is amember of the executive council of Censis and of the Commissionon international relations at Confindustria.

Eugenio Palmieri qualified as journalist in 1971 and worked ascorrespondent for "Il Sole 24 Ore", "IlTempo", "La Stampa". In 1991 he was appointed Headof Press Office and later also supervisor of External Relations.In May 1995 he was appointed Managing Editor of Agi News Agency,a subsidiary of Eni and the second largest Italian newswire.

Luigi Patron is Chief Technology Officer of Eni and Chairmanof Snamprogetti SpA, the engineering company of the Eni Group.Mr. Patron’s industrial career started with Montefibre SpAat Porto Marghera. In 1991, he became Chairman of Montefibre SpAand Chairman of EniChem Fibre SpA. From June 1993 to May 1996,Mr. Patron was Managing Director of EniChem SpA.

Renato Roffi joined the Eni Group in 1971 and held variouspositions in Eni’s subsidiaries until he became theGroup’s senior vice president for human resources in 2000.He is a member of the Board of Directors of various Eni Groupcompanies and Vice Chairman of ASIEP (the Italian association ofenergy and petroleum companies).

 

> 
***Auditors***

*Statutory Auditors*

The Italian legislation requires Italian listed corporationsto have a board of statutory auditors composed of independentexperts in accounting matters and in matters specified in suchcorporations’ by-laws. Eni SpA’s Board of StatutoryAuditors is elected by the shareholders meeting, who alsoappoints the Chairman of the Board. Eni SpA’s by-lawscurrently provide that the Board of Statutory Auditors consistsof five effective statutory auditors and two alternate auditors(each of them automatically substitutes an effective auditor whoresigns or is otherwise unable to serve as an auditor elected inthe same list).

The following table sets forth the names, positions and yearof appointment of the members of the Board of Statutory Auditorsof Eni who were appointed by the Ordinary Shareholders’Meeting held on May 27, 2005 for a three-year period; thereforethis Board of Statutory Auditors will expire at the date of theGeneral Shareholders’ Meeting approving Eni’s financialstatements for the financial year 2007. For a description of theduties of the Board of Statutory Auditors see below.

 

| **Name**             |   | **Position**      |   | **Year        First Appointed to Board of Statutory Auditors** |
|----------------------|--------|-------------------|--------|----------------------------------------------------------------|
|                      |   |                   |   |                                                                |
| Paolo Andrea Colombo |   | Chairman          |   | 2002                                                           |
| Filippo Duodo        |   | Auditor           |   | 1998                                                           |
| Edoardo Grisolia     |   | Auditor           |   | 2005                                                           |
| Riccardo Perotta     |   | Auditor           |   | 1999                                                           |
| Giorgio Silva        |   | Auditor           |   | 1999                                                           |
| Francesco Bilotti    |   | Alternate Auditor |   | 2005                                                           |
| Massimo Gentile      |   | Alternate Auditor |   | 2005                                                           |

 

The following table sets forth the names, positions and yearof appointment of the members of the Board of Statutory Auditorsof Eni, who were elected on May 30, 2002 and who were in chargeuntil May 27, 2005.

 

| **Name**             |   | **Position**      |   | **Year        First Appointed to Board of Statutory Auditors** |
|----------------------|--------|-------------------|--------|----------------------------------------------------------------|
|                      |   |                   |   |                                                                |
| Andrea Monorchio     |   | Chairman          |   | 1995                                                           |
| Luigi Biscozzi       |   | Auditor           |   | 1999                                                           |
| Paolo Andrea Colombo |   | Auditor           |   | 2002                                                           |
| Filippo Duodo        |   | Auditor           |   | 1998                                                           |
| Riccardo Perotta     |   | Auditor           |   | 1999                                                           |
| Fernando Carpentieri |   | Alternate Auditor |   | 1995                                                           |
| Giorgio Silva        |   | Alternate Auditor |   | 1999                                                           |

 

> 
*External Auditors*

As provided for by Italian laws, external auditors must be achartered company and are appointed by the Shareholders’Meeting. Eni’s external auditors, PricewaterhouseCoopersSpA, were appointed by the Shareholders’ Meeting of June 1,2001 for a three-year term ending with the Meeting approvingfinancial statements for 2003. Eni’s Shareholders’Meeting of May 28, 2004 confirmed the appointment ofPricewaterhouseCoopers SpA for a further three-year period endingwith the Meeting approving financial statements for 2006.

 

##### Table of Contents

**Compensation**

Board member compensation is determined by theShareholders’ Meeting, while remuneration levels of theChairman and Managing Director are determined by the Board ofDirectors, based on proposals of the Compensation Committee andafter consultation with the Board of Statutory Auditors. Withreference to the powers delegated to the Chairman and ManagingDirector, the Board of Directors determined their compensation,made up of a fixed and a variable part. In line with Consobprovisions, the section "Other Information" of Eni SpAstatutory financial statements indicates: (i) compensation paidto Board members, Statutory Auditors and General Managers; (ii)subscription rights for Eni shares assigned within three yearsfor no consideration (stock grant) and stock options attributedto the Managing Director and to General Managers; and (iii)number of shares of Eni SpA and of Eni companies held by Boardmembers, Statutory Auditors and General Managers. Information asper (i) and (ii) are included also in the notes to Eni SpA’sstatutory financial statements.

On May 30, 2002 the Shareholders’ Meeting determined theannual compensation of the Chairman (euro 250,000) and of Boardmembers (euro 68,000). The Shareholders’ Meeting of May 28,2004, increased directors compensation to euro 100,000. In itsmeeting of May 30, 2002 the Shareholders’ Meeting alsodetermined a variable compensation up to a maximum of euro 80,000for the Chairman and euro 20,000 for each Board member to be paidin accordance with Eni’s positioning as compared to theother seven major international oil companies for marketcapitalization in terms of total return to shareholders in thereference year. The variable portion of compensation is paid tothe Chairman for euro 80,000 or euro 40,000 and to each Boardmember for euro 20,000 or euro 10,000, respectively, ifEni’s return to shareholders is rated first or second, orthird or fourth in the rating of return to shareholders of theseven major oil companies. Below fourth position no variablecompensation is paid. In the meeting of July 6, 2004, the Boardconfirmed that Eni in 2003 rated fifth in the mentionedpositioning, therefore no variable compensation was paid. Inaddition, Board members receive euro 1,000 for the participationto each meeting of the Board and of Board committees, along withany expense incurred for performing their duties.

The variable part of the compensation of Chairman and ManagingDirector, as well as the variable part of the compensation ofEni’s top management (General Managers of divisions andmanagers holding positions directly reporting to the Chairman andManaging Director) is related to the achievement of specificeconomic and operating objectives (profitability, efficiency,strategic projects) and share price objectives (price of Enishares, comparative total return to shareholders). With referenceto Eni’s performance in 2003, 43% of the remuneration of theChairman and of the Managing Director was variable and 40% ofthat of the top management was variable. The variable part ofcompensation includes, beside the monetary component, Eni’sstock grant plans (see specific information on stock options andstock grants in Note 29 to Eni’s consolidated financialstatements, below).

The Shareholders' Meeting held on May 27, 2005 resolved toapprove: (i) the determination of the fixed amount of the annualcompensation to be paid to the Chairman of the Board of Directorsand to each Director at euro 265,000 and euro 115,000respectively, in addition to the reimbursement of the expensesincurred because of the office; (ii) the determination of avariable amount not higher than euro 80,000 for the Chairman ofthe Board of Directors and euro 20,000 for the Directors.

Pursuant to Consob Decision No. 11971 of May 14, 1999, asamended, compensation of directors of Eni, statutory auditors andgeneral managers of Eni’s divisions is reported in the tablebelow, which includes all the persons who held a position in2004, including a fraction of the year.

| • |   | The column        "Compensation for positions" held at Eni SpA        includes compensation decided by the shareholders’        meeting and compensation of the Chairman and the Managing        Director set by the Board of Directors, in agreement with        the Board of Statutory Auditors, pursuant to Article        2389, subsection 3 of the Italian Civil Code; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the column "Non cash        benefits" indicates all fringe benefits, including        insurance policies;                                                                                                                                                                                                                                                                        |
| • |   | the column "Bonuses and        other incentives" indicates the variable part of the        compensation of the chairman, and of the salary of the        Managing Director and General Managers of Eni’s        divisions (employees of Eni);                                                                                                                               |
| • |   | the column "Other        compensation" indicates the salary of the Managing        Director and of the General Managers (employees of Eni),        as well as the compensation for positions held by        Statutory Auditors in other Eni companies.                                                                                                                           |

The following table containsdetails of compensation of directors, statutory auditors andgeneral managers.

 

| **Name** |   | **Position** |   | **Compensation for position** |   | **Non cash benefits** |   | **Bonuses        and other incentives** |   | **Other compensation** |   | **Total** |
|----------|--------|--------------|--------|-------------------------------|--------|-----------------------|--------|-----------------------------------------|--------|------------------------|--------|-----------|
|          |   |              |   |                               |   |                       |   |                                         |   |                        |   |           |

|   |   | **(thousand        euro)** |
|--------|--------|----------------------------|

| **Board of Directors**                 |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
|----------------------------------------|--------|--------------------------|--------|-----------|--------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|
| Poli Roberto                           |   | Chairman                 |   | 520       |   | 7      |   | 142       |   |   |      |   |   | 669       |
| Mincato Vittorio                       |   | Managing Director        |   | 509       |   |   |   | 735       |   |   | 922       |   |   | 2,166     |
| Cattaneo        Mario Giuseppe         |   | Director                 |   | 108       |   |   |   |      |   |   |      |   |   | 108       |
| Clô Alberto                       |   | Director                 |   | 110       |   |   |   |      |   |   |      |   |   | 110       |
| Costi Renzo                            |   | Director                 |   | 110       |   |   |   |      |   |   |      |   |   | 110       |
| Fruscio Dario                          |   | Director                 |   | 102       |   |   |   |      |   |   |      |   |   | 102       |
| Moscato        Guglielmo               |   | Director                 |   | 112       |   |   |   |      |   |   |      |   |   | 112       |
| Resca Mario                            |   | Director                 |   | 105       |   |   |   |      |   |   |      |   |   | 105       |
|                                   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| **Board of        Statutory Auditors** |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| Monorchio Andrea                       |   | Chairman                 |   | 114       |   |   |   |      |   |   |      |   |   | 114       |
| Biscozzi        Luigi                  |   | Effective        Auditor |   | 91        |   |   |   |      |   |   | 46        | (1)    |   | 137       |
| Colombo Paolo Andrea                   |   | Effective Auditor        |   | 91        |   |   |   |      |   |   | 32        | (2)    |   | 123       |
| Duodo Filippo                          |   | Effective        Auditor |   | 90        |   |   |   |      |   |   | 54        | (3)    |   | 144       |
| Perotta Riccardo                       |   | Effective Auditor        |   | 90        |   |   |   |      |   |   | 45        | (4)    |   | 135       |
|                                   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| **General Manager E&P Division**   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| Cao Stefano                            |   |                     |   |      |   |   |   | 280       |   |   | 644       |   |   | 924       |
|                                   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| **General Manager G&P Division**   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| Sgubini        Luciano                 |   |                     |   |      |   |   |   | 353       |   |   | 574       |   |   | 927       |
|                                   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| **General Manager R&M Division**   |   |                     |   |      |   |   |   |      |   |   |      |   |   |      |
| Callera        Gilberto                |   |                     |   |      |   |   |   | 798       | (5)    |   | 243       |   |   | 1,041     |
| Taraborrelli Angelo                    |   |                     |   |      |   |   |   | 129       |   |   | 317       |   |   | 446       |
|                                        |   |                          |   |           |   |        |   |           |        |   |           |        |   |           |
|                                   |   |                     |   | **2,152** |   | **7**  |   | **2,437** |   |   | **2,877** |   |   | **7,473** |
|                                        |   |                          |   |           |   |        |   |           |        |   |           |        |   |           |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Includes        compensation for appointment as statutory auditor of        Syndial SpA and Polimeri Europa SpA.                                                                                                                                                                                                                                                        |
| (2)    |   | Includes        compensation for the appointment as statutory auditor of        position of Saipem SpA.                                                                                                                                                                                                                                                                 |
| (3)    |   | Includes        compensation for the appointment as statutory auditor of        Snamprogetti SpA, Chairman of the Board of Statutory        Auditors of CEPAV (Consorzio Eni per l’Alta        Velocità) Uno and Chairman of the Board of Statutory        Auditors of CEPAV (Consorzio Eni per l’Alta        Velocità) Due from February 24, 2005. |
| (4)    |   | Includes        compensation for the appointment as statutory auditor of        Enifin SpA and Chairman of the Board of Statutory        Auditors of Snam Rete Gas SpA from April 27, 2004.                                                                                                                                                                             |
| (5)    |   | Includes        employee termination indemnities (euro 798,000).                                                                                                                                                                                                                                                                                                        |

 

For the year ended December 31, 2004, the aggregatecompensation paid to or on behalf of the executive officers ofEni SpA was euro 16.04 million. The foregoing amounts includesalaries, fees for attending meetings, lump-sum amounts paid inlieu of expense reimbursements, stock option, stock grant andhealth and pension contributions. The foregoing amounts do notinclude amounts accrued to the reserve for employee terminationindemnities, which is used to pay severance pay as required byItalian law to employees upon termination of employment. Themembers of the Board of Directors in their capacity as such arenot entitled to receive such severance pay. At December 31, 2004,the total amount accrued to the reserve for employee terminationindemnities with respect to members of the Board of Directors whowere also employees of Eni, with respect to three GeneralManagers and with respect to the executive officers of Eni SpAwas euro 5.19 million.

The table below sets forth the amount and maturity of stockoptions granted to Eni’s Chief Executive Officer, GeneralManagers and executive officers in 2004:

|                                                                                       | **Options granted        in the year** |   | **Options held        at year end** |
|--------------------------------------------------------------------------------------------|----------------------------------------|--------|-------------------------------------|
|                                                                                       |                                        |   |                                     |
| Number of options                                                                          | 638,000                                |   | 1,959,500                           |
| Average        exercise price (euro)                                                       | 16.576                                 |   | 15.131                              |
| Maturity (days)                                                                            | 1,095                                  |   | 580                                 |
| Expiration        (days)                                                                   | 2,748                                  |   | 2,316                               |
| Weighted average exercise price for options        existing as of December 31, 2004 (euro) | 14.434                                 |   |                                |
|                                                                                       |                                        |   |                                     |

The information in the table above is current to June 14,2005. No additional options have been granted from December 31,2004 to that date. Eni issues only ordinary shares. For furtherinformation on Eni’s stock compensation see "Note 29 tothe Consolidated Financial Statements".

 

##### Table of Contents

**Board Practices**

> 
***Appropriate Conduct***

Due to the complex scenario in which Eni operates, the Boardof Directors has deemed it appropriate to provide a cleardefinition of the value system that Eni recognizes, accepts andupholds and the responsibilities that Eni assumes within itsGroup and externally in order to ensure that all Group activitiesare conducted in compliance with laws, in a context of faircompetition, with honesty, integrity, correctness and in goodfaith, respecting the legitimate interests of shareholders,employees, suppliers, customers, commercial and financialpartners and the communities where Eni operates. All thoseworking for Eni, without exception or distinction, are committedto observing these principles within their function andresponsibility and to make others observe them. The belief ofworking for the advantage of Eni cannot be a justification forbehaviors contrary to such principles. These values are stated ina "Code of Conduct" whose observance by employees isevaluated by the Board of Directors, based on the annual reportof the Guarantor for the Code of Conduct. The Code of Conduct ispublished in Eni’s internet site (www.eni.it).

In its meeting of January 20, 2000 Eni’s Board ofDirectors resolved to adopt the Self-discipline Code of ListedCompanies (the "Code") and, pursuant to a thoroughreview of the matter, underscored how Eni’s organizationalmodel is essentially in line with the principles expounded in theCode, as well as with related recommendations issued by Consob.

In accordance with the request of Borsa Italiana SpA, inparticular the "Guidelines for the preparation of the yearlyreport on corporate governance" of February 12, 2003,follows information on Eni’s corporate governance system. Inpreparing this report account has been taken also of the"Guide to the preparation of the report on corporategovernance" published by Assonime and Emittenti Titoli SpAin March 2004.

 

> 
***The Board of Directors: Competencies, Delegate    Powers and Composition***

Eni’s organizational structure follows the traditionalmodel of companies in which management is exclusively entrustedto the Board of Directors, which is the central element ofEni’s corporate governance system. Monitoring functions areentrusted to the Board of Statutory Auditors and the audit of thefinancial statements is entrusted to the external auditorsappointed at the Shareholders’ Meeting.

The Board of Directors delegated specific powers to theChairman and Managing Director, who are the representatives ofthe company according to Article 25 of Eni’s by-laws.

In accordance with internationally accepted principles ofcorporate governance, the Board of Directors establishedcommittees with consulting and proposing functions.

According to its decision of September 17, 2003, in additionto exclusive competencies entrusted to it by Article 2381 of theCivil Code, the Board of Directors has reserved the followingtasks:

| 1.  |   | to define corporate        governance rules for the Company and Group companies,        including the appointment, definition of functions and        regulations of Board Committees;                                                                                                                                                                                        |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.  |   | to define guidelines for the        internal control system, based on indications provided by        the relevant Board Committee, and to monitor the        effectiveness and modes of managing main corporate risks;                                                                                                                                                        |
| 3.  |   | to examine and approve the        main features of corporate and Group organization,        checking the effectiveness of the organization and        administration setup prepared by the Managing Director;                                                                                                                                                                 |
| 4.  |   | to determine – on        proposal of the Managing Director – strategic        guidelines and objectives at the Company and Group level;                                                                                                                                                                                                                             |
| 5.  |   | to examine and approve        multi-annual strategic, industrial and financial plans at        the Company and Group level;                                                                                                                                                                                                                                                   |
| 6.  |   | to examine and approve        yearly budgets of Divisions, of the Company and the        consolidated Group budget;                                                                                                                                                                                                                                                           |
| 7.  |   | to evaluate and approve        quarterly accounts and related disclosures and any other        period accounts and related disclosures provided for by        the law and to compare quarterly results with planned        results;                                                                                                                                           |
| 8.  |   | to evaluate the general        trends in operations with specific attention to possible        conflicts of interest;                                                                                                                                                                                                                                                         |
| 9.  |   | to examine and approve        strategically relevant agreements;                                                                                                                                                                                                                                                                                                              |
| 10. |   | to receive from Directors        entrusted with specific powers timely reports describing        the activities performed under such powers and the most        relevant transactions, according to a specific previously        agreed definition, and any atypical or unusual relations        and transactions with related parties;                                       |
| 11. |   | to receive from Board        Committees periodic reports on activities performed,        according to previously agreed definitions and        timetables;                                                                                                                                                                                                                    |
| 12. |   | to attribute, modify and        revoke powers to Directors, defining their limits and        modes of execution, determining the compensation related        to such powers, after consultation with the Board of        Statutory Auditors. To deliver guidelines to empowered        Directors and to recall to itself transactions included        in the delegated power; |
| 13. |   | to approve, based on the        indications of the relevant Committee, the adoption and        implementation of share incentive plans and to define the        compensation criteria of top managers;                                                                                                                                                                        |
| 14. |   | to appoint, revoke and        delegate powers to general managers, on proposal of the        Managing Director and in agreement with the Chairman;                                                                                                                                                                                                                            |
| 15. |   | to decide major sale and        purchase transactions of the Company and to provide a        pre-emptive evaluation of those concerning Group        companies, in particular:                                                                                                                                                                                                |

|   |   | a) |   | sale and purchase        transactions, as well as conferral of real estate,        investments, companies of amounts exceeding euro 50        million;                                                                                                                                                                                             |
|--------|--------|----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | b) |   | capital expenditure in        tangible and intangible assets with great significance        for the Group in terms of strategic impact and risks, and        however all those of amounts exceeding euro 100 million,        as well as any portfolio and exploration initiatives of        the Exploration & Production segment in new areas; |
|   |   | c) |   | the provision of loans from        Eni or its subsidiaries to third parties;                                                                                                                                                                                                                                                                       |
|   |   | d) |   | the provision from Eni of        personal and real guarantees to third parties in the        interest of Eni or its subsidiaries of amounts exceeding        euro 50 million;                                                                                                                                                                      |
|   |   | e) |   | the provision of loans from        Eni or its subsidiaries to affiliates, as well as of real        and personal guarantees on their bonds of amounts        exceeding euro 50 million and, in any case, if the amount        is not proportional to the stake held in the affiliate;                                                              |

| 16. |   | to examine and decide any        proposal of the Managing Director concerning voting and        appointment of members of the Board of Directors and the        Board of Statutory Auditors of major subsidiaries; |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 17. |   | to formulate all the        proposals of decisions to be presented to the        Shareholders’ Meeting.                                                                                                       |

The Board entrusted the Chairman with powers for researchingand promoting integrated projects and strategic internationalagreements and the Managing Director with all managing powersexcept those that cannot be delegated and those reserved to theBoard. In accordance with Article 27 of Eni’s by-laws, theChairman chairs Shareholders’ Meetings, convenes and chairsBoard of Directors meetings and oversees the implementation ofdecisions made by it. In accordance with Article 23 of Eni’sby-laws, the Board of Directors and the Managing Director reporttimely to the Board of Statutory Auditors, at least quarterly andat each Board meeting, on activities performed and majortransactions of Eni and its subsidiaries, in particular on thosein which they have a direct or indirect interest. In accordancewith Article 2391 of the Italian Civil Code, Directors informother Directors and the Board of Statutory Auditors of anyinterest they may have, directly or on behalf of third parties,in any transaction of Eni.

In accordance with Article 17 of Eni’s by-laws, asamended by the Board on April 13, 2005, the Board of Directors ismade up by 3 to 9 members. The Shareholders’ Meetingappoints up to nine members. Pursuant to Law Decree No. 332 ofMay 31, 1994, modified and converted into Law No. 474 of July30,1994 as amended by Law No. 350 of December 24, 2003, theMinister of Economy and Finance in agreement with the Minister ofProductive Activities may appoint another member with no votingrights. The Board of Directors in charge as of December 31, 2004was made up by 8 members elected by the Shareholders’Meeting of May 30, 2002 for a three-year term. On that occasion,the Minister of Economy and Finance chose not to appoint onemember of the Board, in agreement with the Minister of ProductiveActivities. The appointment of the Board of Directors (except forthe Director appointed by the Economy and Finance Minister inagreement with the Minister of Productive Activities) calls for alist vote. Only shareholders who, alone or with others representat least 1% of voting shares at an ordinary meeting have theright to present lists for the appointment of directors andauditors, as well as the Board of Directors (that never made useof this right). Each shareholder can present or participate inpresenting only one list. Companies controlling a shareholder andjoint controlled companies cannot present, nor participate inpresenting other lists, meaning by subsidiaries the companiesdescribed in Article 2359, paragraph 1 of the Civil Code. Thelists must be deposited at Eni’s headquarters at least tendays before the date set for the Shareholders’ Meeting onfirst call (20 days in case of the Board of Directors presentinga list) and published on newspapers with national distributionand must include a resume of each candidate.

Board members must comply with the honorability andindependence requirements provided for by applicable regulations,as well as the professionalism and experience required forperforming their duties with efficacy and efficiency, to whichthey are expected to dedicate adequate time and resources.

On February 28, 2005, Eni’s Board of Directors, inaccordance with the provisions of the Code, evaluated thestatements presented by Board members and established that nonexecutive Board members and the Chairman were independentaccording to Italian corporate governance standards as they didnot have any economic relationship with Eni and Eni Groupcompanies, with the Managing Director and with the Ministry ofEconomy and Finance, Eni’s major shareholder, such as tobias their autonomous judgment nor are they close relatives ofthe Managing Director. The Managing Director of Eni was anemployee of Eni. On June 1, 2005, Chairman Roberto Poli andDirectors Alberto Clô, Renzo Costi, Dario Fruscio, Marco Reboa,Mario Resca and Pierluigi Scibetta declared that they meet theindependence requirements as provided for by Italian corporategovernance standards.

Eni’s by-laws do not indicate a specific frequency ofmeetings. In 2004, the Board of Directors met 18 times (19 in2003) for an average length of four hours per meeting. The publicis informed of the dates of meetings convened for the approval ofinterim results, of periodic reports as provided for byapplicable laws, as well as the dates of Shareholders’Meetings.

The Board of Directors defined the rules for the calling ofits meetings; in particular, the Chairman convenes Boardmeetings, and, in concert with the Managing Director, definesagenda items. Notice is sent by mail, fax or e-mail within fivedays of the meeting’s date, at least 24 hours in advance incase of urgency. Eni’s by-laws allow meetings held byteleconference, provided that all participants can be identifiedand are allowed to participate in real time. The meeting isdeemed held in the location where Chairman and Secretary arepresent.

Board members receive in advance adequate and thoroughinformation on all issues subject to Board evaluation andresolutions, except for urgent cases and those for whichconfidentiality is deemed necessary. In 2004, on average 90% ofBoard members participated to Board meetings and 88% ofindependent non executive Board members.

 

> 
***Board Committees***

In order to carry out its tasks more effectively, the Board ofDirectors has instituted three advisory Committees: the InternalControl Committee and Compensation Committee, formed exclusivelyby independent, non-executive Board members, and theInternational Oil Committee (previously the Oil & GasCommittee) in which also the Managing Director participates.Board members receive euro 1,000 for each participation in Boardcommittees.

During 2004 and until the expiration of former Eni’ Boardof Directors on May 27, 2005, the Committees were formed asfollows:

*Internal Control Committee*: Mario Giuseppe Cattaneo(Chairman), Alberto Clô, Renzo Costi and Guglielmo AntonioClaudio Moscato.

*Compensation Committee*: Mario Resca (Chairman), MarioGiuseppe Cattaneo, substituted in February 2004 by Roberto Poli,and Renzo Costi.

*International Oil Committee*: Alberto Clô (Chairman),Dario Fruscio, Vittorio Mincato and Guglielmo Antonio ClaudioMoscato.

On June 1, 2005 the newly appointed Board of Directorsappointed Mario Resca, Marco Pinto and Pierluigi Scibetta membersof the Compensation Committee; Marco Reboa, Alberto Clô, RenzoCosti, Marco Pinto and Pieluigi Scibetta members of the InternalControl Committee; and Alberto Clô, Dario Fruscio, Marco Reboaand Paolo Scaroni members of the International Oil Committee.

The Code suggests the creation of a "NominatingCommittee" in the companies with shares held widely by thepublic, especially when the Board notices that shareholders findit difficult to prepare proposals for appointments. Thiscommittee has not been formed in consideration of theshareholding characteristics of Eni and of the fact thatDirectors are appointed on the basis of candidate lists submittedby shareholders or by the Board of Directors.

> 
*Internal Control Committee*

The Internal Control Committee, established by the Board ofDirectors in 1994, based on the decisions adopted by the Board onOctober 18, 2000 and November 7, 2003, holds functions ofsupervision, counsel and proposal in the area of monitoringgeneral management issues.

In the meeting of November 7, 2003 the Board approved theCommittee’s regulation and specified its functions (theregulation is available on Eni’s internet site).

During 2004, the Internal Control Committee convened 15 times,with an average participation of 88% of its members, and hasaccomplished the following: (i) reviewed the audit programsprepared by Eni SpA’s and Group companies’ internalaudit functions; (ii) reviewed and evaluated results of EniSpA’s and Group companies’ internal auditingprocedures; (iii) monitored the initiatives taken by Eni and theresults of action undertaken after being informed of improperpayments on the part of representatives of suppliers of EniPowerto a manager of said company; (iv) met with top levelrepresentatives of administrative functions in the mainsubsidiaries, chairmen of boards of statutory auditors andpartners responsible for external audit companies to examine theessential features of 2003 financial statements with specificreference to extraordinary transactions and relations amongfunctions entrusted with controls at Eni SpA and itssubsidiaries; (v) analyzed the competencies attributed to it bythe Board of Directors with the approval of the new regulation;(vi) examined the results of an analysis on audit structures inother Italian Group companies; (vii) monitored the activitiesdevised by Eni for the application of the "Model oforganization, management and control" as per LegislativeDecrees No. 231/2001 and No. 61/2002; (viii) examined reportsreceived on the activity of the newly established internalmonitoring unit as per Legislative Decree No. 231/2001; (ix)examined the implications related to the definition of aprocedure on the treatment of anonymous reports; (x) examined theresults of the bid for the conferral of the function of externalauditors for the 2004-2006 period and expressed to the Board itsfavorable opinion for the appointment of PricewaterhouseCoopersas external auditor for 2004-2006 financial statements; (xi)examined the audit plans for 2004 financial statements and thereports required by document No. 260 of audit principles"Comments on events related to audits addressed to personsresponsible for corporate governance", as well as theactivities performed by the Groups’ external auditors in2004; (xii) reviewed the situation appointments conferred in 2002and 2003 by Eni and its consolidated subsidiaries and affiliatesto external auditors registered with Consob and related subjects;(xiii) reviewed the situation of appointments of externalauditors of main group companies, the relevant accounts and theopinions contained in the reports of external auditors ofEni’s Italian subsidiaries; and (xiv) monitored theappointment of additional functions to companies belonging to thenetwork of the external auditors, expressing its opinion.

Based on Board of Directors’ resolution of March 22,2005, certain responsibilities and competencies of the InternalControl Committee have been transferred to the Board of StatutoryAuditors effective June 1, 2005 (see below).

In 2005, Eni’s external auditors met with Eni InternalControl Committee in order to discuss: (i) critical accountingpolicies and practices applied for the purpose of a properrepresentation of Eni’s results of operations and financialcondition; (ii) alternative accounting treatments provided for bygenerally accepted accounting principles concerning materialitems discussed with management, including ramifications of theuse of, the impact deriving from the application of saidalternative disclosures and treatments and relevant information,as well as the treatments preferred by external auditors; (iii)the contents of any other material written communication betweenexternal auditors, and management.

> 
*Compensation Committee*

The Compensation Committee, established by the Board ofDirectors in 1996, proposes incentive schemes for managers andthe yearly remuneration of the Chairman and Managing Director tothe Board of Directors and overviews the criteria used indetermining compensation of the Group’s top management.

During 2004, the Committee met 5 times, with an averageparticipation of 93% of its members, and accomplished thefollowing: (i) proposed a regulation for the Committee that wasapproved by the Board in its meeting of February 26, 2004; (ii)reviewed the objectives of the 2004 Group Performance andIncentive Plan and the results of the 2003 plan; examined theassignation schemes of the stock option and stock grant plans for2004 to be approved by the Board of Directors; (iii) presented aproposal concerning the variable part of the remuneration of theChairman and Managing Director; and (iv) examined the positioningin terms of compensation of the Groups’ top management andthe criteria of the annual remuneration policy.

> 
*International Oil Committee*

The International Oil Committee established by the Board ofDirectors in 2002, is entrusted with the monitoring of trends inoil markets and the study of their aspects.

During 2004 the InternationalOil Committee met three times, with an average participation of100% of its members. The first meeting was dedicated to theanalysis of "Hydrocarbon reserves: generalities andEni’s evaluation methods" with specific attention tothe technical, economic and regulatory aspects of the booking ofproved reserves of oil and gas and Eni’s behavior in thisarea. The second meeting was focused on "The gas bubble inEurope and Italy" with specific attention to the balance ofsupply and demand in Italy and Europe by 2010. During the thirdmeeting, the discussion concerned "A comparison ofscenarios: dynamics of prices of oil and energy sources".Special attention was paid to the methodological approach for theconstruction of future price scenarios for oil and gas and theevaluation of their impact of Eni’s capital expenditurepolicies.

> 
*Board of Statutory Auditors*

The Board of Statutory Auditors, in accordance with Article149 of Legislative Decree No. 58/1998, monitors the respect oflaws, of Eni’s memorandum of association, of the principlesof proper administration, the adequacy of the company’sorganizational structure for the parts concerning administrationand accounting, internal controls and Eni’s administrationand accounting systems, as well as its reliability in presentinginformation properly and the adequacy of regulations imposed tosubsidiaries according to Article 114, paragraph 2 of thementioned decree.

The Board of Statutory Auditors comprises five auditors andtwo substitute auditors, all appointed by the Shareholders’Meeting, who also appoints the Chairman, for a three-year term.Previously the Chairman was appointed with decree of the Ministerof Economy and Finance in consultation with the Minister ofProductive Activities. 

Statutory Auditors are appointed in accordance with Articles17 and 28 of Eni’s by-laws, which call for a list vote inorder to ensure presence of representatives of minority equityinterests. Auditors are autonomous and independent even from theshareholders who elected them. The lists of candidates include aresume of each candidate and are deposited at the company’sheadquarters at least 10 days before the date of theShareholders’ Meeting on first call and are published onnational newspapers.

Article 28 of Eni’s by-laws, consistently with theprovisions contained in the Decree of the Minister of Justice No.162 of March 30, 2000, states that at least two auditors and onesubstitute auditor are chosen among chartered auditors and musthave performed auditing activities for at least three years andthat auditors not provided with these requirements must be chosenamong those provided with the level of professionalism describedin Decree No. 162/2000. For the purposes of said Decree, theby-laws define as related subjects commercial law, corporateeconomy and finance, engineering and geology. Eni’s auditorsare all chartered auditors.

Statutory auditors receive in advance adequate and thoroughinformation on all issues subject to Board evaluation andresolutions. Eni’s by-laws allow meetings held byteleconference.

On May 30, 2002 the Shareholders’ Meeting determined theyearly compensation for the Chairman of the Board of StatutoryAuditors and each Auditor amounting to euro 87,000 and euro58,000, respectively and euro 1,000 for the presence to eachmeeting, as well as payment of reasonable attendance expenses.

The Shareholders' Meeting held on May 27, 2005 resolved toapprove the determination of the annual compensation to be paidto the Chairman of the Board of Statutory Auditors and eachstatutory auditor at euro 115,000 and euro 80,000, respectivelyplus the reimbursement of the expenses incurred.

The Board of Directors in its meeting of March 22, 2005,attributed to the Board of Statutory Auditors the followingresponsibilities and competencies effective June 1, 2005: (i) toevaluate proposals for the appointment of the issuer’sexternal auditors and to present recommendations to the Board ofDirectors related to the appointment and termination of suchexternal auditors to be approved by the Shareholders’Meeting; (ii) to oversee the work of said auditors engaged forthe purpose of preparing or issuing an audit report or performingother audit, review or attest services for Eni; (iii) to presentrecommendations to the Board of Directors concerning theresolution of disagreements between management and the auditorsregarding financial reporting; (iv) to approve procedures for:(a) the receipt, retention and treatment of complaints receivedby Eni regarding accounting, internal accounting controls orauditing matters; (b) the confidential, anonymous submission byemployees of Eni of concerns regarding questionable accounting orauditing matters; (v) to establish procedures for thepre-approval of any non-audit service, identified in detail bythe Board, provided to Eni by its auditor and to examine itsreports; (vi) to evaluate requests to engage external auditors torender non-audit services and to express its opinion to the Boardof Directors; (vii) to examine the periodic reports submitted byexternal auditors regarding: (a) all critical accounting policiesand practices to be used; (b) all alternative treatments offinancial information within generally accepted accountingprinciples that have been discussed with management officials andthe treatments preferred by the external auditors; (c) othermaterial written communications between the auditors and themanagement of Eni; (viii) to examine any complaint received bythe Managing Director and the Administration Director concerningsignificant deficiencies in the design or operation of internalcontrols which could adversely affect Eni’s ability torecord, process, summarize and report financial data and anymaterial weaknesses in internal controls; and (ix) to examine anycomplaint received by the Managing Director and theAdministration Director concerning any fraud that involvesmanagement or other employees who have a significant role inEni’s internal controls.

The Board of Statutory Auditors has the authority to engageindependent counsel and other advisors as it determines necessaryto carry out its duties, also through Eni structures.

The Board of Statutory Auditors is provided with appropriatefunding to compensate any advisor it employs as well as to coverits ordinary administrative expenses.

The Board of Statutory Auditors has been selected to fulfillthe role of the audit committee in the US audit committee asexplained below in the section "Significant differences incorporate governance practices as per Section 303A.11 of the NewYork Stock Exchange Listed Company Manual".

> 
*Special Powers of the    State*

For a description of the special powers of the State, see"Item 10 – Memorandum and Articles of Association– Limitations on Voting and Shareholdings – SpecialPowers of the State" below.

> 
*Investor relations and information processing*

In concert with the launch of its privatization process, Eniadopted a communication policy, confirmed by the Code of Conduct,aimed at promoting an ongoing dialogue with institutionalinvestors, shareholders and the markets to ensure systematicdissemination of exhaustive complete, transparent, selective andprompt information on its activities, with the sole limitationimposed by the confidential nature of certain information.Information made available to investors, markets and the press isprovided in the form of press releases, regular meetings withinstitutional investors and the financial community and thepress, in addition to general documentation released andconstantly updated on Eni’s internet site. Investor andshareholder relations are handled by special Eni functions.

Relations with investors and financial analysts are held bythe Investor Relations office. Information is available onEni’s web site and can be requested to theinvestor.relations@eni.it mailbox.

Relations with the press are held by the Relations with thepress unit.

Relations with shareholders are held by the CorporateSecretary office. Information is available on Eni’s web siteand can be requested to the segreteriasocietaria.azionisti@eni.itmailbox and the toll-free number 800940924.

Information regarding period reports and majorevents/transactions is promptly released to the public, alsothrough the internet site. A specific section of Eni’s sitecontains all press releases, procedures concerning corporategovernance, presentations provided in meetings with the press andfinancial analysts, notices to shareholders and bond holders andinformation concerning shareholders’ and bond holders’meetings, including proceeds thereof. Documents available to thepublic free of charge are mailed on request.

Eni is aware that financial information plays a crucial rolein the functioning of capital markets and in the creation andmaintenance of satisfying relationships between the company andits increasingly wide area of stakeholders. Eni is also awarethat investors’ trust in listed companies is one of theessential elements for the functioning of global economy.Investors must be able to rely on the absolute moral integrity ofpersons responsible of key positions in companies and on theirrespect of corporate codes of conduct, procedures and rules.Eni’s commitment to provide investors and markets withtruthful, complete, transparent, timely and selective financialinformation is confirmed by its Code of Conduct, that identifiesthe fundamental values for the deployment of its activities inthe completeness and transparency of information, the formal andsubstantial legitimacy of behavior of its employees at anyorganizational level and the clarity and truthfulness of itsaccounting, in accordance with laws and regulations in force.

On December 18, 2002, Eni’s Board of Directors approved a"Procedure for the disclosure of information to the marketconcerning Group activities" published on Eni’sinternet site. The procedure acknowledges Consob guidelines andthe "Guidelines for information to the market" issuedin June 2002 by the Ref Forum on company information, defines therequirements for disclosure to the public of price sensitiveevents (materiality, clarity, homogeneity, information symmetry,consistency and timeliness) and the information flows foracquiring data from Group companies and providing adequate andtimely information to the Board and the market on price sensitiveevents. It also contains sanctions applied in case of violationof its rules.

Eni’s Code of Conduct defines confidentiality dutiesupheld by Group employees relating to the treatment of sensitiveinformation.

> 
*Internal dealing*

In compliance with the provisions contained in the Rules ofthe markets organized and managed by Borsa Italiana SpA (theItalian Stock Exchange) and in Consob’s Resolution 13655 ofJuly 9, 2002, as amended, on December 18, 2002 Eni’s Boardof Directors has approved the Code of Conduct for InternalDealing (published on Eni’s internet site) concerningtransactions involving financial instruments issued by Eni SpAand its listed subsidiaries. This Code, in force from January 1,2003, contains the provisions that govern public disclosureobligations and limitations regarding transactions involvingfinancial instruments issued by Eni and by its listedsubsidiaries executed on their own behalf by relevant persons.Relevant persons have been identified to be: (i) Board membersand statutory auditors of Eni, the Magistrate of the Court ofAccounts delegate inspector; and (ii) the managers directlyreporting to the Chairman and the Managing Director of Eni andthe managers directly reporting to the aforementioned first lineof managers.

According to the Code, the market has to be informed at theend of each calendar quarter about the operations carried out byrelevant persons if their amount in each calendar quarter exceedseuro 35,000 (the limit set by the Rules of the Italian StockExchange is euro 50,000), while the market has to be informedwithout delay of transactions if their amount exceeds 175,000 ineach three-month calendar period (the limit set by the Rules ofthe Italian Stock Exchange is euro 250,000).

The stock options exercise in connection with stock optionplans and the sale of shares acquired in connection with stockoption and stock grant plans are to be taken into account withreference to the above mentioned limits.

The Code on Internal Dealing prohibits relevant persons fromcarrying out transactions on the financial instruments issued byEni SpA and its listed subsidiaries in the fifteen working dayspreceding the meetings of the Board of Directors of Eni SpAconvened to review the financial statements and the preliminaryresults as well as, if not announced in the previous cases, themeeting of the Board resolving on the dividend proposal to theShareholders’ Meeting. This prohibition does not apply tothe option exercise in connection with stock option and stockgrant plans, provided that shares are not sold in said periods.

 

> 
***Significant differences in corporate governance    practices as per Section 303A.11 of the New York Stock    Exchange Listed Company Manual***

*Corporate governance* standards followed by Italianlisted companies are set forth in the Civil Code and in theLegislative Decree No. 58 of February 24, 1998, "Single textcontaining the provisions concerning financialintermediation" (Testo unico delle disposizioni in materiadi intermediazione finanziaria, the "TUF"), as well asby the Self-discipline Code of listed companies (the"Code") issued by the Committee for corporategovernance of listed companies. As discussed below, Italiancorporate governance standards differ for certain aspects fromNYSE standards.

The civil code and the TUF assign specific binding andirrevocable powers and responsibilities to company’scorporate bodies. The Code, based on this regulatory framework,provides recommendations on corporate governance intended toreflect generally accepted best practices. Although theserecommendations are not binding, Borsa Italiana SpA requestslisted companies to publish an Annual Report on corporategovernance which contains, besides a general description of thecorporate governance system adopted, also any recommendation thatwas not followed and the reasons for this choice. Eni adopted theself-discipline code.

Eni’s organizational structure follows the traditionalItalian model of companies which provides for two main separatecorporate bodies, the Board of Directors and the Board ofStatutory Auditors to whom are respectively entrusted managementand monitoring duties. This model differs from the US unitarymodel which provides for the Board of Directors as the solecorporate body responsible for management and, through an auditcommittee established within the same Board, for monitoring.

Below is a description of the most significant differencesbetween corporate governance practices followed by US domesticcompanies under the NYSE standards and those followed by Eni.

> 
*Independent Directors*

*NYSE Standards* Under NYSE standards listed UScompanies’ Boards must have a majority of independentdirectors. A director qualifies as independent when the Boardaffirmatively determines that such director has no certainmaterial relationship (commercial, industrial, banking,consultancy, etc.) with the listed company (and itssubsidiaries), either directly, or indirectly. In particular, adirector is not deemed independent if he/she or an immediatefamily member has a certain specific relationship with theissuer, its auditors or companies that have material businessrelationships with the issuer (e.g. he/she is an employee of theissuer or a partner/employee of the auditor). In addition, adirector cannot be considered independent in the three-year"cooling-off" period following the termination of anyrelationship that compromised a director’s independence.

*Eni Standards* In Italy, the Code recommends that theBoard of Directors includes an adequate number of independentnon-executive directors "in the sense that they: a) do notentertain, directly or indirectly or on behalf of third parties,nor have recently entertained business relationships with thecompany, its subsidiaries, the executive directors or theshareholder or group of shareholders who controls the company ofa significance able to influence their autonomous judgement; b)neither own, directly or indirectly or on behalf of thirdparties, a quantity of shares enabling them to control thecompany or exercise a considerable influence over it norparticipate in shareholders’ agreements to control thecompany; and c) are not immediate family members of executivedirectors of the company or of persons in the situations referredto in points a) and b)." The independence of directors isperiodically reviewed by the Board of Directors keeping intoaccount the information provided by the directors themselves. TheCode also recommends that to evaluate independence "in thecase of earlier business dealings, reference should be made tothe previous financial year and for work relationships andfunctions of executive director, to the three preceding financialyears."

The Code provides for a qualitative evaluation, that considersthe whole of the relationships held, in order to check as thecase may be if the existing relationships between the issuer andthe director are such to impair the director’s independence.

In 2004, Eni’s Board of Directors judged that theChairman and its non-executive members comply with theindependence standards, as provided for by the Code.

> 
*Meetings of non executive directors*

*NYSE Standards* Non-executive directors, including thosewho are not independent, must meet at regularly scheduledexecutive sessions without management. Besides, if the group ofnon-executive directors includes directors who are notindependent, independent directors should meet separately atleast once a year.

*Eni Standards* Neither Eni’s non-executivedirectors nor Eni’s independent directors must meetseparately, under the Code’s corporate governance rules.

> 
*Audit Committee*

*NYSE Standards* Listed US companies must have an auditcommittee that satisfies the requirements of Rule 10A-3 under theSecurities Exchange Act of 1934 and that complies with thefurther provisions of the Sarbanes-Oxley Act and of Section303A.07 of the NYSE Listed Company Manual.

*Eni Standards* In its meeting of March 22, 2005,Eni’s Board of Directors, making use of the exemptionprovided by Rule 10A-3 for non-US private issuers, has identifiedthe Board of Statutory Auditors as the body that, starting fromJune 1, 2005, will be performing the functions required by theSEC rules and the Sarbanes-Oxley Act to be performed by the auditcommittees of non-US companies listed on the NYSE (see paragraph"Board of Statutory Auditors" earlier). Under Section303A.07 of the NYSE listed Company Manual audit committees of UScompanies have further functions and responsibilities which arenot mandatory for non-US private issuers and which therefore arenot included in the list of functions shown in the paragraphreferenced above.

> 
*Nominating/corporate governance committee*

*NYSE standards* US listed companies must have anominating/corporate governance committee (or equivalent body)composed entirely of independent directors that are entrusted,among others, with the responsibility to identify individualsqualified to become board members and to select or recommenddirector nominees for submission to the shareholders’meeting, as well as to develop and recommend to the Board ofDirectors a set of corporate governance guidelines.

*Eni Standards* This provision is not applicable tonon-US private issuers. The Code allows listed companies to havewithin the Board of Directors a committee for directors’nominees proposals, above all when the Board of Directors detectsdifficulties in the shareholders submission of nomineesproposals, as could happen in publicly-owned companies. Eni hasnot set up a nominating committee, considering the nature of itsshareholding as well as the circumstance that, under Eni by-laws,directors are appointed by the Shareholders’ Meeting basedon lists presented by shareholders or by the Board of Directors.

 

##### Table of Contents

**Employees**

At December 31, 2004, Eni’s employees were 71,497 with areduction of 5,024 employees (down 6.5% over 2003), of which4,100 persons outside Italy and 924 persons in Italy.

Employees hired in Italy were 41,311 (57.8% of all Groupemployees), of these 38,725 were working in Italy, 2,382 outsideItaly and 204 on board of vessels. As compared to 2003, the 924unit decline in employees was due to the balance of personsleaving their job and new hirings (667) and to changes inconsolidation (257).

The process of efficiency improvement and search for newskills and know-how continued in 2004 with the hiring of 1,993persons, of which 1,267 with open-end contracts and 726 personswith a fixed-term contract, most of them with universityqualifications (708 persons of which 424 are engineers) and 517persons with a high school diploma. During the year 2,660 personsleft their job at Eni, of these 2,007 had an open-ended contractand 653 a fixed-term contract.

Employees hired and working outside Italy at December 31, 2004were 30,186 (42.2% of all Group employees), with a 4,100 personsreduction due to the divestment of Agip do Brasil (3,968employees), the positive balance (120 persons with fixed-termcontracts) at Saipem and Snamprogetti, and the negative balanceof new hirings with open-end contracts and persons leaving theirjob in the rest of the Group (252 employees).

| **Employees        at year end** | **2002** |   | **2003** |   | **2004** |
|----------------------------------|----------|--------|----------|--------|----------|
|                             |          |   |          |   |          |

|   | **(units)** |
|--------|-------------|

| Exploration & Production                   | 7,715  |   | 7,718  |   | 7,705  |
|------------------------------------------------|--------|--------|--------|--------|--------|
| Gas &        Power                         | 13,317 |   | 12,982 |   | 12,843 |
| Refining & Marketing                       | 13,757 |   | 13,277 |   | 9,244  |
| Petrochemicals                                 | 7,258  |   | 7,050  |   | 6,565  |
| Oilfield Services Construction and Engineering | 29,091 |   | 26,457 |   | 26,740 |
| Other        activities                        | 6,360  |   | 5,705  |   | 4,983  |
| Corporate and financial companies              | 3,157  |   | 3,332  |   | 3,437  |
|                                           |        |   |        |   |        |
|                                           | 80,655 |   | 76,521 |   | 71,497 |
|                                           |        |   |        |   |        |

The table below sets forthEni’s employees at December 31, 2002, 2003 and 2004 in Italyand outside Italy:

 

|   |   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|--------|----------|--------|----------|--------|----------|
|   |   |   |          |   |          |   |          |

|   | **(units)** |
|--------|-------------|

| Exploration & Production                   | Italy                |   | 4,617  |   | 4,555  |   | 4,539  |
|------------------------------------------------|----------------------|--------|--------|--------|--------|--------|--------|
|                                           | Outside        Italy |   | 3,098  |   | 3,163  |   | 3,166  |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 7,715  |   | 7,718  |   | 7,705  |
|                                           |                 |   |        |   |        |   |        |
| Gas &        Power                         | Italy                |   | 10,852 |   | 10,302 |   | 10,216 |
|                                           | Outside Italy        |   | 2,465  |   | 2,680  |   | 2,627  |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 13,317 |   | 12,982 |   | 12,843 |
|                                           |                 |   |        |   |        |   |        |
| Refining & Marketing                       | Italy                |   | 7,332  |   | 6,882  |   | 6,879  |
|                                           | Outside        Italy |   | 6,425  |   | 6,395  |   | 2,345  |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 13,757 |   | 13,277 |   | 9,224  |
|                                           |                 |   |        |   |        |   |        |
| Petrochemicals                                 | Italy                |   | 5,744  |   | 5,585  |   | 5,237  |
|                                           | Outside Italy        |   | 1,514  |   | 1,465  |   | 1,328  |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 7,258  |   | 7,050  |   | 6,565  |
|                                           |                 |   |        |   |        |   |        |
| Oilfield Services Construction and Engineering |                 |   |   |   |   |   |   |
| Oilfield        Services                       | Italy                |   | 2,255  |   | 2,423  |   | 2,493  |
|                                           | Outside Italy        |   | 22,770 |   | 18,910 |   | 19,139 |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 25,025 |   | 21,333 |   | 21,632 |
|                                           |                 |   |        |   |        |   |        |
| Engineering                                    | Italy                |   | 3,433  |   | 3,544  |   | 3,637  |
|                                           | Outside        Italy |   | 633    |   | 1,580  |   | 1,471  |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 4,066  |   | 5,124  |   | 5,108  |
|                                           |                 |   |        |   |        |   |        |
| Other        activities                        | Italy                |   | 6,347  |   | 5,692  |   | 4,959  |
|                                           | Outside Italy        |   | 13     |   | 13     |   | 24     |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 6,360  |   | 5,705  |   | 4,983  |
|                                           |                 |   |        |   |        |   |        |
| Corporate and financial companies              | Italy                |   | 3,107  |   | 3,252  |   | 3,351  |
|                                           | Outside        Italy |   | 50     |   | 80     |   | 86     |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 3,157  |   | 3,332  |   | 3,437  |
|                                           |                 |   |        |   |        |   |        |
| **Total**                                      | Italy                |   | 43,687 |   | 42,235 |   | 41,311 |
| **Total**                                      | Outside Italy        |   | 36,968 |   | 34,286 |   | 30,186 |
|                                           |                 |   |        |   |        |   |        |
|                                           |                 |   | 80,655 |   | 76,251 |   | 71,497 |
|                                           |                 |   |        |   |        |   |        |
| of which senior managers                       |                 |   | 1,537  |   | 1,733  |   | 1,760  |
|                                           |                 |   |        |   |        |   |        |

 

##### Table ofContents

**Share Ownership**

At April 30, 2005, the total number of shares owned by thedirectors, statutory auditors and executive officers of Eni SpAas a Group was 380,965 equal to approximately 0.01% of Eni’sshare capital outstanding at December 31, 2004. Eni issues onlyordinary shares, each bearing one-vote right; therefore sharesheld by Eni SpA directors, statutory auditors and executiveofficers have no different voting rights.

 

 

##### Table of Contents

**Item 7. MAJOR SHAREHOLDERS AND RELATED PARTYTRANSACTIONS**

**Major Shareholders**

As of May 26, 2005, the Ministry of Economy and Finance, CassaDepositi e Prestiti SpA, Gruppo Banca Intesa and Gruppo SanpaoloIMI were the only persons known by Eni to own more than 2% of anyclass of Eni SpA’s voting securities. At such date, thetotal amount of Eni SpA’s voting securities owned by theseshareholders was:

 

| **Title        of Class**        |   | **Number of Shares Owned** |   | **Percent of Class** |
|----------------------------------|--------|----------------------------|--------|----------------------|
|                                  |   |                            |   |                      |
| Ministry of Economy and Finance  |   | 813,443,277                |   | 20.31%               |
| Cassa        Depositi e Prestiti |   | 400,288,338                |   | 10.00%               |
| Sanpaolo IMI                     |   | 104,562,012                |   | 2.61%                |
| Banca        Intesa              |   | 85,764,957                 |   | 2.14%                |
|                                  |   |                            |   |                      |

 

The Ministry of Economy and Finance, in agreement with theMinistry of Productive Activities, retains certain special powersover Eni. See "Item 10. Additional Information –Memorandum and Articles of Association – Limitations onVoting and Shareholdings – Special Powers of theState". For a discussion of Eni share buy-back program see"Item 16E – Purchases of equity securities by theissuer and affiliated purchasers". As of June 10, 2005 therewere 15,700,024 ADRs, each representing five Eni ordinary shares,outstanding on the New York Stock Exchange, corresponding to1.96% of Eni’s share capital. See "Item 9".

 

 

##### Table ofContents

**Related Party Transactions**

In the ordinary course of its business, Eni enters intotransactions concerning the exchange of goods, provision ofservices and financing with non consolidated subsidiaries andaffiliates, as well other companies owned or controlled by theItalian Government. All such transactions are conducted on anarm’s length basis and in the interest of Eni companies.

Amounts and types of trade and financial transactions withrelated parties are described in Note 26 to the FinancialStatements.

 

 

##### Table of Contents

**Item 8. FINANCIAL INFORMATION**

**Consolidated Statements and Other FinancialInformation**

See Item 18 – Financial Statements.

***Disclosure of Legal Proceedings***

Eni is a party to a number of civil actions and administrativeproceedings arising in the ordinary course of business. Based oninformation available to date, and taking account of the existingrisk reserves, Eni believes that the foregoing will not have amaterial adverse effect on Eni’s consolidated financialstatements.

The following is a description of the most significantproceedings currently pending; unless otherwise indicated below,no provisions have been made for these legal proceedings as Enibelieves that negative outcomes are not probable or because theamount of the provision is not reasonably quantifiable.

> 
**Environment**

> 
*Eni SpA*

In 1997, Grifil SpA summoned AgipPetroli SpA (merged into EniSpA in 2002) before the Court of La Spezia. Grifil requestedpayment for the remediation of a polluted land parcel part of theLa Spezia refinery (which was closed in 1985), sold to it in 1996by Italiana Petroli SpA and later merged into AgipPetroli SpA.The claims for these damages amount to euro 103 million. At theend of 2002 Grifil and AgipPetroli reached an agreement under theterms of which AgipPetroli had to pay half of the clean-up costs,the total amount of which was set by an independent appraisal ateuro 19 million, with AgipPetroli’s share corresponding to amaximum of euro 9.5 million, Grifil in turn had the obligation toremediate the polluted soil and to renounce any claims againstEni. Grifil did not fulfill its obligations to remediate thepolluted soil; however, maintaining the possibility ofprecautionary requests and claims against Grifil, Eni decided toremediate the polluted soil with the assistance of a companyinterested in developing the parcel of land. The first actionpromoted by Grifil before the Court of La Spezia is stillpending. On January 7, 2004 the Municipality of La Spezia put Eniin possession of the area and from that date Eni startedremediation works paying the relevant costs on its own. Enirequested the conservative seizure of Grifil’s land parcel,up to a maximum value of euro 19 million. With two administrativemeasures, on December 2, 2003 and January 13, 2004 respectively,the Court of Genova declared the right of Eni legitimate, basedon the sale contract stipulated between Italiana Petroli andGrifil, to claim the payment of all clean-up expenses that Eniwill incur as Grifil did not fulfil its obligation. The judgeclosed the inquiry phase and stated that the judgment can bebrought to an end. The final decision is expected for July 2005.As for the value attributable to the conservative seizure ofGrifil’s land parcel (up to a value of euro 19 million), theCourt requested Eni to file the contracts for the remediationwork with the court, in which the amounts paid are recognized.The contract with an international company specializing inremediation was signed on April 15, 2004 and immediatelypresented to the Court. In order to preserve Grifil’s assetas a way to recover its credit versus Grifil, Eni, which ispaying for the remediation works, also filed an ordinaryrevocation of title, so that, while waiting for the Court’sruling, Grifil will not be able to sell the land parcel to thirdparties. Recently, this international company specializing inremediation has updated the cost to be incurred for theremediation of this land parcel on the basis of new informationregarding the level of soil pollution. This new estimate amountsto euro 45 million, for which a relevant charge has been accruedto the risk reserve.

In 1999, the public prosecutor of Gela started aninvestigation in order to ascertain alleged soil and seapollution caused by the discharge of pollutants by Eni's Gelarefinery. In November 2002, "Italia Nostra" and theassociation "Amici della Terra" filed civil claimsrelated to this proceeding and requested the payment of damageclaims for a total of euro 15,050 million. In July 2003, therelevant Court decided for the transmission of the inquiries tothe public prosecutor, recognizing a violation of Article 440 ofthe penal code (water and food substances corruption). Thepreliminary hearing was carried out on May 24, 2005. The nexthearing is scheduled on October 18, 2005.

In 2000, the public prosecutor of Gela started aninvestigation on alleged prohibited emissions from the refineryof Gela, which are purported to have had negative effects on thehealth of a number of citizens of Gela, and on a lack ofdeclaration of such emissions in violation of Presidential DecreeNo. 203 of 1988. The investigation ended with an action forevents occurred from 1997. The Municipality of Gela, the Provinceof Caltanissetta and others filed civil claims in this proceedingand requested the payment of compensatory damages for a total ofeuro 878 million. The judgment of first degree before the Courtof Gela is pending.

In 2002, the public prosecutor of Gela started aninvestigation in order to ascertain alleged pollution caused byemissions of the Gela plant, owned by Polimeri Europa SpA,Syndial SpA (former EniChem SpA) and Raffineria di Gela SpA. Aninquiry phase was closed on July 2, 2003. Some local publicentities, environmental NGOs and landowners will act as injuredparty. On January 17, 2005, a second inquiry phase commenced in2003 to ascertain which sort of emissions had eventually producedthe alleged pollution caused by the refinery of Gela, wascompleted.

In March 2002, the public prosecutor of Siracusa started aninvestigation concerning the activity of the refinery of Priolofor intentional pollution of water used for human consumption andrequested a technical opinion, not yet concluded, to ascertainalleged infiltrations of refinery products into the deepwater-bearing stratum used for human consumption purposes in thePriolo area. The proceeding is still in the preliminaryinvestigation phase. In consideration of the complexity of theinvestigation, a qualified company has been given the task toverify the cause, the origin and the extension of theinfiltration. For protective purposes, actions have been takento: (i) create safety measures and clean-up all of the pollutedarea; (ii) reallocate wells for drinking water in an area fartherfrom and higher than the industrial site; and (iii) install apurification system for drinkable water. With a decision of June1, 2004 the seizure was lifted on the storage tanks that had beenseized on April 17, 2003, except for five storage tanks that arestill under seizure.

In June 2002, in connection with a fire in the refinery ofGela, a penal investigation began concerning arson, environmentalcrimes and crimes against natural heritage. On May 12, 2004 thefirst hearing was held for an immediate decision. The proceedingis pending.

In 2002, the public prosecutor of Gela started a penalinvestigation concerning the refinery of Gela to ascertain thequality of ground water in the area of the refinery. On October27, 2003 the prosecutor asked to ascertain the state of therefinery’s storage tanks and the presence of infiltrationsof refinery products into the deep water-bearing stratum, due toa breakage in some tanks. The investigation concerns theenvironmental rules about the pollution of water and soil andillegal disposal of liquid and solid waste materials. With adecision of November 3, 2003, the Court for preliminaryinvestigation, in agreement with a request of the publicprosecutor of Gela, had already ordered the preventive seizure of92 storage tanks. The decree stopped activity at the refinery ofGela in November 17, 2003 following the inquiry phase and manyinvestigations, inspections and analyses were made by expertsappointed by the judge for the preliminary investigation. Theseexperts declared there had been no reasonable loss of productsfrom storage tanks. Thereafter, 42 storage tanks were reopenedand this allowed activity at the facility to restart of the onJanuary 19, 2004. Following this, another 38 tanks were reopened,12 remained under seizure at December 31, 2004.

In relation to the investigations concerning a subsidencephenomenon allegedly caused by hydrocarbon exploration, on May21, 2004, following the decision of the Court of Rovigo, theNucleo Operativo Ecologico dei Carabinieri of Venice placed underpreliminary seizure the Dosso degli Angeli, Angela/Angelina– Ravenna Mare Sud fields and the related wells andplatforms. On June 10, 2004 the Court responded to the claimfiled by Eni and lifted the seizure of the Angela/Angelina –Ravenna Mare Sud fields and related wells and platforms. On March10, 2005, the Supreme Court confirmed the decision of the Courtof Rovigo lifting the seizure on Eni’s fields, thusrejecting the appeal presented by the Public Prosecutor. OnFebruary 5, 2003, a seizure had already been applied to theNaomi/Pandora platform, the Naomi 4 Dir, Naomi 2 Dir and 3 Dir– Pandora 2 Dir wells, and the underwater pipeline for thetransportation of gas to the Casalborsetti facility. Eni believesit has always acted in full compliance with existing laws underthe required authorizations. Taking account of the observationsof the consultants of the Court of Rovigo on which the PublicProsecutor based his case, Eni constituted an independent andinterdisciplinary scientific commission, chaired by Prof. EnzoBoschi, professor of seismology at the Università degli Studi diBologna and chairman of the Istituto nazionale di geofisica evulcanologia, composed of prominent and highly qualifiedinternational experts of subsidence caused by hydrocarbonexploration, with the aim of verifying the size and the effectsand any appropriate actions to reduce or to neutralize anysubsidence phenomenon in the Ravenna and North Adriatic area bothon land and in the sea. The commission produced a study whichdenies the possibility for any risk for human health and fordamage to the environment. It also states that no example isknown anywhere in the world of accidents that caused harm to thepublic caused by subsidence induced by hydrocarbon production.The study also shows that Eni employs the most advancedtechniques for the monitoring, measuring and control of the soil.

> 
*EniPower SpA*

In autumn 2004, the Public Prosecutor of Rovigo started aninvestigation for alleged crimes related to unauthorized wastemanagement activities in Loreo. Samples of the soil taken fromLoreo and from EniPower’s site in Mantova are currentlybeing examined.

> 
*Polimeri Europa SpA*

In 2002, the public prosecutor of Gela started a criminalaction in order to ascertain alleged illegally discharge ofeffluents produced by the Gela plant, owned by Polimeri EuropaSpA, Syndial SpA (former EniChem SpA) and Raffineria di Gela SpA.In January 2005, the Court for preliminary investigation, on thebasis of the request of the public prosecutor, resolved to closethis proceeding against all the defendants.

Before the Court of Gela two criminal actions took place, onein relation to the activity of the F3001 furnace and the otherconcerning the ACN plant (disposal of FOK residue). In both casesthe accused were found guilty. For the proceeding concerning theF3001 furnace the sentence was passed to the civil court for thequantification of the damage to be paid to the CaltanissettaProvince. Eni appealed the Court’s decision.

> 
*Syndial SpA (former EniChem SpA)*

In 1992, the Ministry of Environment summoned EniChem SpA andMontecatini SpA before the Court of Brescia. The Ministryrequested, primarily, to require environmental remediation forthe alleged pollution caused by the Mantova plant from 1976 until1990, and provisionally, in case there was no possibility toremediate, require them to pay environmental damages. The amountis going to be determined during the proceeding, but it will notbe lower than euro 136 million, or determined by the judge ascompensatory liquidation. EniChem acquired the Mantova plant inJune 1989, as part of the Enimont deal. Edison SpA must hold Eniharmless or pay compensatory damage for any damage caused tothird parties by plant operations before Montedison’s sale,even if the damage occurred later.

In 1997, an action was commenced before the Court of Veniceconcerning the criminal charges brought by the Venice publicprosecutor for alleged mismanagement of the Porto Marghera plantstarting in the 1970s until 1995 and for the alleged pollutionand health damage resulting therefrom. On November 2, 2001 theCourt of Venice acquitted all defendants. The appeal against thedecision was presented by the public prosecutor, the StateAttorney on behalf of the Ministry of Environment and the Councilof Ministers, 5 public entities, 12 associations and otherentities and 48 individual persons. On December 15, 2004 theVenice Court of Appeals confirmed the preceding judgment,changing only some marginal parts. As concerns some defendants ofEni and Syndial, the Court of Appeals decided not to proceed dueto the statute of limitations for some crimes, while it confirmedthe preceding judgment for the other matters. All plaintiffsappealed this decision before the court of final instance. Enirecorded a provision to the risk reserve for this legalproceeding. 

In 2000, the Public Prosecutor of Brindisi started a criminalaction against 68 persons who are employees or former employeesof various companies that owned and managed plants for themanufacture of dichloroethane, vinyl chloride monomer and vinylpolychloride from the early 1960s to date, some of which weremanaged by EniChem from 1983 to 1993. At the end of thepreliminary investigation phase, the Public Prosecutor asked thedismissal of the case in respect of the employees and themanagers of EniChem. The judge for preliminary investigation hasnot yet given his opinion. The relevant hearing is set forSeptember 23, 2005. 

On December 18, 2002, EniChem SpA, jointly with Ambiente SpAand European Vinyls Corporation Italia SpA, was summoned beforethe Court of Venice by the province of Venice. The provincerequested compensation for environmental damages, not quantified,caused to the lagoon of Venice by the Porto Marghera plants,which were already the subject of two previous proceedingsagainst employees and managers. In a related action, EuropeanVinyls Corporation Italia presented an action for recourseagainst EniChem and Ambiente. The requests for damage of theProvince of Venice and that of EVC Italia to EniChem and Ambientehave not been quantified. In 2004, the proceedings continued withboth parties presenting memoranda; the next hearing is set onDecember 9, 2005.

On January 16, 2003, the Court of Siracusa issued personalcautionary measures against some employees of EniChem SpA andPolimeri Europa SpA. They are accused of illicit managementrelating to the production, disposal and treatment of liquid andsolid waste materials and of obtaining illicit income. PolimeriEuropa and EniChem, as injured parties, named their defenseattorneys. The collection of evidence effected before the hearingstarts in Court has been concluded and preliminary investigationshave ended with the confirmation of accusations.

Press reports have suggested that the Public Prosecutor ofSiracusa has started preliminary investigations on allegedmalformations related to the ingestion of mercury contaminatedsea food.

On April 14, 2003, the President of the Regional Council ofCalabria, as Delegated Commissioner for Environmental Emergencyin the Calabria Region, started an action against EniChem SpArelated to environmental damages for about euro 129 million andto financial and non-financial damages for euro 250 million (plusinterest and compensation) allegedly caused by Pertusola Sud SpA(merged into EniChem) in the area of Crotone. On June 6, 2003,EniChem appeared before the court and requested the rejection ofthe damages and, as counterclaim, the payment of the total costsfor the remediation works already underway. The relevant hearingis set on July 5, 2005 in order to allow parties to submitmemoranda. The Province of Crotone entered the proceeding,claiming environmental damages for euro 300 million. Syndial wasnotified on October 21, 2004 of the request of the CalabriaRegion to appear before the Court of Milan in order to obtain apreliminary damage payment, in anticipation of the expiration ofthe special office for managing emergency events in Calabria. TheRegion requested payments for over euro 800 million. The firsthearing is set on July 5, 2005.

In March 2004, Sitindustrie SpA, which in 1996 purchased aplant in Paderno Dugnano from Enirisorse (now merged into SyndialSpA), summoned Syndial SpA before the Court of Milan, requestingto establish the responsibility of Syndial SpA in the allegedpollution of soils around the plant and to require it to payenvironmental damages necessary for remediation. Syndial opposedthe claim based on an absence of the right of action of theplaintiff. The judge has not yet decided on Syndial's opposition.

In October 2004, Sitindustrie SpA started an analogousproceeding against Syndial concerning the plant for themanufacture of products in copper and copper alloy at PieveVergonte. The relevant hearing is set on November 10, 2005;parties are allowed to submit memoranda prior to the hearing.

In May 2003, the Minister of the Environment summoned SyndialSpA before the Court of Turin and requested environmental damagesfor euro 2,396 million in relation to alleged DDT pollution inthe Lake Maggiore caused by the Pieve Vergonte plant. OnSeptember 23, 2004 the judge summoned the parties and defined thedate for the submission of memoranda. At the hearing of March 25,2005 the judge acquired the memoranda of both parties; thedecision is still pending.

The municipality of Carrara started an action at the Court ofGenova requesting to Syndial SpA the remediation andreestablishment of the previous environmental conditions at theAvenza site and the payment of environmental damage. This requestis related to an accident occurred in 1984, as a consequence ofwhich EniChem Agricoltura SpA (later merged into Syndial SpA), atthe time owner of the site, had carried out safety andremediation works. The Ministry of the Environment joined theaction and requested the environmental damage payment – froma minimum of euro 53.5 million to a maximum of euro 78.5 million– to be broken down among the various companies that managedthe plant in the past. Previous managers include Syndial, calledinto the action as a guarantor, Rumianca SpA, Sir Finanziaria SpAand Sogemo SpA. A technical survey requested by the Court isunderway in order to ascertain the actual environmental damage tothe site.

> 
**Tax Proceedings**

*Eni SpA*

With a decree dated December 6, 2000 the Lombardia Regiondecided that natural gas used for electricity generation issubject to an additional regional excise tax in relation to whichSnam SpA (merged into Eni SpA in 2002) will substitute for thetax authorities in its collection from customers. Giveninterpretive uncertainties, the same decree provides the termswithin which distributing companies are expected to pay thisexcise tax without paying any penalty. Snam SpA and the otherdistributing companies of Eni believe that natural gas used forelectricity generation is not subject to this additional excisetax. For this reason, an official interpretation has beenrequested from the Ministry of Finance and Economy. With adecision of May 29, 2001, the Ministry confirmed that thisadditional excise tax cannot be applied. The Region decided notto revoke its decree and Snam took appropriate legal action. Onthe basis of action carried out by Snam, the Council of Statedecided on March 18, 2002 that the jurisdiction of theAdministrative court did not apply to this case. In case theRegion should request payment, Eni will challenge this request inthe relevant Court. The Lombardia Region decided with regionalLaw No. 27/2001 that no additional tax is due from January 1,2002 onwards, but still requested the payment of the additionaltaxes due before that date. The period of foreclosure for theformal assessment of the payment is up until five years, so it ispossible that payment will be requested until December 31, 2006.

During 2003, the Customs District of Taranto sent 147 formalassessments and amendments to bills of entry for finishedproducts and goods and semi finished products produced by Eni'sTaranto refinery in 2000, 2001 and 2002 to Eni SpA, as thesuccessor entity of AgipPetroli SpA following its merger intoEni. The notification regards about euro 24 million of customsduties not paid by the company because the imported products werenot yet finished goods, but were destined to processing, forwhich ordinary customs tariffs allow exemption. The formalassessment does not contain the determination of anyadministrative penalties provided for by customs rules. Thepenalty can be from one to ten times the amount of taxes notpaid. The notification is based on the fact that the company doesnot have the administrative authorization to utilize the customsexemption. The company, believing it acted properly pursuant toCircular 20/D/2003, started a proceeding for an administrativeresolution, according to the customs rules. The company asked theRegional Director of Customs of Puglia for the annulment of thereceived assessments as a measure of self-protection. With adecision of November 26, 2004 the Regional Director acceptedEni’s appeal and ended the litigation by cancelling the 147formal assessments.

On March 12, 2004, the Comando Nucleo Regionale PoliziaTributaria of Puglia notified a verbal action of observation tothe company. In this action there is an alleged offense ofsmuggling and falsification of accounts for the same imports,already subjected to the previous assessments of the CustomsDistrict of Taranto and other occurrences between January 1999and February 2003. The verbal action made by a Fiscal Officer,sent to the Public Prosecutor in the Court of Taranto, reclaimsthe omitted payment of customs for about euro 26 million. For theoffense of smuggling, there is a penalty from two to ten timesthe amount of tax not paid. The notification is based on the samelack of administrative authorization, already contested by theCustoms District of Taranto, that was concluded in favor of Eniby the Regional Director.

> 
*Agip Karachaganak BV*

In July 2004, relevant Kazakh authorities informed AgipKarachaganak BV and Agip Karachaganak Petroleum Operating BV,shareholder and operator of the Karachaganak contract,respectively, the final outcome of the tax audits performed forfiscal years 2000 to 2003. Claims by the Kazakh authoritiesconcern unpaid taxes for a total of dollar 43 million, net toEni, and the anticipated offsetting of VAT credits for dollar 140million, net to Eni, as well as the payment of interest andpenalties for a total of dollar 128 million. Both companies fileda counterclaim. With an agreement reached on November 18, 2004,the original amounts were reduced to dollar 22 million net toEni; meetings are underway for finding an agreement on residualmatters. Eni recorded a provision to the risk reserve for thismatter.

> 
*Snam Rete Gas SpA*

With Regional Law No. 2 of March 26, 2002, the Sicilia Regionintroduced an environmental tax upon the owners of primarypipelines in Sicily (i.e. pipelines operating at a maximumpressure of over 24 bar). The tax was payable as of April 2002.In order to protect its interests, Snam Rete Gas filed a claimwith the European Commission, aimed at opening a proceedingagainst the Italian Government and the Tax Commission of Palermo.The Authority for Electricity and Gas, although acknowledgingthat the tax burden is an operating cost for the transportactivity, subjected inclusion of the environment tax in tariffsto the final ruling on its legitimacy by relevant authorities.Therefore, for the 2002-2003 thermal year with Decision No.146/2002 and for the 2003-2004 thermal year with Decision No.71/2003, the Authority for Electricity and Gas published two setsof tariffs: one, in force, that does not take into account thetax, and the second one including it, that will be automaticallyapplied with retroactive effect should the tax be judgedlegitimate. On September 10, 2002, Snam Rete Gas filed a claimwith the Regional Administrative Court of Lombardia requestingthe immediate application of tariffs including the tax. With theruling of December 20, 2002, the Court judged the tax at variancewith European rules and therefore did not accept Snam ReteGas’s claim. In December 2002, Snam Rete Gas suspendedpayments based on the above Court ruling. Payments effected untilNovember 2002 totaled euro 86.1 million. In January 2003 theSicilia Region presented an appeal to the Council of Stateagainst the ruling of the Regional Administrative Court ofLombardia for the part that states the variance of the regionallaw with European rules. On December 16, 2003, the EuropeanCommission judged the tax instituted by the Republic of Italy,through the Sicilia Region, to be in contrast with European rulesand with the cooperation agreement between the European EconomicCommunity and the Peoples’ Democratic Republic of Algeria;the European Commission also stated that such environmental taxis in contrast with the common customs tariff because it modifiesthe equality of customs expenses on commodities imported fromthird countries and could create a deviation in trade with suchcountries and a distortion in access and competition rules. TheCommission initially requested the Italian Government to presentits observations about the argument and later with its opinionpresented on July 7, 2004 it formally requested Italy to cancelthe tax. The Italian Government must conform within two monthsfrom the reception of the opinion. As it did not conform, onDecember 20, 2004 the European Commission passed the case to theCourt of Justice requesting a ruling. With a decision datedJanuary 5, 2004, the Provincial Tax Commission of Palermodeclared the environmental tax of the Sicilia Region illegitimatebecause it is in contrast with European rules and thereforeaccepted Snam Rete Gas’s claim for the repayment of thefirst installment of euro 10.8 million, already paid in April2002, to the Sicilia Region. On May 4, 2004, the Sicilia Regionrepaid the first installment. On April 2, 2004 the Sicilia Regionpresented recourse to the Regional Tax Commission at Palermo,which, on January 5, 2005 rejected this appeal and confirmed theillegitimacy of the tax, condemning the Region to repay theamounts paid and interest accrued to Snam Rete Gas. On April 15,2005 the Sicilia Region presented recourse to the Regional TaxCommission at Palermo. On November 3, 2003, the Sicilia Region,following the procedure presented by Snam Rete Gas concerning theyearly liquidation of the tax for 2002, requested liquidation oftax, fines and interest (euro 14.2 million) relating to theunpaid December 2002 installment. On December 30, 2003 Snam ReteGas filed a claim with request of suspension of payment as aresult of the liquidation notice received from the Sicilia Regionwith the Provincial Tax Commission of Palermo, that, on June 25,2004 accepted Snam Rete Gas’s claim and decided thecancellation of the liquidation notice served by the SiciliaRegion. On September 13, 2004 the Sicilia Region appealed thisdecision with the Regional Tax Commission at Palermo, which, onMarch 7, 2005 rejected this appeal and confirmed the illegitimacyof the tax. In any case Snam Rete Gas will not have to pay thetax: if the tax is considered illegitimate in other Courts oflaw, the company will have the right to the restitution of themoney. If, to the contrary, the tax is considered legitimated bythe other Courts, the Authority for Electricity and Gas willinclude the tax (Decision No. 146/2002 and No. 71/2003) in tariffwith automatic and retroactive effects.

> 
**Other judicial or arbitration proceedings**

*Syndial SpA (former EniChem SpA) - Serfactoring SpA*

In 1991, Agrifactoring SpA commenced proceedings againstSerfactoring SpA, a company 49% owned by Sofid SpA which iscontrolled by Eni SpA. The claim relates to an amount receivableof euro 182 million for fertilizer sales (plus interest andcompensation for inflation), originally owed by Federconsorzi toEniChem Agricoltura SpA (later Agricoltura SpA - in liquidation),and Terni Industrie Chimiche SpA (merged into Agricoltura SpA (inliquidation), that has been merged into EniChem SpA (now SyndialSpA)). Such receivables were transferred by Agricoltura and TerniIndustrie Chimiche to Serfactoring, which appointed Agrifactoringas its agent to collect payments. Agrifactoring guaranteed to paythe amount of such receivables to Serfactoring, regardless ofwhether or not it received payment at the due date. Followingpayment by Agrifactoring to Serfactoring, Agrifactoring wasplaced in liquidation and the liquidator of Agrifactoringcommenced proceedings in 1991 against Serfactoring to recoversuch payments (equal to euro 182 million) made to Serfactoringbased on the claim that the foregoing guarantee became invalidwhen Federconsorzi was itself placed in liquidation. Agricolturaand Terni Industrie Chimiche brought counterclaims againstAgrifactoring (in liquidation) for damages amounting to euro 97million relating to acts carried out by Agrifactoring SpA asagent. The amount of these counterclaims has subsequently beenreduced to euro 46 million following partial payment of theoriginal receivables by the liquidator of Federconsorzi andvarious setoffs. These proceedings, which have all been joined,were decided with a partial judgment, deposited on February 24,2004: the request of Agrifactoring has been rejected and thecompany has been ordered to pay the sum requested by Serfactoringand damages in favor of Agricoltura, to be determined followingthe decision. Agrifactoring appealed against this partialdecision, requesting in particular the annulment of the firststep judgement, the reimbursement of the euro 180 million amountfrom Serfactoring along with the rejection of all its claims andthe payment of all expense of the proceeding. The appeal pendingwill be discussed in a hearing set for March 16, 2007. The judgeof the Court of Rome, responsible for the determination of theamount of damages to be paid to Serfactoring and Agricoltura,decided on May 18, 2005 to suspend this determination until thepublication of the decision of the Court of Appeals, inaccordance with Article 295 of the Code of civil procedure.

> 
*Syndial SpA (former EniChem SpA)*

In 2002, EniChem SpA was summoned by ICR Intermedi Chimici diRavenna Srl before the Court of Milan in relation to a breach ofa preliminary agreement for the purchase of an industrial area inRavenna. ICR requested payment of compensatory damages forapproximately euro 46 million, of which euro 3 million arecompensatory damages and euro 43 million are for loss of profits.During 2004 the preliminary inquiry was completed. Conclusionswere filed by the parties on the relevant hearing of May 26,2005. The procedure is due for a decision.

> 
*Snamprogetti SpA*

In December 2002, Snamprogetti SpA made a request for anarbitration proceeding against Fertilizantes Nitrogenados deVenezuela – Fertinitro CEC – to the InternationalChamber of Commerce of Paris. In December 2004, Fertinitro andSnamprogetti reached an agreement that provides for: (i) theacceptance of the plant in Jose, Venezuela, and in return, theStand-by Letter of Credit it provided to Fertinitro; (ii) therecovery of the Stand-By Letter of Credit; (iii) a settlementbetween the parties for the payables related to the awarding oflicenses from Snamprogetti and a dollar 6.5 million compensationto be paid to Fertinitro; and (iv) the decision of both partiesto supersede all requests/claims made to the arbitration court.In December 2004 Snamprogetti executed the agreement.

> 
**Antitrust, EU    Proceedings, actions of the Authority for Electricity and Gas    and of other regulatory Authorities**

> 
*Eni SpA*

In March 1999, the Antitrust Authority concluded itsinvestigation started in 1997; and (i) verified that Snam SpA(merged in Eni SpA in 2002) abused its dominant position in themarket for the transportation and primary distribution of naturalgas relating to the transportation and distribution tariffsapplied to third parties and the access of third parties toinfrastructure; (ii) fined Snam euro 2 million; and (iii) ordereda review of these practices relating to such abuses. Snambelieves it has complied with existing legislation and appealedthe decision with the Regional Administrative Court of Laziorequesting its suspension. On May 26, 1999, stating that thesedecisions are against Law No. 9/1991 and the European Directive98/30/CE, this Court granted the suspension of the decision. TheAntitrust Authority did not appeal this decision. The decision onthis dispute is still pending.

With a decision of December 9, 2004, the Italian AntitrustAuthority started an inquiry on the distribution of jet fuelagainst six Italian companies, including Eni and some of itssubsidiaries, that store and load jet fuel in the Rome Fiumicino,Milan Linate and Milan Malpensa airports. The inquiry intends toascertain the existence of alleged limitations to competition asoil companies would agree to divide among themselves the suppliesto airlines. The date set for the closing of the inquiry March31, 2006.

Detailed information on the investigations by the AntitrustAuthority (BluGas, closed in October 2004 and TTPC, started inFebruary 2005) is included in the "Operating Review –Gas & Power segment – Regulatory Framework", whichis considered an integral part of these Notes.

On April 28, 2005, an inquiry was started, ordered by theCommission of the European Communities on April 18, concerningthe alleged participation of Eni and its subsidiaries in actionsintended to restrict competition in the sector of paraffin. Thealleged illicit behavior would have taken the form of: (i)determination of prices and their increase; (ii) subdivision ofmarket shares; and (iii) exchange of trade secrets, such asproduction capacity and sales volumes. Eni may appeal againstthis decision with the Court of first instance of the EuropeanCommunities.

The U.S. Department of Justice – Antitrust Division onApril 25, 2005 notified a subpoena to Eni Petroleum Co Inc, awholly owned Eni subsidiary, in its Houston headquartersrequesting the company to provide information and documents onwaxes activity and setting a hearing for June 20, 2005.

> 
*GNL Italia SpA*

With Decision No. 16/2004 published on February 16, 2004, theItalian Authority for Electricity and Gas initiated a formalinvestigation of GNL Italia SpA concerning the refusal to GasNatural Vendita Italia SpA to access on an annual basis theregasification service at Eni’s Panigaglia terminal forvolumes amounting to about 220 million cubic meters of naturalgas.

On November 19, 2003 GNL Italia informed the Authority forElectricity and Gas, in accordance with Article 24 paragraph 3 ofLegislative Decree No. 164/2000, of the request forregasification services on a continuous basis from Gas NaturalVendita Italia for about 220 million cubic meters of natural gas.GNL Italia offered only spot capacity as the whole regasificationcapacity had been conferred to Eni SpA under a contract signed onJanuary 29, 2002 and filed with the same Authority forElectricity and Gas, and approved with Decision No. 38/2002. WithDecision No. 120 of July 22, 2004 the Authority for Electricityand Gas ordered GNL Italia to provide continuous capacity to GasNatural Vendita and initiated a formal investigation aimed atrequesting a fine under Article 2, paragraph 20, letter c of LawNo. 481/1995 in violation of Articles 14 and 15 of Decisions No.120/2001 and 38/2002 of the Authority for Electricity and Gas. Inorder to execute the requirements of Decision No. 120/2004, GNLItalia: (i) obtained by Eni a change in its contract planning ofdischarges of ships in order to allow Gas Natural Vendita Italiato access the regasification services in August and Septemberwith one discharge a month; and (ii) assigned capacity to GasNatural Vendita Italia and entered a regasification contract withGas Natural Vendita Italia that provide for a discharge per monthin the months of August and September 2004. On November 19, 2004Eni filed a claim against this decision with the RegionalAdministrative Court of Lombardia. This claim, concerning inparticular the Authority for Electricity and Gas’s decisionson access to regasification services at the Panigaglia terminalis still pending. With Decision No. 2 of January 12, 2005 theAuthority for Electricity and Gas fined GNL Italia euro 50,000that the company paid on February 21, 2005.

> 
*Polimeri Europa SpA and Syndial SpA*

In December 2002, inquiries were commenced concerning allegedanti-competitive agreements in the area of elastomers. Theseinquiries were commenced concurrently by European and U.S.authorities. The first product under scrutiny was EP(D)M: theEuropean Commission submitted to inspection the manufacturingcompanies of that product, among which Polimeri Europa SpA andSyndial and requested information to those two companies and totheir controlling company, Eni SpA. After the inquiries theCommission decided to open a procedure for violation ofcompetition laws and notified Eni, Polimeri Europa and Syndial tothat effect on March 8, 2005. Syndial filed memoranda. EP(D)Mmanufacture is also under scrutiny in the United States, wherethe Department of Justice of San Francisco requested informationand documents to Polimeri Europa Americas Inc, a U.S. subsidiaryof Polimeri Europa and to its deputy chairman and sales manager.Class actions were filed claiming damages in relation to thealleged violation. The investigation was also extended to thefollowing products: NBR, CR, BR, SSBR and SBR. The EuropeanCommission started an investigation regarding BR, SBR, SSBR. OnJanuary 26, 2005 the Commission dropped the charges in relationto SSBR, while it decided to open a procedure for BR and SBR. NBRand CR are under scrutiny in Europe and the USA, where classactions have been started. With regard to CR, Syndial enteredinto a plea agreement with the Department of Justice pursuant towhich Syndial would agree to pay a fine of US dollar 9 million,while the Department of Justice would agree that it will notbring further criminal charges against Syndial or against itsaffiliate companies. A court hearing has been scheduled for June27, 2005 for the approval of the plea agreement and sentencing.Eni recorded a provision for this matter. The European Commissionrequested Eni, Polimeri Europa and Syndial to provide informationabout CR.

> 
*Stoccaggi Gas Italia SpA*

With Decision No. 26 of February 27, 2002, the Authority forElectricity and Gas determined tariff criteria for modulation,mineral and strategic storage services for the period starting onApril 1, 2002 until March 31, 2006 and effective retroactivelyfrom June 21, 2000. On March 18, 2002 Stoccaggi Gas Italia SpA(Stogit) filed its proposal of tariff for modulation, mineral andstrategic storage for the first regulated period. With DecisionNo. 49 of March 26, 2002, the Authority for Electricity and Gasrepealed Stogit’s proposal and defined tariffs for the firstregulated period. Stogit applied the tariff determined by the twodecisions, but filed an appeal against both Authority forElectricity and Gas decisions with the Regional AdministrativeCourt of Lombardia requesting their cancellation. With a decisiondated September 29, 2003, that Court rejected the appealpresented by Stogit. On February 3, 2004, Stogit filed an appealto the Council of State against the sentence of first instance.

> 
*Distribuidora de Gas Cuyana SA*

The agency entrusted with the regulations for the natural gasmarket in Argentina ("Enargas") started a formalinvestigation on some operators, among these Distribuidora de GasCuyana SA, a company controlled by Eni. Enargas stated that thecompany has applied improperly calculated conversion factors tovolumes of natural gas invoiced to customers and requested thecompany to apply the conversion factors imposed by localregulations from the date of the default notification (March 31,2004) without prejudice to any damage payment and fines that maybe decided after closing the investigation. On April 27, 2004,Distribuidora de Gas Cuyana presented a defense memorandum toEnargas, without prejudice to any possible appeal. At this dateit is not possible to quantify any negative effects deriving fromthis action, given its very early phase.

 

> 
***Settled Legal Proceedings***

*Eni SpA*

Agip SpA (merged into Eni SpA in 1997) received four formalassessments from the Italian tax authorities that claimed thatits income in 1989, 1990, 1991 and 1992 had been understated forincome tax purposes. These assessments concern an alleged globalunderstated amount of euro 196 million, determined by markingdownward and upward adjustments to the prices of certainpetroleum products that Agip sold to or bought from other Enicompanies. All these assessments were judged as unfounded and,therefore, annulled by the Provincial Tax Commission of Milan.The appeals of the tax authorities were rejected by the RegionalTax Commission of Milan or were given up by the Italian taxauthorities. The decision of the appeal proceedings, because ofthe termination of the appeals or because of the decision of thetax authorities not to continue, must be considered final withoutexpense for the company. With a decision dated May 7, 2001 theProvincial Tax Commission of Milan revoked the formal assessmentagainst Agip SpA concerning income understatement for 1994, foran improper use of loss carryforwards relating to the year 1992.The Italian tax authorities appealed the decision to the RegionalTax Commission, which reviewed the case on May 19, 2004. Duringthe discussion the tax authorities, considering the outcomefavorable to Eni of the 1992 assessment, acknowledged the properbehavior of Agip. The Regional Tax Commission of Milan with adecision deposited on June 14, 2004 rejected the appeal of taxauthorities.

> 
*Snamprogetti SpA*

In December 2002, Snamprogetti SpA made a request for anarbitration proceeding against Fertilizantes Nitrogenados deVenezuela – Fertinitro CEC – to the InternationalChamber of Commerce of Paris. In December 2004, Fertinitro andSnamprogetti reached an agreement that provides for: (i) theacceptance by the client of the plant in Jose, Venezuela, and inreturn, the Stand-by Letter of Credit it provided to Fertinitro;(ii) the recovery of the Stand-By Letter of Credit; (iii) asettlement between the parties for the payables related to theawarding of licenses from Snamprogetti and a dollar 6.5 millioncompensation to be paid to Fertinitro; and (iv) the decision ofboth parties to supersede all requests/claims made to thearbitration court. In December 2004 Snamprogetti executed theagreement.

 

> 
***Court inquiries***

The Milan Public Prosecutor is inquiring on contracts awardedby Eni’s subsidiary EniPower and on supplies from othercompanies to EniPower. The media have provided wide coverage ofthese inquiries. It emerged that illicit payments have been madeby EniPower suppliers to a manager of EniPower who has beenimmediately dismissed. The Court presented EniPower(commissioning entity) and Snamprogetti (contractor ofengineering and procurement services) with notices of process inaccordance with existing laws regulating administrativeresponsibility of companies (Legislative Decree No. 231/2001). Inits meeting of August 10, 2004, Eni’s Board of Directorsexamined the situation mentioned above and approved the creationby Eni’s CEO of a task force in charge of verifying thecompliance with Group procedures regarding the terms andconditions for the signing of supply contracts by EniPower andSnamprogetti and the subsequent execution of works. The Boardalso advised divisions and departments of Eni to fully cooperatein every respect with the Court. From the inquiries performed,that have not yet covered all relationships with contractors andsuppliers, no default in the organization and internal controlsemerged. For some specific aspects inquiries have been performedby external experts. In accordance with its transparency andfirmness guidelines, Eni will take the necessary steps for actingas plaintiff in the expected legal action in order to recover anydamage that might derive to Eni by the illicit behavior of itssuppliers and of their and Eni’s employees.

Within an unrelated investigation on two Eni managers, thePublic Prosecutor of Rome on March 10, 2005 notified Eni of theseizure of papers concerning Eni’s relations with two oilproduct trading companies.

 

> 
***TSKJ Consortium - SEC Investigations***

In June 2004, the U.S. Securities and Exchange Commissionnotified Eni a request of voluntary assistance, which Enipromptly carried out, in order to obtain information regardingthe TSKJ consortium in relation to the construction of naturalgas liquefaction facilities at Bonny Island in Nigeria. The TSKJconsortium is formed by Snamprogetti (Eni 100%) with a 25%interest and, for the remaining part, by subsidiaries ofHalliburton/KBR, Technip and JGC. The investigations of theCommission concern alleged improper payments made to certainpublic officials from the TSKJ consortium. Snamprogetti startedan internal inquiry on the matter. Other Authorities arecurrently investigating this matter. Eni and Snamprogetti arecurrently providing information to, and otherwise working with,the Commission and other Authorities.

 

> 
***Dividends***

Eni’s dividend policy in future periods, and the amountof future dividends, will depend upon a number of factorsincluding, but not limited to, Eni’s capital expenditure anddevelopment plans, level of profitability and leverage25 and the "Risk Factors"set out in Item 3. Eni SpA’s net income and, therefore, theamounts available for payment of dividends therefrom will alsodepend on the level of dividends received from Eni’ssubsidiaries. However, subject to such factors, the Board ofDirectors expects to recommend to future meetings of shareholdersto maintain the dividend level set in year 2004 (euro 0.90 pershare) in the next four-year plan. The euro 0.90 dividend pershare proposed by Eni’s Board of Directors for fiscal year2004 represents an increase of 20% with respect to the dividendfor fiscal year 2003 (euro 0.75 per share); the ratio ofaggregate dividends payments to consolidated net income (pay-out)for year 2004 is approximately 47%. This dividend proposal wasapproved by the general shareholders’ meeting on May 27,2005. In 2005, management also plans to start paying dividends ona six-month basis. This circumstance will not alter the overallamount of dividends paid for each fiscal year to shareholders.

 

 

##### Tableof Contents

**Significant Changes**

See "Item 5 – Recent Developments" for adiscussion of Eni’s results of operations in the firstquarter of 2005 and other material developments that occurredafter December 31, 2004.

 

 

##### Table of Contents

**Item 9. THE OFFER AND THE LISTING**

**Offer and Listing Details**

The ordinary shares of Eni SpA, nominal value euro 1.00 each(the "Shares"), are traded on the Blue Chip segment ofthe Mercato Telematico Azionario or MTA ("Telematico"),the Italian screen-based dealer market, which is the principaltrading market for shares in Italy. The Blue Chip segment ofTelematico includes shares of the companies whose marketcapitalization amounts to more than euro 800 million. AmericanDepositary Shares ("ADSs"), each representing fiveshares, are listed on the New York Stock Exchange.

The table below sets forth the reported high and low referenceprices of Shares on Telematico and of ADSs on the New York StockExchange, respectively. See "Item 3 – Key Information– Exchange Rates" regarding applicable exchange ratesduring the periods indicated below. 

|   | **Telematico** |   | **New York        Stock Exchange** |
|--------|----------------|--------|------------------------------------|
|   |                |   |                                    |

|   | **High** |   | **Low** |   | **High** |   | **Low** |
|--------|----------|--------|---------|--------|----------|--------|---------|
|   |          |   |         |   |          |   |         |

|   | **(euro        per Share)** |   | **(US$        per ADS)** |
|--------|-----------------------------|--------|--------------------------|

| 2000                                     | 14.496 |   | 9.536  |   | 64.875  |   | 46.5625 |
|------------------------------------------|--------|--------|--------|--------|---------|--------|---------|
| 2001                                     | 15.598 |   | 11.564 |   | 69.700  |   | 52.500  |
| 2002                                     | 17.145 |   | 12.938 |   | 82.110  |   | 60.900  |
| 2003                                     | 15.746 |   | 11.881 |   | 94.980  |   | 66.150  |
| 2004                                     | 18.748 |   | 14.723 |   | 126.450 |   | 92.350  |
|                                     |   |   |   |   |    |   |    |
| **2003**                                 |   |   |   |   |    |   |    |
| First        quarter                     | 15.746 |   | 11.881 |   | 82.080  |   | 66.150  |
| Second quarter                           | 14.284 |   | 12.490 |   | 84.850  |   | 68.100  |
| Third        quarter                     | 14.104 |   | 12.819 |   | 78.860  |   | 73.130  |
| Fourth quarter                           | 15.163 |   | 13.423 |   | 94.980  |   | 78.540  |
|                                     |   |   |   |   |    |   |    |
| **2004**                                 |   |   |   |   |    |   |    |
| First        quarter                     | 16.640 |   | 14.723 |   | 101.340 |   | 92.350  |
| Second quarter                           | 17.980 |   | 16.319 |   | 108.410 |   | 97.310  |
| Third        quarter                     | 18.584 |   | 16.272 |   | 114.510 |   | 99.020  |
| Fourth quarter                           | 18.748 |   | 17.651 |   | 126.450 |   | 110.610 |
|                                     |   |   |   |   |    |   |    |
| **2005**                                 |   |   |   |   |    |   |    |
| First        quarter                     | 20.480 |   | 17.930 |   | 135.720 |   | 118.500 |
| January 2005                             | 18.720 |   | 17.930 |   | 122.760 |   | 118.500 |
| February        2005                     | 19.691 |   | 18.680 |   | 131.000 |   | 121.290 |
| March 2005                               | 20.480 |   | 19.744 |   | 135.720 |   | 127.810 |
| April 2005                               | 20.800 |   | 19.270 |   | 133.280 |   | 124.430 |
| May 2005                                 | 20.930 |   | 19.330 |   | 131.490 |   | 122.510 |
| June 2005        (through June 10, 2005) | 21.560 |   | 21.150 |   | 131.860 |   | 129.270 |
|                                     |        |   |        |   |         |   |         |

Source: Reuters.

Morgan Guaranty Trust Company of New York (the"Depositary") functions as Eni’s depositary bankissuing American Depositary Receipts ("ADRs") pursuantto the Deposit Agreement among Eni, the depositary and thebeneficial owners ("Beneficial Owners") and registeredholders from time to time of ADRs issued thereunder.

At June 10, 2005 there were 15,700,024 ADRs outstanding,representing 78,500,120 shares, or 1.96% of all Eni's sharesoutstanding, held by 49 holders of record (including TheDepository Trust Company) in the United States of America, 47 ofwhich are US residents. Since certain of such ADRs are held bynominees, the number of holders may not be representative of thenumber of Beneficial Owners in the United States or elsewhere.

The Shares are included inthe S&P/MIB, the new primary Italian stock exchange indexthat measures the performance of the 40 leading companies inleading industries listed on Telematico and Nuovo Mercato. Theconstituents of the S&P/MIB are selected according to thefollowing criteria: sectorial representation, marketcapitalization of free-float shares and liquidity. SinceSeptember 20, 2004 S&P/MIB is the principal indicator used totrack the performance of the Italian stock market, and is thebasis for the FIB future contracts, as well as the MIBO optioncontracts traded in the Italian Derivatives Market("IDEM") managed by Borsa Italiana SpA ("BorsaItaliana"). The Shares are the largest component of theS&P/MIB, with a weighting of approximately 18.7%, asestablished by Standard & Poor’s and Borsa Italianaafter reviewing the composition of the S&P/MIB on May 20,2005. In addition, future and option contracts on the Shares aretraded on IDEM. IDEM facilitates the trading of future and optioncontracts on index and shares issued by companies that meetcertain required capitalization and liquidity thresholds.

Since January 14, 2002 the rule on the minimum lot of sharesfor transactions on the Telematico has been eliminated. OutsideTelematico, block trading is permitted for orders that meetcertain minimum size requirements and must be notified to Consoband Borsa Italiana. Starting from May 15, 2000 the Shares havebeen also trading on a special market, named After Hours tradingmarket or TAH ("After Hours"), after the closure of theday time of Telematico under special rules. Since March 28, 2000,a three-day rolling cash settlement has been applied to alltrades of equity securities in Italy, instead of the previousfive-day settlement.

 

 

##### Table of Contents

**Markets**

Telematico is organized and administered by Borsa Italianasubject to the supervision and control of the CommissioneNazionale per le Società e la Borsa (the National Commission forCompanies and the Stock Exchange or "Consob"), thepublic authority charged, inter alia, with regulating investmentcompanies, securities markets and public offerings of securitiesin Italy to ensure the transparency and regularity of thedealings and protect investors. Borsa Italiana is a joint stockcompany (Società per Azioni) that was established to manage theItalian regulated financial markets (including Telematico) aspart of the implementation in Italy of the EU Investment ServicesDirective. Borsa Italiana has issued rules governing theorganization and the administration of the markets it regulates,which are Telematico (shares, convertible bonds, pre-emptiverights, warrants, ETFs and Funds), Nuovo Mercato (high growthcompanies), After Hours, Mercato Expandi (small companies), IDEM(index and stock derivatives market), SeDeX (covered warrants andcertificates), MOT and Euro MOT (bond markets), as well as theadmission to listing on and trading on these markets.

If the opening price of a security (established each tradingday prior to the commencement of trading based on bids received)differs by more than 10% (or such other amount established byBorsa Italiana) from the previous day’s reference price,trading in that security will not be permitted until BorsaItaliana authorizes the trading. The reference price iscalculated for each security as a weighted average of the last10% of volumes traded in a single day. If in the course of atrading day the price of a security fluctuates by more than 5%from the last reported sale price (or 10% from the openingprice), trading in that security will be automatically suspendedfor a certain period of time. In the event of such a suspension,effect is not given to trades agreed but not confirmed before thesuspension.

Effective July 1, 1998, the Italian financial markets areprimarily regulated by Legislative Decree No. 58 of February 24,1998 ("Decree No. 58"), which consolidated the previousregulation primarily by restating the provisions of LegislativeDecree No. 415 of July 23, 1996.

Decree No. 58 provides that trading of equity securities, aswell as any other investment services, may now be carried out onbehalf of the public by società di intermediazione mobiliare(securities dealing firms or "SIMs"), which areauthorized intermediaries, authorized banks and certain types offinance companies. In addition, banks and investment firmsorganized in a member nation of the EU are permitted to operatein Italy provided that the intent of the bank or investment firmto operate in Italy is communicated to Consob and the Bank ofItaly by the competent authority of the member state. Pursuant toDecree No. 58 the Bank of Italy, in agreement with Consob, isresponsible for regulating clearance and settlement. Non-EU banksand non-EU investment firms may operate in Italy subject to thespecific authorization of Consob and the Bank of Italy.

 

 

##### Table of Contents

**Item 10. ADDITIONAL INFORMATION**

**Memorandum and Articles of Association**

The full text of the memorandum and articles of association ofEni is attached as an exhibit to this annual report.

Eni is incorporated under the name "Eni SpA"resulting from the transformation of Ente Nazionale Idrocarburi,a public law agency, established by Law 136 of February 10, 1953.The company objects are the direct and/or indirect management, byway of shareholdings in companies, agencies or businesses, ofactivities in the field of hydrocarbons and natural vapors, suchas exploration and development of hydrocarbon fields,construction and operation of pipelines for transporting thesame, processing, transformation, storage, utilization and tradeof hydrocarbons and natural vapors, all in compliance withconcessions required by law.

The company also has the object of direct and/or indirectmanagement, by way of shareholdings in companies, agencies orbusinesses, of activities in the fields of chemicals, nuclearfuels, geothermy and renewable energy sources, in the sector ofengineering and construction of industrial plants, in the miningsector, in the metallurgy sector, in the textile machinerysector, in the water sector, including derivation, drinkingwater, purification, distribution and reuse of waters; in thesector of environmental protection and treatment and disposal ofwaste, as well as in every other business activity that isinstrumental, supplemental or complementary with theaforementioned activities.

The company also has the object of managing the technical andfinancial co-ordination of subsidiaries and affiliated companiesas well as providing financial assistance on their behalf.

The company may perform any operations necessary or useful forthe achievement of the company objects; by way of example, it mayinitiate operations involving real estate, moveable goods, tradeand commerce, industry, finance and banking asset and liabilityoperations, as well as any action that is in any way connectedwith the company objects with the exception of public fundraising and the performance of investment services as regulatedby Decree No. 58 of February 24, 1998.

The company may take shareholdings and interests in othercompanies or businesses with objects similar, comparable orcomplementary to its own or those of companies in which it hasholdings, either in Italy or abroad, and it may provide real andor personal bonds for its own and others’ obligations,especially guarantees.

 

> 
***Directors***

The Board of Directors is invested with the fullest powers forordinary and extraordinary management of the company and, inparticular, the Board has the power to perform all acts it deemsadvisable for the implementation and achievement of the companyobjects, except for the acts that the law or Eni’s by-lawsreserve to the shareholders’ meeting.

For a complete description of the powers of the Board, theManaging Director and the Chairman, appointments, role of theBoard and rules and procedures of the meetings of the Board see"Item 6 – Board Practices".

The Board of Directors and the Managing Director reporttimely, at least every three months and however in the Board ofDirectors meetings, to the Board of Statutory Auditors on theactivities and on the most relevant operations regarding theoperational, economic and financial management of the company andits subsidiaries: in particular the Board of Directors and theManaging Director report to the Board of Statutory Auditors onoperations entailing potential conflicts of interest. Article2391 of the Italian Civil Code applies in the case of interestsof the Directors.

The Chairman and the members of the Board are remunerated inan amount established by the ordinary Shareholders’ Meeting.Said resolution, once taken, will remain valid for subsequentbusiness years until the Shareholders’ Meeting decidesotherwise.

There are no provisions as to retirement based on age-limitrequirements, or requirement of share ownership for adirector’s qualification in Eni’s by-laws.

 

> 
***Limitations on Voting and Shareholdings***

*General*

There are no limitations imposed by Italian law or by theby-laws of Eni SpA on the rights of non-residents of Italy orforeign persons to hold or vote the shares other than thelimitations described below (which are equally applicable toresidents and non-residents of Italy).

The by-laws provide that no person, in any capacity, may ownshares amounting to more than 3% of Eni SpA’s voting sharecapital. Such maximum limit is calculated taking into account theaggregate shareholding of a controlling entity, whether anindividual or a legal entity (each a "person"); itsdirectly or indirectly controlled entities, as well as entitiescontrolled by the same controlling entity; affiliated entities,as well as relatives within the second degree by blood ormarriage (except for a legally separated spouse). Affiliationexists as set forth in applicable Italian legislation, as well asbetween entities that, directly or indirectly, through controlledentities (other than those managing investment funds) are bound,even with third parties, by agreements relating to the exerciseof voting rights or the transfer of shares or interests inthird-party companies or other agreements relating to third-partycompanies as specified by applicable Italian legislation if suchagreements relate to at least 10% of the voting share capital ofa listed company or 20% of the voting share capital of anon-listed company. For purposes of calculating the 3% limit,shares held through a fiduciary nominee or intermediary are takeninto account.

Any voting rights attributable to shares held or controlled inexcess of such 3% limit cannot be exercised, and the votingrights of each entity to whom such limit on shareholding appliesare reduced proportionately, unless otherwise jointly disposed ofin advance by the parties involved. In the event that shares heldor controlled in excess of the maximum limit are voted, anyshareholders’ resolution adopted pursuant to such a vote maybe challenged if the majority required to approve such resolutionwould not have been reached without the vote of the Sharesexceeding such maximum limit. Shares not entitled to be voted arenevertheless counted for the purpose of determining the quorum ata shareholders’ meeting.

Under the provisions of Law No. 602 of November 27, 1996, the3% limit does not apply to shareholdings in Eni SpA held by theMinistry of Economy and Finance; state-owned entities controlledby other entities or by the State. The 3% limit does not apply,in the event that such limit is exceeded as a result of theacquisitions of shares pursuant to a mandatory tender offer(offerta pubblica di acquisto totalitaria) or a preventativetender offer (offerta pubblica di acquisto preventiva), each asprovided for by Decree No. 58, regardless of whether a majorityof the voting rights is acquired thereby. The approval of theMinisters as described below in "– Special Powers ofthe State" is however requested for Shares acquired pursuantto tender offers.

For other limitations that may affect voting rights, see"– Reporting Requirements and Restrictions onAcquisitions of Shares".

> 
*Special Powers of the State*

Under Italian laws the State, acting through the Minister ofEconomy and Finance, in agreement with the Minister of ProductiveActivities (together with the Minister of Economy and Finance,the "Ministers"), holds certain special powers inconnection with any transfer of a controlling interest in certainState-owned companies operating in public service sectors,including Eni SpA. The law places no limit on the duration ofsuch special powers. Such powers are to be exercised inaccordance with EU principles. Specific guidelines have beenintroduced by the Decree of the President of the Council ofMinisters (DPCM), May 4, 1999, which sets forth the conditions inwhich the Ministers can exercise their special veto over acompany’s strategic decisions. According to Article 66 ofLaw 488, dated December 23, 1999, such guidelines have beenconfirmed by the DPCM dated June 10, 2004.

Pursuant to the DPCM of April 1, 2005, Eni modified itsby-laws in order to apply the provisions of Law No. 350 ofDecember 24, 2003 (2004 budget law), which modified Article 2 ofLaw Decree No. 332 of May 31, 1994, as modified and convertedinto Law No. 474 of July 30, 1994, regarding the Special Powersof the State. Eni's by-laws acknowledges in Article 6.2 that theSpecial Powers of the State are as follows:

| a)     |   | opposition with respect to        the acquisition of material shareholdings by entities        affected by the shareholding limit as set forth in        Article 3 of Law Decree 332 of May 31, 1994, converted        with amendments into Law 474 of July 30, 1994, which        – as per Decree issued by the Minister of Treasury        on October 16, 1995 – include those representing at        least 3% of share capital with the right to vote at the        ordinary shareholders' meeting. Any opposition is        required to be expressed within ten days of the date of        the notice to be filed by the Board of Directors at the        time a request is made for registration in the        Shareholders' Register if the Minister considers that        such an acquisition may prejudice the vital interests of        the Italian State. Until the ten-day period has expired,        the voting rights or any rights other than the economic        rights connected with the shares representing a material        shareholding may not be exercised. If the opposition        power is exercised on the basis that prejudice may be        caused by the operation to the vital interests of the        Italian State, the transferee may not exercise the voting        rights or any rights other than the economic rights        connected with the shares representing a material        shareholding and must sell said shares within one year.        If the shareholder fails to comply, the law court, upon        request of the Minister of Economy and Finance, will        order the sale of the shares representing a material        shareholding according to the procedures set forth in        Article 2359-ter of the Civil Code. The act through which        the opposition power is exercised may be appealed by the        transferee before the Regional Administrative Court of        Lazio within sixty days as of its issue;     |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| b)     |   | opposition with respect to        the subscription of Shareholders' pacts or agreements as        per Article 122 of Legislative Decree No. 58 of February        24, 1998, involving – as per Decree issued by the        Minister of Treasury on October 16, 1995 – at least        3% of the share capital with the right to vote at        ordinary shareholders' meetings. In order to allow the        exercise of the above mentioned opposition power, Consob        notifies the Minister of Economy and Finance of the        relevant pacts or agreements communicated to it pursuant        to the aforementioned Article 122 of Legislative Decree        No. 58 of February 24, 1998. The opposition power may be        exercised within ten days of the date of the notice by        Consob. Until the ten-day period has expired, the voting        rights or any rights other than the economic rights        connected with the shares held by the shareholders who        have subscribed the above mentioned pacts or agreements        may not be exercised. If the opposition power is        exercised on the basis that prejudice may be caused by        said pacts or agreements to the vital interests of the        Italian State, the shareholders pacts or agreements shall        be null and void. If in the shareholders’ meetings        the shareholders who have signed shareholders’ pacts        or agreements behave as if those pacts or agreements        disciplined by Article 122 of Legislative Decree No. 58        of February 24, 1998 were still in effect, the        resolutions approved with their vote, if determining for        the approval, may be sued. The act through which the        opposition power is exercised may be sued by the        shareholders who joined the above mentioned pacts or        agreements before the Regional Administrative Court of        Lazio within sixty days as of its issue; |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| c)     |   | veto power with respect to        resolutions to dissolve the company, to transfer the        business, to merge, to demerge, to transfer the company's        registered office abroad, to change the company objects        and to amend the by-laws cancelling or modifying the        powers indicated in this Article. The act through which        the veto power is exercised shall be duly motivated in        consideration of the prejudice the related resolution may        cause to the vital interests of the Italian State and may        be sued by the dissenting Shareholders before the        Regional Administrative Court of Lazio within sixty days        as of its issue;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| d)     |   | appointment of one Board        member with no voting rights. Should such appointed        Director lapse, the Minister of Economy and Finance in        agreement with the Minister of Productive Activities will        appoint his substitute.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

With a decision published on May 23, 2000, the European Courtof Justice declared that Italy, in granting the Minister ofEconomy and Finance "special powers" and introducingthem in the by-laws of some privatized companies, violated theobligations imposed by Articles 43 (former Article 52, right ofestablishment), 49 (former 59, free provision of services) and 56(former 73b, free movement of capitals) of the European Treaty.

In accordance with past decisions, the Court analyzed Italianlegislation in force at the expiration of the terms defined inthe European Commissions’s informed opinion, therefore itdid not take into account DPCM of May 4, 1999, Article 66 of LawNo. 488/1999 and DPCM of June 10, 2004 and Law No. 350 ofDecember 24, 2003 which included provisions limiting those"special powers" of the Minister of Economy andFinance. These are currently being analyzed by the EuropeanCommission.

*Minority Protection Provisions*

Under Italian laws, the by-laws of companies, such as Eni SpA,that impose a maximum limit on the number of shares that may beheld by any shareholder must provide for the election ofdirectors and statutory auditors through the voto di lista(voting list) system, to ensure that minority shareholders of acompany are represented on its board of directors and board ofstatutory auditors. Accordingly, Eni’s by-laws require thatthe members of the Board of Directors and the Board of StatutoryAuditors of Eni SpA not directly appointed by the Ministers (see"– Special Powers of the State") be elected on thebasis of candidate lists presented either by the Board ofDirectors or by one or more shareholders (including the Ministerof Economy and Finance) representing in the aggregate at least 1%of the share capital of Eni SpA having the right to vote atordinary shareholders’ meetings. Such candidate lists mustbe deposited at the registered office of Eni SpA and published inat least three Italian newspapers having general circulation inItaly (two of which must be business dailies). Publication of thecandidate list presented by the Board of Directors shall occur atleast 20 days before the first call (as defined below) of theShareholders’ Meeting. Such term is reduced to 10 days inthe case of candidate lists proposed by shareholders. Eachshareholder may present or participate in the presentation ofonly one candidate list and each candidate may appear on only onelist.

Under Eni’s by-laws, the election of the members of theBoard of Directors will proceed as follows:

| a)     |   | seven tenths of the members        to be elected will be drawn out from the candidate list        that receives the majority of votes expressed by the        shareholders in the numerical order in which they appear        on the list, rounded off in the event of a fractional        number to the next lower number;                                                                                                                                                                                                                                                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| b)     |   | the remaining Board members        will be drawn out from the other candidate lists; to this        purpose the votes obtained by each candidate list will be        divided by one or two or three depending on the number of        the members to be elected. The quotients thus obtained        will be assigned progressively to candidates of each said        list in the numerical order in which they appear in each        list. Quotients thus assigned to candidates of said lists        will be set in one decreasing numerical order. Those who        obtain the highest quotients will be elected. |

The election of members of the Board of Statutory Auditors isgoverned by the same rules, except that the Board of Directorsmay not present a candidate list to the Board of StatutoryAuditors, and that, pursuant to Decree No. 58, Eni’s by-lawsprovides that, in the event of a Board of Statutory Auditorsformed by more than three Auditors, at least two of them beappointed by minority shareholders.

The Extraordinary Shareholders’ Meeting held on May 28,2004 approved an amendment to Article 17.3 of the by-lawsaccording to which companies that are controlling entities orunder common control, as defined by Article 2359, firstParagraph, of the Civil Code, or companies controlled by the sameentity of the company presenting a list shall not present nortake part in the presentation of another candidate list.

Several provisions of Italian legislation are intended toincrease the protection of minority shareholders. In particular:(i) shareholders’ meetings must be called also upon requestof holders of at least 10% of the outstanding Shares (the Boardof Directors, however, may refuse to call the meeting whenconflicting with the company’s interests) (Article 2367c.c.); (ii) at an extraordinary shareholders’ meetingresolutions may be passed with the approval of at least twothirdsof the shares represented at the meeting, on the first, second orthird call (Articles 2368-2369 c.c.) by the majority, one-thirdand one-fifth of the outstanding share capital, respectively;(iii) shareholders’ actions against the Board of Directors,the Statutory Auditors. Official Receivers and the ManagingDirector may be initiated by shareholders holding at least 5% ofthe outstanding shares (Article 2393 bis c.c.); (iv) the actionsfor which a single shareholder may sue (Article 2394-bis c.c.);and (v) collective shareholders’ complaints to the Board ofStatutory Auditors may be promoted by shareholders holding atleast 5% of the outstanding share (Article 2409 c.c.). Thecompany’s by-laws may further lower the thresholds in (iii)and (v) and increase the voting quorums under (ii). Effectivefrom July 1, 1998, accounting control functions are under theexclusive competence of company’s independent auditors, andthe company’s Board of Statutory Auditors no longer carriesout such functions.

> 
*Reporting Requirements and Restrictions on Acquisitions    of Shares*

Under Consob Regulation, any direct or indirect participationin excess of 2%, 5%, 7.5%, 10% and subsequent multiples of 5% inthe voting shares of a listed company must be notified to suchcompany and to Consob, within five open market days from theeffectiveness of the transaction triggering such obligation tonotify.

The obligation to notify also applies to any direct orindirect participation owned through ADSs.

For listed companies, whose by-laws impose a maximum limit onthe number of shares that may be held by any shareholder, Consobis entitled to fix different relevant thresholds by decree.

Further, the reduction of the foregoing interest below therelevant thresholds must be notified within the same terms.

Shares held in excess of any such threshold cannot be voted inthe event the above notices have not been provided. Anyresolution violation of such limitation can be voided ifchallenged in court by shareholders and Consob, if the resolutionwould have not be adopted without the consent of the shares inquestion.

The relevant thresholds noted above shall be calculatedincluding: (i) shares registered in the name of the relevantreporting person whose underlying voting rights are attributed tothird parties, and viceversa; and (ii) shares held through thirdparties and shares whose voting rights are attributable to suchthird parties, excluding shares registered in the name of, orendorsed to, fiduciaries, as well as shares whose voting rightsare attributed to intermediaries for purposes of the managementof mutual or individual savings.

Furthermore, calculation of 5%, 10%, 25%, 50% and 75%thresholds shall also take into account shares outstanding whichthe relevant reporting person is entitled to purchase or to selldirectly or through third parties. Shares to be purchased throughthe exercise of conversion rights or warrants shall be calculatedonly in the event the acquisition can take place within a sixtydays period.

In the event the same relevant participation is directly orindirectly held by two or more entities, then obligation tonotify may be satisfied by one of such person, provided thatcompleteness of information is guaranteed.

Any participation exceeding 10% of the voting capital of anunlisted company, including any foreign company, owned by alisted company must be notified to such non-listed company withinseven days from reaching such threshold. Similarly, thenon-listed company must be notified about any subsequentreduction of such participation below the 10% threshold.

Listed companies are also required to notify Consob of theirparticipation exceeding 10% of the voting capital of non-listedcompanies owned at the end of the first six months and of thefull year. Such notification is due within 30 days from the dateof approval of the Annual Report and the Report on the First SixMonths, respectively.

In the event the same relevant participation is directly orindirectly held by two or more entities, then the obligation tonotify may be satisfied by one of such entities, provided thatcompleteness of information is guaranteed.

The 10% threshold shall be calculated including: (i) sharesregistered in the name of the relevant listed company, even ifvoting rights are attributable to third parties; (ii) shareswhose voting rights are attributable to the relevant listedcompany, in the event such voting rights entitle such party toexercise a dominant or material influence at the ordinaryshareholder’s meeting; and (iii) shares registered in thename of third parties and shares whose voting rights areattributable to third parties.

In addition to the rules of Article 2359 bis of the Italiancivil code, governing the acquisition of shares of the parentcompany by a controlled subsidiary, Decree No. 58/1998 regulatesadditional cross-ownership matters as follows.

Cross-ownership between listed and non-listed companies maynot exceed 2% of the shares of the listed company or 10% of theshares of the non-listed company. For calculating these ownershipthresholds, the rules for calculations of interests in listed andnon-listed companies apply.

The company ultimately exceeding the 2% or 10% interest in alisted or unlisted company respectively may not exercise thevoting rights on the shares held in excess of such thresholds;such shares must be sold within 12 months.

If anyone holds an interest exceeding 2% of the share capitalof a listed company, such listed company or any entitycontrolling such listed company may not acquire an interestexceeding 2% of the share capital of a listed company controlledby said holder. If the foregoing limit is exceeded, the holderwho last exceeded the foregoing limit or both the holders, if itis not possible to ascertain which holder exceeded such limitlast, may not exercise the voting right related to the sharesexceeding the foregoing limit. Such limits are not applicable incase of a tender offer for acquiring at least 60% of the ordinaryshares of a listed company. For a description of the limitationon cross-ownership between a company and its subsidiaries, see"Purchase by Eni SpA of its Own Shares".

Under Decree No. 58, any agreement, in whatever form, intendedto regulate the exercise of voting rights in a listed company orin the companies controlling a listed company, together with anyof its subsequent amendments, renewal or termination, must be:(i) notified to Consob, within five days from its execution; (ii)disclosed to the public through the publication, in summary form,in one Italian newspaper having general circulation, within tendays from its execution; and (iii) deposited in theCompanies’ Register of the place where such listed companyhas its registered office within 15 days from its execution.

The same requirements also apply to agreements, in whateverform, that: (a) impose an obligation of prior consultation forthe exercise of voting rights in a listed company and in itscontrolling companies; (b) contain undertakings limiting thetransferability of shares and other securities granting rightsfor the acquisition or subscription of shares; (c) provide forthe acquisition of the shares and securities; and (d) contemplateor cause the exercise, also in association with other persons, ofdominant influence over the listed company that issued the sharesand its controlled entities.

In the event the obligations set out above are not completelysatisfied, then the agreement is ineffective and the votingrights connected to the relevant shares may not be exercised. Incase of violation of such limitation imposed on the votingrights, a resolution can be challenged if such resolution wouldhave not been approved without the vote of such shares.

If the parties have agreed upon the duration of the agreement,such duration cannot exceed three years. In absence of agreement,each party to the agreement can withdraw from such an agreementby giving a six month notice.

In accordance with Law No. 287 of October 10, 1990, anyacquisition of sole or joint control over a company that wouldcreate or strengthen a dominant position in the domestic marketin a manner that eliminates or significantly reduces competitionis prohibited. However, if the acquiring party and the company tobe acquired operate in more than one EU member state and togetherexceed certain revenue thresholds, the antitrust approval of theacquisition falls within the exclusive jurisdiction of theEuropean Commission.

> 
*Shareholders’ Meetings*

Registered shareholders are entitled to attend and vote atordinary and extraordinary shareholders’ meetings. Eachholder is entitled to cast one vote for each share held. Votesmay be cast personally, by proxy or by mail, in accordance withapplicable regulations. Meetings are called by Eni SpA’sBoard of Directors when required or deemed necessary, or onrequest of shareholders representing at least 10% of outstandingshares, who must provide an agenda of the matters to be discussedto the Chairman of the Board of Directors. Meetings may also becalled, by the Board of Statutory Auditors or by two Auditors,provided that such call has been notified in advance.

Ordinary shareholders’ meetings must be convened at leastonce a year. At these ordinary meetings, shareholders approve thefinancial statements, resolve upon dividend distribution, if any,may appoint Directors, Statutory Auditors and, when necessary,the External Auditors, determine their remuneration and vote onthe liability of Directors and Statutory Auditors and approveshareholders’ meeting regulation. Extraordinary meetings ofshareholders may be called to pass upon proposed amendments tothe by-laws, capital increases, mergers, consolidations,demerger, issuance of debentures, appointment of liquidators andsimilar extraordinary actions. The notice of a shareholders’meeting generally specifies two meeting dates ("calls")and because Eni SpA is listed such notice may specify three callsfor extraordinary shareholders’ meetings.

The attendance quorum required for a valid shareholder actionat an ordinary meeting on first call is 50% or more of theoutstanding shares, while on second call there is no attendancequorum requirement. At a duly called ordinary meeting, in bothfirst and second calls, resolutions may be approved by a simplemajority of the shares represented at the meeting.

The attendance quorum required for a valid shareholder meetingat an extraordinary meeting is more than 50% of the outstandingshares on first call, while on second call the attendance quorumis more than 1/3 of the Shares outstanding and on third call theattendance quorum is more than 1/5 of the shares outstanding. Onfirst, second and third call, resolutions may be approved by amajority of 2/3 of the Shares represented at the shareholdersmeeting.

The financial statements of Eni SpA are submitted for approvalto the annual shareholders’ meeting, which must be convenedwithin 180 days after the end of the financial year. Shareholdersare informed of all meetings to be held by publication of anotice in the Gazzetta Ufficiale and in at least one Italiannewspaper of general circulation at least 30 days before the datefixed for the meeting. Under current legislation, the reports andproposals of the Board of Directors to the shareholders meetingfor any item on the agenda of the meeting and the financialstatements to be submitted to the shareholders’ approval,shall be deposited at the Shareholders disposal at theCompany’s registered office and at Borsa Italiana.

Admission to the meeting is granted to shareholders whorequested the notification of attendance pursuant to Article 34of Consob Deliberation No. 11768 of December 23, 1998, at leastfive days prior to the date of the meeting on first call. Theextraordinary shareholders’ meeting, held on May 28, 2004,approved the amendment of Article 13 of the by-laws according towhich the term is reduced to two days. For a description of theprocedures to be followed by Beneficial Owners of ADRs to attendshareholders’ meetings and exercise voting rights withrespect to underlying Shares, see "Description of AmericanDepositary Receipts – Voting of Deposited Securities".Beneficial Owners of Shares held with Monte Titoli need only toinstruct the relevant banks associated with Monte Titoli whichhold their accounts to procure admission tickets and proxy forms.

The Extraordinary Shareholders’ Meeting held on May 28,2004, approved the amendment to Article 23 of the by-lawsaccording to which the Board of Director is allowed to resolve:(i) the merger and demerger of at least 90% directly ownedsubsidiaries; (ii) the establishment and winding up of branches;and (iii) the amendment to the by-laws to adequate its provisionsto the current legislation.

Pursuant to Legislative Decree No. 213 dated June 24, 1998,Eni SpA’s shares have been "dematerialized" (theshares are not longer incorporated in a certificate). Thereforefor the exercise of the rights connected to outstanding Sharesnot yet dematerialized, Shareholders must first deliver suchshares to a financial intermediary associated with Monte Titoli.

Shareholders may appoint proxies by completing the formattached to the admission ticket. Directors, Statutory Auditors,auditors and employees of Eni SpA or of controlled companies, andthe External Auditors of Eni SpA, banks and Monte Titoli may notbe appointed proxies. Any one proxy may not represent more than200 shareholders of Eni SpA. A proxy may be appointed for asingle meeting, including the first, second and third callthereof unless the proxy is general or given to a company,association, foundation, other entities or institutions to anemployee. The by-laws of Eni SpA provide for voting by mail.There are no limitations arising under Italian law or the by-lawsof Eni SpA on the right of non-resident or foreign persons tohold or vote the Shares other than limitations that applygenerally to all shareholders.

Rules relating to proxies are established by Decree No. 58 andthe related Consob Regulation No. 11971 dated May 14, 1999.Accordingly whereby: (i) proxies may be solicited, collected orexercised by banks, investment firms and shareholders’associations; (ii) proxies may be granted only in respect ofshareholders’ meetings that have been called; and (iii)proxies may be limited to voting on particular proposals. DecreeNo. 58 also allows companies to implement vote by mail proceduresand establishes new regulations relating to, among other things,takeovers, cross-shareholdings, shareholders’ agreements andsaving shares.

Meetings of Eni’s shareholders are conducted according tothe "Eni SpA’s Shareholders’ MeetingRegulation" as approved by the Ordinary Shareholders’Meeting of Eni on December 4, 1998 and amended by the OrdinaryShareholders’ Meeting held on May 28, 2004 in order toadequate the provision to the new rules content in the Civil Codefor the participation to the Shareholders’ Meetings.

> 
*Subscription Rights*

New shares may be issued pursuant to a resolution ofshareholders at an extraordinary meeting. Under Italian law,shareholders have a preemptive right to subscribe for new issuesof shares and debentures convertible into shares in proportion totheir respective shareholdings. Subject to certain conditionsprincipally designated to prevent dilution of the rights ofshareholders, this right may be waived or limited by resolutiontaken by an extraordinary shareholders’ meeting by theaffirmative vote of more than 50% of the shares outstanding. Suchpercentage applies to all calls of the meeting.

> 
*Liquidation Rights*

Under Italian law, subject to the satisfaction of the claimsof all other creditors, shareholders are entitled to adistribution of the remaining liquidated assets of Eni SpA inproportion to the nominal value of their shares. Holders ofsavings shares and preferred shares, if foreseen by the by-laws,in the event such shares are issued by Eni SpA, are entitled to apreferred right to distribution from liquidation up to theirnominal value. Thereafter, if there are surplus assets, ordinaryshareholders rank equally in the distribution of such assets.Shares rank pari passu among ordinary shareholders in aliquidation.

 

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**Material Contracts**

None.

 

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**Exchange Controls**

There are no exchange controls in Italy. Residents andnon-residents of Italy may effect any investments, divestmentsand other transactions that entail a transfer of assets to orfrom Italy, subject only to the reporting, record-keeping anddisclosure requirements described below. In particular, residentsof Italy may hold foreign currency and foreign securities of anykind, within and outside Italy, while non-residents may invest inItalian securities without restriction and may export from Italycash, instruments of credit or payment and securities, whether inforeign currency or euro, representing interest, dividends, otherasset distributions and the proceeds of dispositions.

Updated reporting and record-keeping requirements arecontained in recent Italian legislation which implements an EUdirective regarding the free movement of capital. Suchlegislation requires that transfers into or out of Italy of cashor securities in excess of euro 10 thousand be reported inwriting to the Ufficio Italiano Cambi (the Italian ExchangeOffice) by residents or non-residents that effect such transfersdirectly, or by banks, securities dealers or Poste Italiane SpA(Italian Mail) that effect such transactions on their behalf. Inaddition, banks, securities dealers or Poste Italiane SpAeffecting such transactions on behalf of residents ornon-residents of Italy are required to maintain records of suchtransactions for five years, which records may be inspected atany time by Italian tax and judicial authorities. Non-compliancewith these reporting and record- keeping requirements may resultin administrative fines or, in the case of false reporting and incertain cases of incomplete reporting, criminal penalties. TheUfficio Italiano Cambi will maintain reports for a period of tenyears and may use them, directly or through other governmentoffices, to police money laundering, tax evasion and any othercrime or violation.

 

##### Table of Contents

**Taxation**

*The information set forth below is a summary only, andItalian, the United States and other tax laws may change fromtime to time. Holders of shares and ADSs should consult withtheir professional advisors as to the tax consequences of theirownership and disposition of the shares and ADRs, including, inparticular, the effect of tax laws of any other jurisdiction.*

 

> 
***Italian Taxation***

The following is a summary of the material Italian taxconsequences of the ownership and disposition of shares or ADRsas at the date hereof and does not purport to be a completeanalysis of all potential tax effects relevant to the ownershipor disposition of shares or ADRs.

> 
*Income tax*

Dividends received by Italian resident individuals in relationto participations exceeding 2% of the voting rights or 5% of theshare capital ("substantial participations") areincluded in the taxable income subject to personal income tax tothe extent of 40% of their amount. Personal income tax applies atprogressive rates ranging from 23% to 43% plus local surtaxes.Dividends received by Italian resident individuals in relation tonon-substantial participations not related to the conduct of abusiness are subject to a substitute tax of 12.5% withheld at thesource by the dividend paying agent. This being the case, thedividend is not to be included in the individual’s taxreturn. If the non-substantial participations are related to theconduct of a business, dividends received are included in thetaxable business income to the extent of 40% of their amount.

Dividends received by Italian pension funds are included inthe overall result of the pension funds subject to a 11%substitute tax. Dividends received by Italian collectiveinvestment funds are included in the overall result of thecollective investment funds subject to a 12.5% substitute tax.Dividends received by Italian real estate investment funds arenot subject to tax in the hands of the real estate investmentfunds. Entities exempt from IRES (company income tax) are subjectto the substitute tax at the rate of 27%.

Dividend paid to non Italian residents are subject to the samesubstitute tax levied at source by the dividend paying agent atthe rate of 27%, provided that the participations are notconnected to an Italian permanent establishment. Up tofour-ninths of the substitute tax withheld might be recovered bythe non-resident shareholder from the Italian Tax Authoritiesupon provision of evidence of full payment of income tax on suchdividend in his/her country of residence in an amount at leastequal to the total refund claimed.

The substitute tax may be reduced under the tax treaty inforce between Italy and the country of residence of theBeneficial Owner of the dividend. Italy has executed income taxtreaties with approximately 70 foreign countries, including allEU member states, Argentina, Australia, Brazil, Canada, Japan,New Zealand, Norway, Switzerland, the United States and somecountries in Africa, the Middle East and the Far East. Generallyspeaking, it should be noted that tax treaties are not applicablewhere the holder is a tax-exempt entity or, with few exceptions,a partnership or a trust.

In order to obtain the treaty benefit (reduced substitute taxrate) at the same time of payment, the Beneficial Owner must filean application to the dividend paying agent chosen by theDepositary stating the existence of the conditions for theapplicability of the treaty benefit, together with acertification issued by the foreign Tax Authorities stating thatthe shareholder is a resident of that country for treatypurposes.

Under the tax treaty between the United States and Italy,dividends derived and beneficially owned by a U.S. resident whoholds less than 10% of the Company’s shares are subject toan Italian withholding or substitute tax at a reduced rate of15%, provided that the participations are not effectivelyconnected with a permanent establishment in Italy through whichthe U.S. resident carries on a business or a fixed establishmentin Italy through which such U.S. resident performs independentpersonal services (for further details please refer to therelevant provisions set forth in the Italy-U.S. Tax Treaty). Inthe absence of such conditions, the dividend paying agent willdeduct from the gross amount of the dividend the substitute taxat the statutory rate of 27%.

Based on the certification procedure required by the ItalianTax Authorities, to benefit from the direct application of the15% substitute tax the U.S. shareholder must provide the dividendpaying agent with a certificate obtained from the U.S. InternalRevenue Service (the "IRS") with respect to eachdividend payment. The request for that certificate must include astatement, signed under penalties for perjury, to the effect thatthe shareholder is a U.S. resident individual or corporation, anddoes not maintain a permanent establishment in Italy, and mustset forth other required information. The normal time forprocessing requests for certification by the IRS is normallyabout six to eight weeks.

Where the Beneficial Owner has not provided the abovementioned documentation, the dividend paying agent will deductfrom the gross amount of the dividend the substitute tax at thestatutory rate of 27%. The U.S. recipient will then be entitledto claim from the Italian Tax Authorities the difference("treaty refund") between the domestic rate and thetreaty one by filing specific forms (certificate) with theItalian Tax Authorities.

According to the Italian taxlaw as reflected in the Deposit Agreement, the Company is notinvolved: (i) in withholding amounts due by holders of ADSs torelevant taxing authorities in connection with any distributionsrelating to ADSs; or (ii) in the procedures through which certainholders of ADSs may obtain tax rebates, credits, refunds or othersimilar benefits. Pursuant to the Deposit Agreement, thecustodian and the Depositary have undertaken to use reasonableefforts to make and maintain arrangements to enable persons thatare considered the United States residents for purposes ofapplicable law to receive any rebates or tax credits (pursuant totreaty or otherwise) relating to distributions on the ADSs towhich such persons are entitled in addition, the Depositary hasagreed to establish procedures to enable all holders to takeadvantage of any rebates or tax credits (pursuant to treaty ofotherwise) relating to distributions on the ADSs to which suchholders are entitled and to provide, at least annually, a writtennotice, in a form previously agreed to by the Company, to theholders of ADSs of any necessary actions to be undertaken by suchHolders.

> 
*Transfer tax*

In general terms, no Italian transfer tax is payable in thefollowing cases:

| • |   | contracts executed on        regulated financial markets;                                                                                                                                                   |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | contracts concerning shares        of non-listed companies, executed between non-resident        persons and banks or other authorized intermediaries        (provided that certain conditions are met);    |
| • |   | contracts concerning listed        shares even if not executed on regulated financial        markets, between non-resident persons and banks or other        authorized intermediaries or investment funds. |

The mentioned exemption from transfer tax does not entail theapplication of stamp duty or registration tax.

To provide a more complete picture, transfer tax is currentlypayable at the following rates:

| • |   | Euro 0.072 for euro 51.65        (or fraction thereof) of the price at which the Shares or        ADRs are transferred, when the transfer occurs directly        between the contracting parties or through intermediaries        other than those listed below.                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Euro 0.025 for euro 51.65        (or fraction thereof) of the price at which the Shares or        ADRs are transferred, when the transfer occurs between        private individuals and a bank or between private        individuals through an intermediary, such as an exchange        agent, a bank, a stock broker, or a SIM. |
| • |   | Euro 0.0061 for euro 51.65        (or fraction thereof) of the price at which the Shares or        ADRs are transferred, when the transfer occurs between        banks, exchange agents or SIMs.                                                                                                                                  |

*Capital Gains Tax*

This paragraph applies with respect to capital gains out ofthe scope of a business activity carried out in Italy.

Gains realized by Italian resident individuals upon the saleof substantial participations are included in the taxable basesubject to personal income tax to the extent of 40% of theiramount, while gains realized upon the sale of non substantialparticipations are subject to a substitute tax at a 12.5% rate.

For gains deriving from the sale of non substantialparticipations, two different systems may be applied at theoption of the shareholder as an alternative to the filing of thetax return:

| • |   | the so-called        "administered savings" tax regime (risparmio        amministrato), based on which intermediaries acting as        shares depositaries shall apply a substitute tax (12.5%)        on each gain, on a cash basis. If the sale of shares        generated a loss, said loss may be carried forward up to        the fourth following year; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the so-called        "portfolio management" tax regime (risparmio        gestito) which is applicable when the shares form part of        a portfolio managed by an Italian asset management        company. The accrued net profit of the portfolio is        subject to a 12.5% substitute tax to be applied by the        portfolio.                           |

Gains realized by non residents from non substantialparticipations in listed companies are deemed not to be realizedin Italy and consequently are not subject to the capital gainstax.

On the contrary, gains realized by non-residents fromsubstantial participations even in listed companies are deemed tobe realized in Italy and consequently they are subject to thecapital gains tax.

However double taxation treaties may eliminate the capitalgains tax. Under the income tax convention between the UnitedStates and Italy, a U.S. resident will not be subject to thecapital gains tax unless the shares or ADRs form part of thebusiness property of a permanent establishment of the holder inItaly or pertain to a fixed establishment available to ashareholder in Italy for the purposes of performing independentpersonal services. U.S. residents who sell shares may be requiredto produce appropriate documentation establishing that theabove-mentioned conditions of non-taxability pursuant to theconvention have been satisfied.

> 
*Inheritance and Gift Tax*

No inheritance tax applies in Italy to the transfer of sharesor ADRs by reason of death. Transfer of shares or ADRs, even ifheld outside Italy, by reason of donation are subject to theordinary Italian transfer tax on the value of the gift exceeding180,759.91 euro, only if the donee is not the spouse, a directdescendant or a relative up to the fourth degree of the donor.However, tax applies in the fixed amount of 129.11 euro.

An anti avoidance rule applies to gift of assets (such asshares) which, if sold for consideration, would give rise tocapital gain subject to substitute tax as per Decree No. 461 ofNovember 21, 1997. In particular if the donee sells the sharesfor consideration within five years from the receipt thereof asgift, the substitute tax will apply on the capital gaindetermined as if the gift had never been given.

> 
***United States Taxation***

The following is a summary of certain U.S. federal income taxconsequences to U.S. Holders (as defined below) of the ownershipand disposition of Shares or ADRs. This summary is addressed toU.S. Holders that hold Shares or ADSs as capital assets, and doesnot purport to address all material tax consequences of theownership of Shares or ADSs. The summary does not deal withspecial classes of investors, such as tax-exempt entities,dealers in securities, traders in securities that elect to markto market, certain insurance companies, broker-dealers, investorsliable for alternative minimum tax, investors that actually orconstructively own 10% or more of Eni SpA’s Shares,investors that hold Shares or ADSs as part of a straddle or ahedging or conversion transaction and investors whose"functional currency" is not the U.S. dollar.

This summary is based on the tax laws of the United States(including the Internal Revenue Code of 1986, as amended, (the"Code") its legislative history, existing and proposedregulations thereunder, published rulings and court decisions) asin effect on the date hereof, and which are subject to change (orchanges in interpretation), possibly with retroactive effect. Thesummary is based in part on representations of the Depositary andassumes that each obligation in the Deposit Agreement and anyrelated agreement will be performed in accordance with its terms.U.S. Holders should consult their own tax advisors to determinethe U.S. federal, state and local and foreign tax consequences tothem of the ownership and disposition of Shares or ADSs.

As used in this section, the term "U.S. Holder"means a beneficial owner of Shares or ADSs who or that is: (i) acitizen or resident of the United States; (ii) a domesticcorporation; (iii) an estate the income of which is subject tothe United States federal income tax without regard to itssource; or (iv) a trust if a court within the United States isable to exercise primary supervision over the administration ofthe trust and one or more United States persons have theauthority to control all substantial decisions of the trust.

The discussion does not address any aspects of the UnitedStates taxation other than federal income taxation. Inparticular, U.S. Holders are urged to confirm their eligibilityfor benefits under the income tax convention between the UnitedStates and Italy with their advisors and to discuss with theiradvisors any possible consequences of their failure to qualifyfor such benefits.

In general, and taking into account the earlier assumptions,for the United States federal income tax purposes, U.S. Holderswho own ADRs evidencing ADSs will be treated as owners of theunderlying Shares. Exchanges of Shares for ADSs, and ADSs forshares, generally will not be subject to the United Statesfederal income tax.

> 
*Dividends*

Distributions paid on the shares generally will be treated asdividends for U.S. federal income tax purposes to the extent paidout of Eni SpA’s current or accumulated earnings and profitsas determined for U.S. federal income tax purposes, but will notbe eligible for the dividends received-deduction generallyallowed to corporations. To the extent that a distributionexceeds Eni SpA’s earnings and profits, it will be treated,first, as a non-taxable return of capital to the extent of theU.S. Holder’s tax basis in the shares or ADSs, andthereafter as a taxable gain on the sale or exchange of shares orADSs. A U.S. Holder will be subject to U.S. federal taxation, onthe date of actual or constructive receipt by the U.S. Holder (inthe case of Shares) or by the Depositary (in the case of ADSs)with respect to the gross amount of any dividends, including anyItalian tax withheld therefrom, without regard to whether anyportion of such tax may be refunded to the U.S. Holder by theItalian tax authorities. If you are a noncorporate U.S. Holder,dividends paid to you in taxable years beginning before January1, 2009 that constitute qualified dividend income will be taxableto you at a maximum tax rate of 15% provided that you hold theShares or ADSs for more than 60 days during the 121-day periodbeginning 60 days before the ex-dividend date and meet otherholding period requirements. Dividends we pay with respect to theshares or ADSs generally will be qualified dividend income. Theamount of the dividend distribution that you must include in yourincome as a U.S. holder will be the US dollar value of the europayments made, determined at the spot euro/US dollar rate on thedate the dividend distribution is includible in your income,regardless of whether the payment is in fact converted into USdollars. Generally, any gain or loss resulting from currencyexchange fluctuations during the period from the date you includethe dividend payment in income to the date you convert thepayment into US dollars will be treated as ordinary income orloss and will not be eligible for the special tax rate applicableto qualified dividend income.

Subject to certain conditions and limitations, Italian taxwithheld from dividends will be treated as a foreign income taxeligible for credit against the U.S. Holder’s U.S. federalincome tax liability. Special rules apply in determining theforeign tax credit limitation with respect to dividends that aresubject to the maximum 15% tax rate. To the extent a refund ofthe tax withheld is available to a U.S. Holder under Italian lawor under the income tax convention, the amount of tax withheldthat is refundable will not be eligible for credit against yourUnited States federal income tax liability. See "ItalianTaxation – Income Tax" above, for the procedures forobtaining a tax refund. Dividends paid on the Shares will betreated as income from sources outside the United States.Dividend paid in taxable years beginning before January 1, 2007generally will be of "passive" or "financialservices" income, and dividends paid in taxable yearsbeginning after December 31, 2006 will, depending on yourcircumstances, be "passive" or "general"income which, in either case, is treated separately from othertypes of income for purpose of computing the foreign tax creditallowable to you.

> 
*Sale or Exchange of Shares*

In general, a U.S. Holder will recognize gain or loss for U.S.federal income tax purposes on the sale or exchange of Shares orADSs equal to the difference between the U.S. Holder’sadjusted basis in the shares or ADSs (determined in US dollars),as the case may be, and the amount realized on the sale orexchange (or if the amount realized is denominated in a foreigncurrency its US dollar equivalent, determined at the spot rate onthe date of disposition). Generally, such gain or loss will betreated as capital gain or loss if the Shares or ADSs are held ascapital assets and will be a long-term capital gain or loss ifthe shares or ADSs have been held for more than one year on thedate of such sale or exchange. Long-term capital gain of anon-corporate U.S. Holder that is recognized before January 1,2009 is generally subject to a maximum tax rate of 15%. Inaddition, any such gain or loss realized by a U.S. Holdergenerally will be treated as U.S. source income or loss for U.S.foreign tax credit purposes.

##### Table of Contents

**Documents on Display**

It is possible to read and copy documents referred to in thisannual report on Form 20-F that have been filed with the SEC atthe SEC’s public reference room located at 100F Street, NE,Room 1580, Washington, DC 20549 and at the SEC’s otherpublic reference rooms in New York City and Chicago. Please callthe SEC at 1-800-SEC-0330 for further information on the publicreference rooms and their copy charges. The SEC filings are alsoavailable to the public from commercial document retrievalservices and in the website maintained by the SEC at www.sec.gov.It is also possible to read and copy documents referred to inthis annual report on Form 20-F at the New York Stock Exchange,20 Broad Street, 17th floor, New York.

 

 

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**Item 11. QUALITATIVE AND QUANTITATIVEDISCLOSURES ABOUT MARKET RISK**

Eni operates internationally in the oil and natural gas,electricity generation, petrochemicals and oilfield services andengineering industries and is subject to exposure to market risksfrom changes in interest rates, foreign exchange rates andcommodity prices.

Derivative financial instruments are utilized by Eni to reducethese risks, as explained below.

Eni’s treasury activities are managed primarily by twocaptive finance companies, operating in the Italian andinternational financial markets. Eni’s operatingsubsidiaries are required to reduce foreign exchange rate risk toa minimum level by coordinating their operations with suchfinance companies.

Eni SpA’s Board of Directors has defined a policy thatrequires the Treasury Department of Eni SpA to determine themaximum level of foreign exchange rate and interest rate risksthat can be assumed by Eni’s finance companies. Such policyalso defines the eligible counterparties in derivativetransactions. As far as interest rate and foreign exchange raterisks are concerned, the calculation and measurement techniquesfollowed by Eni’s finance companies are in accordance withestablished banking standards (such standards are established bythe Basel Committee). However, the tolerable level of riskadopted by such companies is more conservative than that definedby the Basel Committee. Eni SpA’s Treasury Department isresponsible for monitoring compliance with Eni’s policy, aswell as the correlation between the indicators adopted formeasuring of the tolerable risk level, the portfolio of financialinstruments and market conditions.

Eni does not enter into derivative transactions on aspeculative basis.

The Company has estimated its market risk exposure usingsensitivity analysis. Market risk exposure has been defined asthe change in fair value of derivative financial and commodityinstruments and other financial instruments assuming ahypothetical 10 percent adverse change in market prices or rates.Fair value was determined using dealer quotes or appropriatepricing models. The interest rate used for periods shorter thanone year is LIBOR/EURIBOR. The Company has applied thesensitivity analysis to derivative financial and commodityinstruments and other financial instruments that are exposed tointerest rate, foreign exchange rate and commodities price risk.The results of the sensitivity analysis are summarized below.Actual changes in market prices or rates may differ fromhypothetical changes. 

For a comprehensive disclosure of market risk see Note 23 tothe Consolidated Financial Statements.

 

> 
***Foreign Exchange Risks***

Eni’s operations are denominated in various foreigncurrencies and consequently Eni is exposed to exchange ratefluctuations that have an impact on its cash flows and financingactivities. The Company’s exposure to foreign currency ratesexists primarily with US dollars and British pounds versus euro.

Eni enters into various types of foreign exchange contracts inmanaging its foreign exchange risk. The notional amount of thesecontracts is indicated in the following table:

| (million        euro)      | **Dec. 31, 2003        Notional amount** |   | **Dec. 31, 2004        Notional amount** |
|----------------------------|------------------------------------------|--------|------------------------------------------|
|                       |                                          |   |                                          |
| Forward exchange contracts | 6,165                                    |   | 8,501                                    |
| Options                    | 550                                      |   | 91                                       |
|                       | **6,715**                                |   | **8,592**                                |
|                       |                                          |   |                                          |

 

Eni uses forward exchange contracts primarily to hedgeexisting receivables and payables, including deposits andborrowings denominated in currency other than euro. Some of thecontracts involve the exchange of currencies other than the localcurrency, according to the needs of foreign consolidatedsubsidiaries. Both buy and sell amounts of such contracts areindicated at the notional value. The term of forward exchangecontracts is normally not longer than one year. The increase ofeuro 2,336 million in forward exchange contracts is primarily dueto Enifin SpA’s transactions in order to hedge financialshort-term payables of Eni Coordination Center SA (euro 1,785million).

Eni generally uses a combination of currency options thatenable a predetermined risk rate band, related to expensesdenominated in currency other than euro, to be locked in.Currency options, purchased in the over-the-counter market for apremium, provide Eni with the right to buy or sell an agreedamount of currency at a specified exchange rate at the end of aspecified period. The decrease of euro 459 million is essentiallydue to the expiration of options of the Oilfield Services,Construction and Engineering segment (euro 296 million) and Gas& Power segment (euro 144 million).

Based on the results of the sensitivity analysis, Eniestimates that the potential impact of a 10% decrease or increasein euro exchange rates of each currency on the fair value ofexisting financial instruments as of December 31, 2004 amounts toeuro 78 million (euro 57 million at December 31, 2003).

 

> 
***Interest Rate Risk***

Debt and the existence of mismatches between assets andliabilities earning or paying fixed interests expose Eni to therisk of interest rate fluctuations. Eni enters into various typesof interest rate contracts in managing its interest rate risk.The notional amount of these contracts is indicated in thefollowing table:

| (million        euro)        | **Dec. 31, 2003        Notional amount** |   | **Dec. 31, 2004        Notional amount** |
|------------------------------|------------------------------------------|--------|------------------------------------------|
|                         |                                          |   |                                          |
| Interest rate swaps          | 5,690                                    |   | 5,663                                    |
| Interest        rate collars | 74                                       |   | 33                                       |
|                         | **5,764**                                |   | **5,696**                                |
|                         |                                          |   |                                          |

Eni enters into interest rate derivatives, particularly"interest rate swaps", to alter interest rate exposuresarising from mismatches between assets and liabilities, to lowerfunding costs and to diversify sources of funding. Under interestrate swaps, Eni agrees with other parties to exchange, atspecified intervals, the difference between interest amountcalculated by reference to an agreed notional principal amountand agreed fixed or floating interest rates.

Eni uses "interest rate collars" to manage itsinterest rate risk. An interest rate collar is a combination ofoptions that enables a predetermined interest rate band to belocked in. Eni also uses primarily zero-cost collars that do notrequire payment of an option premium.

Based on the results of a sensitivity analysis, Eni estimatesthat a 10% decrease or increase in the euro would impact on thefair value of existing financial instruments as of December 31,2004, in the amount of euro 78 million.

Based on the results of a sensitivity analysis, Eni estimatesthat a 10% decrease or increase in the interest rate yield on thefair value of existing financial instruments as of December 31,2004 amounts to euro 82 million (euro 90 million at December 31,2003).

 

> 
***Commodity Price Risk***

Eni enters into commodity-based derivative contracts tominimize the commodities price volatility in order to conformcosts to revenues.

In natural gas trading activity, Eni uses exchange tradedcrude oil forward contracts with the aim of hedging the riskrelated to natural gas sales at fixed prices following supplycontracts at variable costs with an indexation to the petroleumproducts in the international markets.

In refining and marketing activities of petroleum products,Eni uses derivative instruments with the aim of reducing theuncertainty of the market prices.

The expiration date of contracts is less than 1 year. Thetable below summarizes trade derivative contracts at December 31,2003 and 2004.

|   |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

|   |   | **Buy** |   | **Sell** |   | **Buy** |   | **Sell** |
|--------|--------|---------|--------|----------|--------|---------|--------|----------|
|   |   |         |   |          |   |         |   |          |

| Crudes              | (barrels)      |   | 6,629,544 |   | 1,146,000 |   | 1,497,121 |   | 2,949,000 |
|---------------------|----------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Oil        products | (tonnes)       |   | 159,849   |   | 381,200   |   | 434,150   |   | 287,411   |
| Oil products        | (gallons)      |   |      |   | 104,580   |   |      |   | 4,620     |
| Electricity         | (megawatthour) |   |      |   |      |   | 804,507   |   |      |
|                |           |   |           |   |           |   |           |   |           |

Eni’s commodity market risk exposure as of December 31,2004 is not material (not material at December 31, 2003 as well).

 

 

##### Table of Contents

**Item 12. DESCRIPTION OF SECURITIES OTHERTHAN EQUITY SECURITIES**

Not applicable.

 

 

##### Table of Contents

**PART II**

**Item 13. DEFAULTS, DIVIDEND ARREARAGES ANDDELINQUENCIES**

None.

**Item 14. MATERIAL MODIFICATIONS TO THERIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

None.

**Item 15. CONTROLS AND PROCEDURES**

In designing and evaluating the Company’s disclosurecontrols and procedures, the Company’s management, includingthe principal executive officer and principal financial officer,recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance ofachieving the desired control objectives, and the Company’smanagement necessarily was required to apply its judgement inevaluating the cost-benefit relationship of possible controls andprocedures. Because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurancethat all control issues and instances of fraud, if any, withinthe Company have been detected.

It should be noted that Eni has investments in certainunconsolidated entities. As Eni does not control or manage theseentities, its disclosure controls and procedures with respect tosuch entities are necessarily more limited than those itmaintains with respect to its consolidated subsidiaries.

The Company’s management, with the participation of theprincipal executive officer and principal financial officer, hasevaluated the effectiveness of the design and operation of itsdisclosure controls and procedures pursuant to Exchange Act Rule13a-14(c) as of the end of the period covered by this Form 20-F.Based on that evaluation, the principal executive officer andprincipal financial officer have concluded that these disclosurecontrols and procedures are effective at the reasonable assurancelevel.

There have not been changes in the Company’s internalcontrol over financial reporting that occurred during the periodcovered by this Form 20-F that have materially affected, or arereasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

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**Item 16A. Board of Statutory AuditorsFinancial Expert**

Eni’s Board of Statutory Auditors has determined thatfour members of Eni’s Board of Statutory Auditors, qualifyas "audit committee financial expert", as defined inItem 16A of Form 20-F. These four members are: Paolo AndreaColombo, who is the Chairman of the Board, and Filippo Duodo,Riccardo Perotta and Giorgio Silva.

 

 

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**Item 16B. Code of Ethics**

Eni adopted a code of ethics that applies to all Eni’semployees including Eni’s principal executive officer,principal financial officer and principal accounting officer. Enipublished its code of ethics on Eni’s website. It isaccessible at www.eni.it, under the section Publications -Corporate Responsibility - Code of Practice.

Eni’s code of ethic contains ethical guidelines,describes corporate values and required standards of businessconduct and moral integrity. The ethical guidelines are designedto deter wrongdoing and to promote honest and ethical conduct,compliance with applicable laws and regulations and internalreporting of violations of the guidelines. The code also affirmsthe principles of accounting transparency and internal control.

 

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**Item 16C. Principal Accountant Fees andServices**

PricewaterhouseCoopers SpA has served as Eni independentpublic auditor for fiscal years 2002 and 2003 and as Eniprincipal independent public auditor for fiscal year 2004, forwhich audited consolidated financial statements appear in thisannual report on Form 20-F.

The following table shows total fees paid by Eni and oursubsidiaries for services provided by Eni public auditorPricewaterhouseCoopers and its member firms, with respect to theprevious two years:

|   | **For the year ended        December 31,** |
|--------|--------------------------------------------|
|   |                                            |

| (thousands of euro) | **2003** |   | **2004** |
|---------------------|----------|--------|----------|
|                |          |   |          |

| Audit fees         | 7,177     |   |   | 9,344     |   |
|--------------------|-----------|--------|--------|-----------|--------|
| Audit-related fees | 296       |   |   | 136       |   |
| Tax fees           | 695       |   |   | 344       |   |
| All other fees     | 71        |   |   | 54        |   |
| **Total**          | **8,179** |   |   | **9,878** |   |
|               |           |   |        |

 

Audit Fees principally include fees billed for the standardaudit work that needs to be performed each year in order to issuean opinion on the consolidated financial statements of Eni. Italso includes other audit services which are those services thatonly the external auditor reasonably can provide, such as comfortletter/consent letter, certification services, assistance andrevision of documents filed with the SEC.

Audit Related Fees include fees billed for other assurance andrelated services provided by auditors, but not restricted tothose that can only reasonably be provided by the externalauditor signing the audit report, that are reasonably related tothe performance of the audit or review of the company’sfinancial statements such as audits of pension and benefit plans,merger and acquisition due diligence, audit and consultancyservices rendered in connection with acquisition deals, checks oninternal control systems over financial reporting, certificationservices not provided for by law and regulations andconsultations concerning financial accounting and reportingstandards.

Tax Fees include fees billed for the assistance withcompliance and reporting of income and value added taxes,assistance with assessment of new or changing tax regimes, taxconsultancy in connection with merger and acquisition deals,services rendered in connection with tax refunds, assistancerendered on occasion of tax inspections and in connection withtax claims and recourses and assistance with assessing relevantrules, regulations and facts going into Eni correspondence withtax authorities.

Other Fees include fees billed for services that arepermissible under applicable rules and regulations and consistprimarily of consultancy services related to IT and secretarialservices.

> 
*Pre-approval Policies and Procedures of the Internal    Control Committee*

The Internal Control Committee informed all Group companiesthat they cannot request Eni’s external auditors to performservices other than audits, services related to audits, and tothe company’s capital markets transactions. This restrictionapplies to our principal external auditor and to other externalauditors performing audit services relating to 5% or more ofEni’s consolidated revenues or total assets. Servicesstrictly related to audit services and to the company’scapital markets transactions have been listed by the InternalControl Committee.

Audit services and services strictly related to audit servicesand to the company’s capital markets transactions have beenidentified as permissible and have been pre-approved by theInternal Control Committee, which also informed all Groupcompanies that pre-approval by the Committee is required for anyother service requested to be performed by the external auditors,including those non-audit services which are permissible underapplicable rules and regulations.

 

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**Item 16D. Exemptions from the ListingStandards for Audit Committees**

Making use of the exemption provided by Rule 10A-3 for non-USprivate issuers, Eni has identified the Board of StatutoryAuditors as the body that, starting from June 1, 2005, will beperforming the functions required by the SEC rules and theSarbanes-Oxley Act to be performed by the audit committees ofnon-US companies listed on the NYSE (see "Item 6 –Board of Statutory Auditors" above).

 

 

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**Item 16E. Purchases of Equity Securities bythe Issuer and Affiliated Purchasers**

Pursuant to Italian law, a company may purchase its own sharesonly pursuant to a prior authorization by a shareholders’meeting, and must pay for such shares only out of distributableearnings and distributable reserves as reflected in the mostrecent financial statements approved by a shareholders’meeting. The nominal value of shares so purchased, includingshares held by subsidiaries, may not exceed 10% of suchcompany’s share capital. Shares purchased in excess of such10% limit must be resold within one year from the date of theirpurchase. Identical limitations apply to purchases of shares of acompany by its subsidiaries. In order to increaseshareholders’ value, Eni’s Ordinary Shareholders’Meeting held on May 27, 2005 authorized the continuation of theshare buy-back program for an 18-month period starting on May 27,2005 and up to 400 million ordinary shares, nominal value euro 1each, for an aggregate amount not exceeding euro 5.4 billion. The400 million shares and the 5.4 billion thresholds take intoaccount the number and amount of Eni shares purchased from thebeginning of the buy-back program until May 26, 2005. At thatdate, Eni owned 245.158 million shares, equal to approximately6.12% of Eni’s share capital, for an aggregate amount ofeuro 3,440 million (corresponding to an average purchase price ofeuro 14.032 per share). The shares are to be purchased on theTelematico at a price no lower than their nominal value and nohigher than 5% over the reference price recorded on the businessday preceding each purchase.

The following tables present purchases of treasury shares byEni from the beginning of the program through May, 2005:

| **Period**                                |   | **Numbers of shares (million)** |   | **Average price        (euro per share)** |   | **Total cost        (million euro)** |   | **Share capital %** |
|-------------------------------------------|--------|---------------------------------|--------|-------------------------------------------|--------|--------------------------------------|--------|---------------------|
|                                      |   |                                 |   |                                           |   |                                      |   |                     |
| 2000                                      |   | 44.4                            |   | 12.92                                     |   | 574                                  |   | 1.11                |
| 2001                                      |   | 110.0                           |   | 13.58                                     |   | 1,494                                |   | 2.75                |
| 2002                                      |   | 52.2                            |   | 14.74                                     |   | 770                                  |   | 1.30                |
| 2003                                      |   | 23.9                            |   | 13.76                                     |   | 329                                  |   | 0.60                |
| 2004                                      |   | 4.2                             |   | 16.60                                     |   | 70                                   |   | 0.10                |
| Total held        as of December 31, 2004 |   | 234.8                           |   | 13.79                                     |   | 3,238                                |   | 5.86                |
|                                      |   |                                 |   |                                           |   |                                      |   |                     |

 

|   | **Total number of shares purchased** |   | **Average price paid per share****(euro)** |   | **Total number of shares purchased, as part of        publicly announced plans or programs** |   | **Maximum number of shares that may yet be        purchased under the plans or programs** |
|--------|--------------------------------------|--------|--------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
|   |                                      |   |                                            |   |                                                                                              |   |                                                                                           |

| January        2004   |   | 106,049   |   | 14.798 |   | 106,049   |   | 169,311,485 |
|-----------------------|--------|-----------|--------|--------|--------|-----------|--------|-------------|
| February        2004  |   | 204,410   |   | 15.102 |   | 204,410   |   | 169,107,075 |
| March 2004            |   | 484,724   |   | 16.006 |   | 484,724   |   | 168,622,351 |
| April 2004            |   | 151,245   |   | 16.878 |   | 151,245   |   | 168,471,106 |
| May 2004              |   | 875,834   |   | 16.554 |   | 875,834   |   | 167,595,272 |
| June 2004             |   | 985,337   |   | 17.040 |   | 985,337   |   | 166,609,935 |
| July 2004             |   | 748,871   |   | 16.532 |   | 748,871   |   | 165,861,064 |
| August        2004    |   | 309,382   |   | 16.819 |   | 309,382   |   | 165,551,682 |
| September        2004 |   | 312,933   |   | 17.398 |   | 312,933   |   | 165,238,749 |
| October        2004   |   |      |   |   |   |      |   | 165,238,749 |
| November        2004  |   | 51,450    |   | 18.014 |   | 51,450    |   | 165,187,299 |
| December        2004  |   |      |   |   |   |      |   | 165,187,299 |
| January        2005   |   | 560,260   |   | 18.169 |   | 560,260   |   | 164,627,039 |
| February        2005  |   | 854,920   |   | 19.061 |   | 854,920   |   | 163,772,119 |
| March 2005            |   | 1,297,742 |   | 19.916 |   | 1,297,742 |   | 162,474,377 |
| April 2005            |   | 3,764,013 |   | 19.494 |   | 3,764,013 |   | 158,710,364 |
| May 2005              |   | 4,030,350 |   | 19.800 |   | 4,030,350 |   | 154,680,014 |
|                  |   |           |   |        |   |           |   |             |

 

 

##### Table of Contents

**PART III**

**Item 17. FINANCIAL STATEMENTS**

Not applicable.

**Item 18. FINANCIAL STATEMENTS**

Index to Financial Statements:

 

Report of Independent Registered PublicAccounting Firm

Other Auditors’ Reports on theconsolidated financial statements of certain major subsidiariesof Eni SpA (separate financial statements not included herein)

Consolidated Balance Sheets atDecember 31, 2003 and 2004

Consolidated Statements ofIncome for the years ended December 31, 2002, 2003 and 2004

Consolidated Statements of Cash Flowsfor the years ended December 31, 2002, 2003 and 2004

Supplemental Information for theyears ended December 31, 2002, 2003 and 2004

Consolidated Statements of Changes inShareholders’ Equity for the years ended December 31, 2002,2003 and 2004

Notes to the Consolidated FinancialStatements

 

##### Table of Contents

**Item 19. EXHIBITS**

1. By-laws as amended as of April 13, 2005

8. List of subsidiaries

11. Code of Ethics

Certifications:

12.1. Certification pursuant to Rule 13a-14(a)of the Securities Exchange Act

12.2. Certification pursuant to Rule 13a-14(a)of the Securities Exchange Act

13.1. Certification furnished pursuant to Rule13a-14(b) of the Securities Exchange Act (such certificate is notdeemed filed for purpose of Section 18 of the Exchange Act andnot incorporated by reference with any filing under theSecurities Act)

13.2. Certification furnished pursuant to Rule13a-14(b) of the Securities Exchange Act (such certificate is notdeemed filed for purpose of Section 18 of the Exchange Act andnot incorporated by reference with any filing under theSecurities Act)

 

 

##### Tableof Contents

**SIGNATURES**

The registrant certifies that it meets all of the requirementsfor filing on Form 20-F and has duly caused this annual report tobe signed on its behalf by the undersigned, thereunto dulyauthorized.

Date: June 24, 2005

 

 

 

 

 

 

 

| Eni SpA                         |
|---------------------------------|
|                            |
| /s/ FABRIZIO COSCO              |
|                                 |
|                            |
| Fabrizio Cosco                  |
| Title: Deputy Company Secretary |

 

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**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

To the Shareholders ofEni SpA

We have audited the accompanying consolidated balance sheetsof Eni SpA and its subsidiaries as of December 31, 2004 and 2003,and the related consolidated statements of income, changes inshareholders’ equity, and cash flows for each of the threeyears in the period ended December 31, 2004, all expressed ineuro. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these consolidated financial statements based on ouraudits. We did not audit the financial statements of certainsubsidiaries, which statements reflect total assets of 24 percentof the related consolidated totals as of December 31, 2003, andtotal revenues of 15 and 13****percent, of the relatedconsolidated totals for each of the two years in the period endedDecember 31, 2003. Those statements were audited by otherauditors whose reports thereon have been furnished to us, and ouropinion expressed herein, insofar as it relates to the amountsincluded for those entities, is based solely on the reports ofthe other auditors. 

We conducted our audits of these statements in accordance withthe standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and performthe audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statementpresentation. We believe that our audits and the reports of otherauditors provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to abovepresent fairly, in all material respects, the consolidatedfinancial position of Eni SpA and its subsidiaries at December31, 2004 and 2003, and the consolidated results of theiroperations and their cash flows for each of the three years inthe period ended December 31, 2004, in conformity with theItalian law governing consolidated financial statements andgenerally accepted accounting principles in Italy.

Accounting laws and principles generally accepted in Italyvary in certain significant respects from accounting principlesgenerally accepted in the United States of America. Informationrelating to the nature and effect of such differences ispresented in Notes 27, 28 and 29 to the consolidated financialstatements.

**PricewaterhouseCoopers SpA**

Rome, June 24, 2005

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**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

**Italian statutory consolidated financialstatements**

To the Stockholdersof Saipem S.p.A.

We have audited the Italian statutory consolidated balancesheets of Saipem SpA and subsidiaries (the "Group") asof December 31, 2003, and 2002, and the related consolidatedstatements of income, changes in shareholders' equity and cashflows for each of the years in the three-year period endedDecember 31, 2003, expressed in millions of Euro. These financialstatements (not presented separately herein) are theresponsibility of the Company's management. Our responsibility isto express an opinion on these financial statements based on ouraudits. We did not audit the financial statements of certainsubsidiaries, which reflect total assets of 4% as of December 31,2003 and 2002 and revenues of 7% and 13% of the relatedconsolidated totals for each of the years ended December 31, 2003and 2002 respectively. Those statements were audited by otherauditors whose reports have been furnished to us and our opinion,insofar as it relates to the amounts included for thesesubsidiaries, is based solely on the reports of the otherauditors.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits andthe reports of other auditors provide a reasonable basis for ouropinion.

In our opinion, based on our audits and the reports of otherauditors, the Italian statutory consolidated financial statementsreferred to above present fairly, in all material respects, theconsolidated financial position of Saipem S.p.A. and subsidiariesas of December 31, 2003 and 2002, and the consolidated results oftheir operations and their cash flows for each of the years inthe three-year period ended December 31, 2003, in conformity withgeneral accepted accounting principles in Italy.

April 6, 2004Milan, Italy

**Reconta Ernst & Young S.p.A.**

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**INDEPENDENT AUDITORS’ REPORT**

**Italian statutory financial statements**

To the Stockholdersof Italgas – Società Italiana per il Gas p.A.

We have audited the Italian statutory balance sheet of Italgas– Società Italiana per il Gas p.A. as of December 31, 2003,and the related statement of income, changes inshareholders’ equity and cash flows for the year then ended.These financial statements (not presented separately herein) arethe responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audits. We did not audit the financialstatements of certain subsidiaries which represent 12% of totalassets as of December 31, 2003. Those statements were audited byother auditors whose reports have been furnished to us and ouropinion, insofar as it relates to the amounts included for thesesubsidiaries, is based solely on the reports of the othersauditors.

We conducted our audit in accordance with the standards of thePublic Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatements presentation. We believe that our audit and thereports of others auditors provide a reasonable basis for ouropinion.

In our opinion, based on our audit and on the reports of otherauditors, the Italian statutory financial statements referred toabove present fairly, in all material respects, the financialposition of Italgas – Società Italiana per il Gas p.A. asof December 31, 2003, the result of its operations and its cashflows for the year ended, in conformity with generally acceptedaccounting principles in Italy.

Turin, ItalyApril 6, 2004

**Reconta Ernst & Young S.p.A.**

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##### Table of Contents

 

**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory consolidated financialstatements**

To the Stockholdersof Italgas-Società Italiana per il Gas p.A.

We have audited the Italian statutory consolidated balancesheet of Italgas-Società Italiana per il Gas pA and subsidiaries(the "Group") as of December 31, 2002 and 2001, and therelated consolidated statement of income, changes inshareholders' equity and cash flows for each of the years in thetwo-year period ended December 31, 2002. These financialstatements (not presented separately herein) are theresponsibility of the Company's management. Our responsibility isto express an opinion on these financial statements based on ouraudits. We did not audit the financial statements of certainsubsidiaries which statements represent assets constitutingrespectively 16% and 19% of the consolidated assets as ofDecember 31, 2002 and 2001. Those statements were audited byother auditors whose reports have been furnished to us and ouropinion, insofar as it relates to the amounts included for thesesubsidiaries, is based solely on the reports of the otherauditors.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits andthe reports of other auditors provide a reasonable basis for ouropinion.

In our opinion, based on our audits and the reports of otherauditors, the Italian statutory consolidated financial statementsreferred to above present fairly, in all material respects, theconsolidated financial position of Italgas-Società Italiana peril Gas p.A. and subsidiaries as of December 31, 2002 and 2001,and the consolidated results of their operations and their cashflows for each of the years in the two-year period ended December31, 2002, in conformity with the accounting principles governingthe presentation of consolidated statutory financial statementsin Italy.

Turin, ItalyApril 3, 2003

**Reconta Ernst & Young S.p.A.**

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**INDEPENDENT AUDITORS’ REPORT**

**Slovenian statutory financial statements**

To the Stockholdersof ADRIAPLIN d.o.o.

We have audited the Slovenian statutory balance sheet ofADRIAPLIN d.o.o. as of December 31, 2003, and the relatedstatements of income for the year ended December 31, 2003. Thesefinancial statements (not presented separately herein) are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with InternationalStandards on Auditing and with the auditing standards generallyaccepted in the United States of America. Those standards requirethat we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the Slovenian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of ADRIAPLIN d.o.o. as of December 31, 2003,and the result of its operations for the year ended December 31,2003, in conformity with generally accepted accounting principlesin Slovenia.

Ljubljana, SloveniaMarch 12, 2004

**Ernst & Young d.o.o.**

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory financial statements**

To the Stockholdersof Compagnia Napoletana di Illuminazione e Scaldamento col GasS.p.A.

We have audited the Italian statutory balance sheet ofCompagnia Napoletana di Illuminazione e Scaldamento Col GasS.p.A. as of December 31, 2003, and the related statement ofincome, changes in shareholders' equity and cash flows for theyear then ended. These financial statements (not presentedseparately herein) are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audit in accordance with the standards of thePublic Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonablebasis for our opinion.

In our opinion, the Italian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Compagnia Napoletana di Illuminazione eScaldamento Col Gas S.p.A. as of December 31, 2003, the result ofits operations and its cash flows for the year then ended, inconformity with generally accepted accounting principles inItaly.

Naples, ItalyMarch 31, 2004

**Reconta Ernst & Young S.p.A.**

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**REPORT OF INDEPENDENT AUDITORS**

To the Stockholders ofEni Portugal Investment S.p.A.

We have audited the balance sheets of Eni Portugal InvestmentS.p.A. (an Italian corporation) as of December 31, 2003, and therelated statements of income, changes in shareholders' equity andcash flows for each year in the two-year period ended December31, 2003 expressed in euro (which financial statements are notenclosed herein). These financial statements are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

 

In our opinion, based on our audits, the financial statementsreferred to above present fairly, in all material respects, thefinancial position of Eni Portugal Investment S.p.A. as ofDecember 31, 2003 and the results of their operations and theircash flows for each year in the two-year period ended December31, 2003, in conformity with accounting principles generallyaccepted in Italy.

Rome, ItalyMay 7, 2004

**Deloitte Touche S.p.A.**

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory financial statements**

To the Stockholdersof Fiorentinagas S.p.A.

We have audited the Italian statutory balance sheet ofFiorentinagas S.p.A. as of December 31, 2003, and the relatedstatement of income, changes in shareholders' equity and cashflows for the year then ended. These financial statements (notpresented separately herein) are the responsibility of theCompany's management. Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the Italian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Fiorentinagas S.p.A. as of December 31,2003, the result of its operations and its cash flows for theyear then ended, in conformity with generally accepted accountingprinciples in Italy.

Florence, ItalyApril 8, 2004

**Reconta Ernst & Young SpA**

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory financial statements**

To the Stockholdersof Fiorentinagas Clienti S.p.A.

We have audited the Italian statutory balance sheet ofFiorentinagas Clienti S.p.A. as of December 31, 2003, and therelated statement of income, changes in shareholders' equity andcash flows for the year then ended. These financial statements(not presented separately herein) are the responsibility of theCompany's management. Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the Italian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Fiorentinagas Clienti S.p.A. as of December31, 2003, the result of its operations and its cash flows for theyear then ended, in conformity with generally accepted accountingprinciples in Italy.

Florence, ItalyApril 8, 2004

**Reconta Ernst & Young SpA**

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory financial statements**

To the Stockholdersof Italgas Più S.p.A.

We have audited the Italian statutory balance sheet of ItalgasPiù S.p.A. as of December 31, 2003, and the related statement ofincome, changes in shareholders' equity and cash flows for theyear then ended. These financial statements (not presentedseparately herein) are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the Italian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Italgas Più S.p.A. as of December 31,2003, the result of its operations and its cash flows for theyear then ended, in conformity with generally accepted accountingprinciples in Italy.

Turin, ItalyApril 5, 2004

**Reconta Ernst & Young S.p.A.**

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**INDEPENDENT AUDITORS’ REPORT**

**Hungarian statutory financial statements**

To the Stockholdersof Mol-Gáz Kereskedelmi Kft.

We have audited the Hungarian statutory balance sheet ofMol-Gáz Kereskedelmi Kft. as of December 31, 2003, which shows abalance total of 000HUF 15,553,956 and a loss of the year of000HUF 208,007, and the related statement of income for the yearended December 31, 2003. These financial statements (notpresented separately herein) are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audit in accordance with the Hungarianstatutory auditing standards and the auditing standards generallyaccepted in the United States of America. Those standards requirethat we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the Hungarian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Mol-Gáz Kereskedelmi Kft. as of December31, 2003, and the result of its operations for the year endedDecember 31, 2003, in conformity with generally acceptedaccounting principles in Hungary.

Without qualifying our opinion, we draw the attention of theshareholders to the fact that the accompanying annual financialstatements for 2003 indicate a significant operating loss andloss for the year and that current liabilities and accruedexpenses & deferred income exceed current assets and prepaidexpenses & accrued income by THUF 4,190,487. In order toensure the Company's ability to continue operations on a goingconcern basis, the Company has developed a plan as set out onpage 66 of the notes to the financial statements. The validity ofthis basis depends on TIGáZ Rt continuing its support byproviding adequate funds or on other third party financingarrangements becoming available. In the absence of such support,there is a significant risk that the Company will not be able tocontinue operating on a going concern basis. The accompanyingfinancial statements have been drawn up based on the goingconcern assumption and do not contain the effects of adjustmentswhich may become necessary should this assumption become invalid.

**Ernst & Young Kft.**

Budapest, HungaryFebruary 13, 2004

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory financial statements**

To the Stockholdersof Napoletanagas Clienti S.p.A.

We have audited the Italian statutory balance sheet ofNapoletanagas Clienti S.p.A. as of December 31, 2003, and therelated statement of income, changes in shareholders' equity andcash flows for the year then ended. These financial statements(not presented separately herein) are the responsibility of theCompany's management. Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the Italian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Napoletanagas Clienti S.p.A. as of December31, 2003, the result of its operations and its cash flows for theyear then ended, in conformity with generally accepted accountingprinciples in Italy.

Naples, ItalyMarch 31, 2004

**Reconta Ernst & Young SpA**

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**REPORT OF INDEPENDENT AUDITORS**

To the stockholders ofSnam Rete Gas S.p.A.

We have audited the consolidated balance sheets of Snam ReteGas S.p.A. (an Italian corporation) and its subsidiary (the"Company") as of December 31, 2003, and the relatedconsolidated statements of income, changes in shareholders’equity and cash flows for each of the periods in the two-yearperiod ended December 31, 2003 expressed in euro (whichconsolidated financial statements are not enclosed herein). Thesefinancial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. Our auditincludes examining, on a test basis, evidence supporting theamounts and disclosures in the consolidated financial statements.An audit also includes assessing the accounting principles usedand significant estimates made by management, as well asevaluating the overall consolidated financial statementpresentation. We believe that our audits provide a reasonablebasis for our opinion.

In our opinion, based on our audits, the consolidatedfinancial statements referred to above present fairly, in allmaterial respects, the financial position of Snam Rete Gas SpAand subsidiary as of December 31, 2003 and the results of theiroperations and their cash flows for each year in the two-yearperiod ended December 31, 2003, in conformity with accountingprinciples generally accepted in Italy.

**Deloitte Touche**

Milan, ItalyApril 5, 2004

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**INDEPENDENT AUDITOR'S REPORT**

**Italian statutory consolidated financialstatements**

To the Stockholdersof Società Azionaria per la Condotta di Acque Potabili p.A.("Acque Potabili S.p.A.")

We have audited the Italian statutory consolidated balancesheet of Acque Potabili S.p.A. and subsidiaries as of December31, 2003, and the related consolidated statement of income,changes in shareholders' equity and cash flows for the year thenended. These financial statements (not presented separatelyherein) are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the Italian statutory consolidated financialstatements referred to above present fairly, in all materialrespects, the consolidated financial position of Acque PotabiliS.p.A. and subsidiaries as of December 31, 2003, the consolidatedresult of their operations and their cash flows for the year thenended, in conformity with generally accepted accountingprinciples in Italy.

Turin, ItalyApril 6, 2004

**Reconta Ernst & Young S.p.A.**

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**INDEPENDENT AUDITORS’ REPORT**

**Hungarian statutory financial statements**

To the Stockholdersof Tigáz Rt.

We have audited the Hungarian statutory balance sheet ofTigáz Rt as of December 31, 2003, which shows a balance total of000HUF 80,414,801 and a profit after dividend for the year of000HUF 1,790,826, and the related statement of income for theyear ended December 31, 2003. These financial statements (notpresented separately herein) are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audit in accordance with the Hungarianstatutory auditing standards and the auditing standards generallyaccepted in the United States of America. Those standards requirethat we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, aswell as evaluating the overall financial statements presentation.We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the Hungarian statutory financial statementsreferred to above present fairly, in all material respects, thefinancial position of Tigáz Rt as of December 31, 2003, theresult of its operations for the year ended December 31, 2003, inconformity with generally accepted accounting principles inHungary.

Budapest, HungaryMarch 18, 2004

**Ernst & Young Kft**

 

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**BALANCE SHEETS(Amounts stated in million euro)**

|   | **Note** |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|----------|--------|-------------------|--------|-------------------|
|   |          |   |                   |   |                   |

| **ASSETS**                                                                                                                        |   |   |       |   |   |       |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| **Current        assets:**                                                                                                        |   |   |       |   |   |       |   |
| Marketable securities                                                                                                             | 3      |   | 1,277      |   |   | 1,292      |   |
| Receivables,        net                                                                                                           | 4      |   | 12,877     |   |   | 14,204     |   |
| Inventories, net:                                                                                                                 | 5      |   |       |   |   |       |   |
| *Crude        oil, natural gas and petroleum products*                                                                            |   |   | 1,604      |   |   | 1,558      |   |
| *Chemical products*                                                                                                               |   |   | 636        |   |   | 700        |   |
| *Work in        progress on long-term contracts*                                                                                  |   |   | 434        |   |   | 404        |   |
| *Other*                                                                                                                           |   |   | 619        |   |   | 658        |   |
| Total        inventories                                                                                                          |   |   | 3,293      |   |   | 3,320      |   |
| Accrued interest and other                                                                                                        |   |   | 533        |   |   | 602        |   |
| ***Total        current assets***                                                                                                 |   |   | **19,603** |   |   | **20,682** |   |
| **Non-current assets:**                                                                                                           |   |   |       |   |   |       |   |
| Fixed assets, net of accumulated depreciation,        amortization and writedowns                                                 | 6      |   | 36,360     |   |   | 37,616     |   |
| Receivables, net                                                                                                                  | 4      |   | 2,320      |   |   | 1,999      |   |
| Investments                                                                                                                       | 7      |   | 3,160      |   |   | 3,282      |   |
| Intangible assets                                                                                                                 | 8      |   | 3,610      |   |   | 3,190      |   |
| Other                                                                                                                             | 9      |   | 2,283      |   |   | 2,343      |   |
| ***Total non-current assets***                                                                                                    |   |   | **47,733** |   |   | **48,430** |   |
| **TOTAL        ASSETS**                                                                                                           |   |   | **67,336** |   |   | **69,112** |   |
| **LIABILITIES AND SHAREHOLDERS' EQUITY**                                                                                          |   |   |       |   |   |       |   |
| **Current        liabilities:**                                                                                                   |   |   |       |   |   |       |   |
| Short-term debt                                                                                                                   | 11     |   | 7,428      |   |   | 4,115      |   |
| Current        portion of long-term debt                                                                                          | 11     |   | 490        |   |   | 936        |   |
| Trade accounts payable                                                                                                            |   |   | 5,887      |   |   | 6,286      |   |
| Advances                                                                                                                          |   |   | 1,551      |   |   | 1,352      |   |
| Taxes payable                                                                                                                     | 10     |   | 2,183      |   |   | 2,514      |   |
| Accrued        expenses and other                                                                                                 |   |   | 3,841      |   |   | 3,845      |   |
| ***Total current liabilities***                                                                                                   |   |   | **21,380** |   |   | **19,048** |   |
| **Non-current        liabilities:**                                                                                               |   |   |       |   |   |       |   |
| Long-term debt                                                                                                                    | 11     |   | 8,336      |   |   | 7,674      |   |
| Reserve        for employee termination indemnities                                                                               |   |   | 555        |   |   | 590        |   |
| Reserves for contingencies                                                                                                        | 12     |   | 5,708      |   |   | 6,102      |   |
| Deferred        and other non-current income tax liabilities                                                                      | 12     |   | 2,442      |   |   | 2,768      |   |
| Accrued expenses and other                                                                                                        |   |   | 597        |   |   | 464        |   |
| ***Total        non-current liabilities***                                                                                        |   |   | **17,638** |   |   | **17,598** |   |
| **TOTAL LIABILITIES**                                                                                                             |   |   | **39,018** |   |   | **36,646** |   |
| ***Minority        interests***                                                                                                   |   |   | **1,622**  |   |   | **2,128**  |   |
| **Shareholders’ equity:**                                                                                                    | 13     |   |       |   |   |       |   |
| Capital        stock 4,004,424,476 fully paid shares nominal value 1        euro each (4,002,922,176 shares at December 31, 2003) |   |   | 4,003      |   |   | 4,004      |   |
| Reserves                                                                                                                          |   |   | 20,272     |   |   | 22,289     |   |
| Treasury        shares                                                                                                            |   |   | (3,164     | )      |   | (3,229     | )      |
| Net income for the year                                                                                                           |   |   | 5,585      |   |   | 7,274      |   |
| ***Total        shareholders’ equity***                                                                                      |   |   | **26,696** |   |   | **30,338** |   |
| **TOTAL LIABILITIES AND SHAREHOLDERS’        EQUITY**                                                                        |   |   | **67,336** |   |   | **69,112** |   |

 

*(The accompanying notes arean integral part of these consolidated financial statements)*

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**STATEMENTS OF INCOME****(Amounts stated in million euro, except per Share and per ADSdata)**

|   | **Note** |   | **2002** |   | **2003** |   | **2004** |
|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |

| **Revenues:**                                                                                                        |   |   |       |   |   |       |   |   |       |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Net sales        from operations                                                                                     | 14     |   | 47,922     |   |   | 51,487     |   |   | 58,382     |   |
| Other income and revenues                                                                                            |   |   | 1,080      |   |   | 913        |   |   | 1,298      |   |
| **Total        revenues**                                                                                            |   |   | **49,002** |   |   | **52,400** |   |   | **59,680** |   |
| **Operating expenses:**                                                                                              |   |   |       |   |   |       |   |   |       |   |
| Purchases,        services and other                                                                                 | 15     |   | 31,893     |   |   | 34,566     |   |   | 39,092     |   |
| Payroll and related costs                                                                                            | 16     |   | 3,103      |   |   | 3,166      |   |   | 3,264      |   |
| Depreciation,        amortization and writedowns                                                                     | 17     |   | 5,504      |   |   | 5,151      |   |   | 4,861      |   |
| **Operating income**                                                                                                 |   |   | **8,502**  |   |   | **9,517**  |   |   | **12,463** |   |
| **Interest        and other income (expense):**                                                                      |   |   |       |   |   |       |   |   |       |   |
| Financial income (expense) and exchange        differences, net (a)                                                  | 18     |   | (167       | )      |   | (154       | )      |   | (95        | )      |
| Other        income (expense) from investments                                                                       | 19     |   | 43         |   |   | (17        | )      |   | 229        |   |
| **Total interest and other income (expense)**                                                                        |   |   | **(124**   | **)**  |   | **(171**   | **)**  |   | **134**    |   |
| Income        before extraordinary income (expense) and income taxes                                                 |   |   | 8,378      |   |   | 9,346      |   |   | 12,597     |   |
| Extraordinary income (expense) (b)                                                                                   | 20     |   | (29        | )      |   | 49         |   |   | (56        | )      |
| **Income        before income taxes**                                                                                |   |   | **8,349**  |   |   | **9,395**  |   |   | **12,541** |   |
| Income taxes                                                                                                         | 21     |   | (3,127     | )      |   | (3,241     | )      |   | (4,653     | )      |
| **Income        before minority interest**                                                                           |   |   | **5,222**  |   |   | **6,154**  |   |   | **7,888**  |   |
| Minority interest in net income                                                                                      |   |   | (629       | )      |   | (569       | )      |   | (614       | )      |
| **Net        income**                                                                                                |   |   | **4,593**  |   |   | **5,585**  |   |   | **7,274**  |   |
|                                                                                                                 |   |   |       |   |   |       |   |   |       |   |
| **Earnings        per Share (based on the weighted-average number of shares        outstanding for each period)**(c) | 22     |   | **1.20**   |   |   | **1.48**   |   |   | **1.93**   |   |
| **Earnings per ADS (based on five shares per        ADS)**(c)                                                        |   |   | **6.00**   |   |   | **7.39**   |   |   | **9.64**   |   |

___________________

(a) Included financial income and expense andchanges in value of financial assets net of interest capitalized.(b) Before income taxes.(c) Amount in euro.

*(The accompanying notes arean integral part of these consolidated financial statements)*

 

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**STATEMENTS OF CASH FLOWS****(Amounts stated in million euro)**

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| **Cash flows from operating activities**                                                    |   |       |   |   |       |   |   |       |   |
|---------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Net income                                                                                  |   | 4,593      |   |   | 5,585      |   |   | 7,274      |   |
| Minority interest in net income                                                             |   | 629        |   |   | 569        |   |   | 614        |   |
| Depreciation        and amortization                                                        |   | 4,962      |   |   | 4,710      |   |   | 4,566      |   |
| Writedowns, net                                                                             |   | 591        |   |   | 586        |   |   | 235        |   |
| Net change        in other reserves                                                         |   | 96         |   |   | 144        |   |   | 408        |   |
| Net change in the reserve for employee        termination indemnities                       |   | 33         |   |   | 53         |   |   | 36         |   |
| Gain on        disposal of assets, net                                                      |   | (152       | )      |   | (35        | )      |   | (374       | )      |
| Dividend income                                                                             |   | (32        | )      |   | (22        | )      |   | (72        | )      |
| Interest        income                                                                      |   | (322       | )      |   | (197       | )      |   | (201       | )      |
| Interest expense                                                                            |   | 568        |   |   | 574        |   |   | 575        |   |
| Exchange        differences                                                                 |   | (65        | )      |   | (279       | )      |   | (76        | )      |
| Extraordinary expense (income), net                                                         |   | 29         |   |   | (49        | )      |   | 56         |   |
| Income        taxes                                                                         |   | 3,127      |   |   | 3,241      |   |   | 4,653      |   |
| *Cash generated from operating income before        changes in working capital*             |   | 14,057     |   |   | 14,880     |   |   | 17,694     |   |
| (Increase)        decrease:                                                                 |   |       |   |   |       |   |   |       |   |
| - inventories                                                                               |   | (209       | )      |   | (162       | )      |   | (68        | )      |
| - accounts        receivable                                                                |   | (925       | )      |   | (622       | )      |   | (1,183     | )      |
| - accrued interest and other current assets                                                 |   | 88         |   |   | 66         |   |   | 43         |   |
| - trade        and other accounts payable                                                   |   | 555        |   |   | 451        |   |   | 704        |   |
| - accrued expenses and other                                                                |   | (19        | )      |   | (198       | )      |   | (60        | )      |
| *Cash        from operations*                                                               |   | 13,547     |   |   | 14,415     |   |   | 17,130     |   |
| Dividends received                                                                          |   | 147        |   |   | 189        |   |   | 200        |   |
| Interest        received                                                                    |   | 164        |   |   | 234        |   |   | 197        |   |
| Interest paid                                                                               |   | (579       | )      |   | (432       | )      |   | (541       | )      |
| Net        extraordinary expense paid                                                       |   | (162       | )      |   | (50        | )      |   | (400       | )      |
| Income taxes paid                                                                           |   | (2,539     | )      |   | (3,529     | )      |   | (4,224     | )      |
| **Net        cash provided from operating activities**                                      |   | **10,578** |   |   | **10,827** |   |   | **12,362** |   |
| **Cash flows from investing activities**                                                    |   |       |   |   |       |   |   |       |   |
| Investments:                                                                                |   |       |   |   |       |   |   |       |   |
| - intangible assets                                                                         |   | (1,205     | )      |   | (959       | )      |   | (732       | )      |
| - fixed        assets                                                                       |   | (6,843     | )      |   | (7,843     | )      |   | (6,771     | )      |
| - new consolidated subsidiaries and businesses                                              |   | (1,043     | )      |   | (283       | )      |   |       |   |
| -        investments                                                                        |   | (272       | )      |   | (702       | )      |   | (316       | )      |
| - securities                                                                                |   | (61        | )      |   | (103       | )      |   | (683       | )      |
| -        financing receivables                                                              |   | (661       | )      |   | (1,095     | )      |   | (428       | )      |
| - change in accounts payable in relation to        investments and capitalized depreciation |   | 193        |   |   | 207        |   |   | (13        | )      |
|                                                                                        |   | (9,892     | )      |   | (10,778    | )      |   | (8,943     | )      |
| Disposals:                                                                                  |   |       |   |   |       |   |   |       |   |
| - intangible assets                                                                         |   | 77         |   |   | 49         |   |   | 13         |   |
| - fixed assets                                                                              |   | 475        |   |   | 177        |   |   | 260        |   |
| - consolidated subsidiaries and businesses                                                  |   | 270        |   |   | 338        |   |   | 563        |   |
| - investments                                                                               |   | 113        |   |   | 86         |   |   | 57         |   |
| - securities                                                                                |   | 194        |   |   | 301        |   |   | 648        |   |
| - financing receivables                                                                     |   | 234        |   |   | 1,758      |   |   | 830        |   |
| - change in accounts receivable in relation to        disposals                             |   |       |   |   | 11         |   |   | (4         | )      |
|                                                                                        |   | 1,363      |   |   | 2,720      |   |   | 2,367      |   |
| **Net cash used in investing activities**                                                   |   | **(8,529** | **)**  |   | **(8,058** | **)**  |   | **(6,576** | **)**  |
| **Cash flows from financing activities**                                                    |   |       |   |   |       |   |   |       |   |
| Proceeds from long-term debt                                                                |   | 2,145      |   |   | 3,118      |   |   | 1,229      |   |
| Payments of long-term debt                                                                  |   | (503       | )      |   | (485       | )      |   | (797       | )      |
| Additions to (reductions of) short-term debt                                                |   | 2,094      |   |   | (1,004     | )      |   | (4,051     | )      |
|                                                                                        |   | **3,736**  |   |   | **1,629**  |   |   | **(3,619** | **)**  |
| Payments by minority shareholders                                                           |   | 62         |   |   | 13         |   |   | 2          |   |
| Sale (purchase) of additional interests in        subsidiaries                              |   | (103       | )      |   | (2,606     | )      |   | 631        |   |
| Dividends to minority shareholders                                                          |   | (3,035     | )      |   | (3,011     | )      |   | (3,077     | )      |
| Other                                                                                       |   | (770       | )      |   | (329       | )      |   | (65        | )      |
| **Net cash used in financing activities**                                                   |   | **(110**   | **)**  |   | **(4,304** | **)**  |   | **(6,128** | **)**  |
| *Effect of change in consolidation area*                                                    |   | 57         |   |   | (9         | )      |   | 12         |   |
| *Effect of exchange rate differences*                                                       |   | (121       | )      |   | (98        | )      |   | (29        | )      |
| **Net cash flow for the year**                                                              |   | **1,875**  |   |   | **(1,642** | **)**  |   | **(359**   | **)**  |
| **Cash and cash equivalent at beginning of the        year**                                |   | **1,390**  |   |   | **3,265**  |   |   | **1,623**  |   |
| **Cash and cash equivalent at end of the year**                                             |   | **3,265**  |   |   | **1,623**  |   |   | **1,264**  |   |

*(The accompanying notes arean integral part of these consolidated financial statements)*

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##### Table of Contents

 

**SUPPLEMENTAL INFORMATION****(Amounts stated in million euro)**

 

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| **Effect of investments in new consolidated        subsidiaries and businesses** |   |      |   |   |    |   |   |    |   |
|----------------------------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|---------|--------|
| Non-current        assets                                                        |   | 1,245     |   |   | 1,179   |   |   |    |   |
| Current assets                                                                   |   | 697       |   |   | 567     |   |   |    |   |
| Net        borrowings                                                            |   | 125       |   |   | (683    | )      |   |    |   |
| Other liabilities                                                                |   | (844      | )      |   | (768    | )      |   |    |   |
| *Net        effect of investments*                                               |   | **1,223** |   |   | **295** |   |   |    |   |
| Transferred from equity investment                                               |   | (4        | )      |   |    |   |   |    |   |
| Minority        interest and reserves                                            |   |      |   |   | (3      | )      |   |    |   |
| *Purchase price*                                                                 |   | **1,219** |   |   | **292** |   |   |    |   |
| less: cash        acquired                                                       |   | (176      | )      |   | (9      | )      |   |    |   |
| **Cash from investments in consolidated        subsidiaries**                    |   | **1,043** |   |   | **283** |   |   |    |   |
| **Effect        of disposal of consolidated subsidiaries and businesses**        |   |      |   |   |    |   |   |    |   |
| Non-current assets                                                               |   | 153       |   |   | 108     |   |   | 381     |   |
| Current        assets                                                            |   | 53        |   |   | 2       |   |   | 263     |   |
| Net borrowings                                                                   |   | (16       | )      |   | (1      | )      |   | (227    | )      |
| Other        liabilities                                                         |   | (85       | )      |   | (4      | )      |   | (174    | )      |
| Exchange differences from translation in the        period                       |   |      |   |   |    |   |   | 45      |   |
| *Net        effect of disposal*                                                  |   | **105**   |   |   | **105** |   |   | **288** |   |
| Gain (loss) on disposal                                                          |   | 194       |   |   | 233     |   |   | 327     |   |
| Minority        interest and reserves                                            |   | (6        | )      |   |    |   |   |    |   |
| *Selling price*                                                                  |   | **293**   |   |   | **338** |   |   | **615** |   |
| less: cash        conferred                                                      |   | (23       | )      |   |    |   |   | (52     | )      |
| **Cash flow on disposal**                                                        |   | **270**   |   |   | **338** |   |   | **563** |   |

 

 

*(The accompanying notes arean integral part of these consolidated financial statements)*

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##### Table of Contents

 

**STATEMENTS OF CHANGES INSHAREHOLDERS’ EQUITY****(Amounts stated in million euro)**

|   |   | Share        capital |   | Legal                reserve of Eni SpA |   | Reserv        for treasury shares |   | Reserve        from        mergers |   | Distri-        butable reserve of Eni SpA |   | Former                Agip SpA        reserves reconsti-        tuted |   | State        grants |   | Consoli-        dation reserves |   | Reserve        for shares granted to employees Article 2349 civil code |   | Reserve        Article 13 Law Decree 124/1993 |   | Cumulative        translation adjustment reserve |   | Treasury        shares |   | Retained        earnings |   | Net        income for the year |   | Total |
|--------|--------|----------------------|--------|-----------------------------------------|--------|-----------------------------------|--------|------------------------------------|--------|-------------------------------------------|--------|-----------------------------------------------------------------------|--------|---------------------|--------|---------------------------------|--------|------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------------------------------------------------|--------|------------------------|--------|--------------------------|--------|--------------------------------|--------|-------|
|   |   |                      |   |                                         |   |                                   |   |                                    |   |                                           |   |                                                                       |   |                     |   |                                 |   |                                                                        |   |                                               |   |                                                  |   |                        |   |                          |   |                                |   |       |

| **Balance at December        31, 2001**                                                                                  |   | **4,001** |   |   | **959** |   |   | **3,400** |   |   |      |   |   | **3,514** |   |   | **103** |   |   | **62** |   |   | **31** |   |   | **3**  |   |   |   |   |   | **1,362**  |   |   | **(2,068** | **)**  |   | **8,365**  |   |   | **7,751** |   |   | **27,483** |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|
| Dividend distribution (euro 0.75 per Share)                                                                              |   |      |   |   |    |   |   |      |   |   |      |   |   | (757      | )      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | (2,119    | )      |   | (2,876     | )      |
| Allocation of 2001 net income                                                                                            |   |      |   |   |    |   |   |      |   |   |      |   |   | 3         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | 5,629      |   |   | (5,632    | )      |   |       |   |
| Increase of reserve for shares granted to        employees Article 2349 civil code                                       |   |      |   |   |    |   |   |      |   |   |      |   |   | (2        | )      |   |    |   |   |   |   |   |   |   |   | 2      |   |   |   |   |   |       |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Authorization to repurchase        shares                                                                                |   |      |   |   |    |   |   | 2,000     |   |   |      |   |   | (2,000    | )      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Reserve from mergers                                                                                                     |   |      |   |   |    |   |   |      |   |   | 1,390     |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   | 1      |   |   |       |   |   |       |   |   | (1,391     | )      |   |      |   |   |       |   |
| Shares repurchased                                                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   | (770       | )      |   |       |   |   |      |   |   | (770       | )      |
| Shares issued under stock grant plan                                                                                     |   | 1         |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   | (1     | )      |   |   |   |   |       |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Exchange differences due to        the translation of financial statements prepares in        currencies other than euro |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (2,125     | )      |   |       |   |   |       |   |   |      |   |   | (2,125     | )      |
| Other changes                                                                                                            |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | (48        | )      |   |      |   |   | (48        | )      |
| Net income for the year                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | 4,593     |   |   | 4,593      |   |
| **Balance at December 31, 2002**                                                                                         |   | **4,002** |   |   | **959** |   |   | **5,400** |   |   | **1,390** |   |   | **758**   |   |   | **103** |   |   | **62** |   |   | **31** |   |   | **4**  |   |   | **1**  |   |   | **(763**   | **)**  |   | **(2,838** | **)**  |   | **12,555** |   |   | **4,593** |   |   | **26,257** |   |
| Dividend distribution (euro        0.75 per Share)                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | (2,833    | )      |   | (2,833     | )      |
| Allocation of 2002 net income                                                                                            |   |      |   |   |    |   |   |      |   |   |      |   |   | 789       |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | 971        |   |   | (1,760    | )      |   |       |   |
| Shares repurchased                                                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   | (329       | )      |   |       |   |   |      |   |   | (329       | )      |
| Reduction in value of stock grant                                                                                        |   |      |   |   |    |   |   | (3        | )      |   |      |   |   | 3         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   | 3          |   |   |       |   |   |      |   |   | 3          |   |
| Shares issued under stock        grant plan                                                                              |   | 1         |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   | (1     | )      |   |   |   |   |       |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Reclassification                                                                                                         |   |      |   |   |    |   |   |      |   |   | (1,390    | )      |   | 1,500     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | (110       | )      |   |      |   |   |       |   |
| Exchange differences arising        on the translation of foreign currency financial        statements                   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,845     | )      |   |       |   |   |       |   |   |      |   |   | (1,845     | )      |
| Exchange differences arising on the distribution        of dividendsand other changes                                    |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 103        |   |   |       |   |   | (245       | )      |   |      |   |   | (142       | )      |
| Net income for the year                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | 5,585     |   |   | 5,585      |   |
| **Balance at December 31, 2003**                                                                                         |   | **4,003** |   |   | **959** |   |   | **5,397** |   |   |      |   |   | **3,050** |   |   | **103** |   |   | **62** |   |   | **31** |   |   | **3**  |   |   | **1**  |   |   | **(2,505** | **)**  |   | **(3,164** | **)**  |   | **13,171** |   |   | **5,585** |   |   | **26,696** |   |
| Dividend distribution (euro        0.75 per Share)                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | (2,828    | )      |   | (2,828     | )      |
| Allocation of 2003 net income                                                                                            |   |      |   |   |    |   |   |      |   |   |      |   |   | 22        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | 2,735      |   |   | (2,757    | )      |   |       |   |
| Shares repurchased                                                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   | (70        | )      |   |       |   |   |      |   |   | (70        | )      |
| Shares issued under stock grant plan                                                                                     |   | 1         |   |   |    |   |   | (5        | )      |   |      |   |   | 5         |   |   |    |   |   |   |   |   |   |   |   | (1     | )      |   |   |   |   |       |   |   | 5          |   |   |       |   |   |      |   |   | 5          |   |
| Cost of stock option                                                                                                     |   |      |   |   |    |   |   |      |   |   |      |   |   | 3         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   |      |   |   | 3          |   |
| Former Italgas SpA reserves reconstituted                                                                                |   |      |   |   |    |   |   |      |   |   |      |   |   | (43       | )      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | 43         |   |   |      |   |   |       |   |
| Reserves from mergers of        EniData SpA                                                                              |   |      |   |   |    |   |   |      |   |   | 4         |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | (4         | )      |   |      |   |   |       |   |
| Reclassification                                                                                                         |   |      |   |   |    |   |   |      |   |   |      |   |   | 859       |   |   | (84     | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   | (775       | )      |   |      |   |   |       |   |
| Exchange differences arising        on the translation of foreign currency financial        statements                   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (760       | )      |   |       |   |   |       |   |   |      |   |   | (760       | )      |
| Exchange differences arising on the distribution        of dividends and other changes                                   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 63         |   |   |       |   |   | (45        | )      |   |      |   |   | 18         |   |
| Net income for the year                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |       |   |   |       |   |   | 7,274     |   |   | 7,274      |   |
| **Balance at December 31, 2004**                                                                                         |   | **4,004** |   |   | **959** |   |   | **5,392** |   |   | **4**     |   |   | **3,896** |   |   | **19**  |   |   | **62** |   |   | **31** |   |   | **2**  |   |   | **1**  |   |   | **(3,202** | **)**  |   | **(3,229** | **)**  |   | **15,125** |   |   | **7,274** |   |   | **30,338** |   |

*(The accompanying notes arean integral part of these consolidated financial statements)*

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##### Table of Contents

 

**Notes to the Consolidated FinancialStatements**

 

**1 General**

Eni SpA and its subsidiaries ("Eni")together constitute a fully integrated company operating in theoil and gas, electricity generation, petrochemicals, oilfieldservices and engineering industries. Eni SpA is the successorentity to Ente Nazionale Idrocarburi, which was established in1953 as a public statutory body to act as Italy’s nationaloil and gas company. In July 1992, in connection with theprivatization program of the Italian Government (the"Government"), the public statutory body was convertedinto a joint stock company, with the Ministry of Economy andFinance (previously Ministry of Treasury, Budget and EconomicPlanning) of Italy as the sole shareholder. See Note 13"Shareholders’ equity" for further informationregarding share capital.

 

**2 Summary of significant accounting and reporting policies**

**Basis of presentation**

The consolidated financial statements of Enihave been prepared in accordance with Eni’s group accountingpolicies which are in accordance with principles prescribed byItalian law and supplemented by the accounting principles issuedby the Consiglio Nazionale dei Dottori Commercialisti e deiRagionieri by the Organismo Italiano di Contabilità or, in theabsence thereof and if applicable, the International AccountingStandards Board (IASB). In the absence of indications in saidprinciples, particularly related to the application of the Unitof Production and Production Sharing Agreement methods ofaccounting, specific criteria for hydrocarbons exploration andproduction applied internationally have been followed(collectively, "Italian GAAP"). Italian GAAP differs incertain respects from generally accepted accounting principles inthe United States ("U.S. GAAP"). A description of thesedifferences and their effects on net income andshareholders’ equity is set forth in Notes 27 and 28, and,in Note 29, the additional financial statement disclosuresrequired by U.S. GAAP and the SEC. The financial statements havebeen reformatted from the original Italian statutory financialstatement presentation and include certain additional disclosuresin order to conform more closely to the form and content offinancial statements required by the U.S. Securities and ExchangeCommission (the "SEC"). Reclassifications reflectessentially a different aggregation of certain items that weresegregated between current and non-current, as well as therecording as a decrease in net borrowings of implicit interestsand the reclassification as a decrease in net equity of treasuryshares purchased, items that in the original Italian statutoryfinancial statements are classified as current assets and fixedassets, respectively.

**Principles of consolidation**

The consolidated financial statements includethe statutory accounts of Eni SpA and all Italian and foreigncompanies controlled by Eni SpA, directly or indirectly, eitherby holding the majority of the voting rights or sufficient votesto enable it to exercise control at ordinary shareholders’meetings. The consolidated financial statements also include, ona proportional basis to reflect the company’s interest inthe activity, the accounts of companies controlled jointly withother partners, except for joint ventures which are accounted forunder the equity method. The effects of proportionateconsolidation are not material. Insignificant subsidiaries,companies in liquidation, if their exclusion does not result in amisrepresentation of the company’s financial condition andconsolidated results, and companies purchased exclusively forsale, are not included in the scope of consolidation. Asubsidiary is considered insignificant when it does not exceedtwo of these limits: (i) total assets or liabilities: euro 3,125thousand; (ii) total revenues euro 6,250 thousand; (iii) averagenumber of employees: 50 units. Moreover, companies, for which theconsolidation does not produce significant effects, are notincluded in the scope of consolidation. Such companies representsubsidiaries that work for other companies as the operator in themanagement of upstream oil contracts and that are proportionallyfinanced, on the basis of the budgets approved, by the companiesinvolved in the oil contract, to which the company reports costsand revenues following the management activity of the oilcontract. Costs and revenues and other operating data(production, reserves, etc.) of exploration activities arerecognized on a proportional basis in the financial statements ofthe companies involved, as well as the obligations for theexploration activities. The effects of these exclusions are notmaterial.

Companies excluded from consolidation areaccounted for under the equity method or cost basis as describedbelow under the heading Investments.

**Investments**

Investments in non-consolidated subsidiariesexcluded from the consolidation process and in companies whereEni SpA has a 20% to 50% investment, if material, are accountedfor using the equity method. Other investments are recorded atcost, adjusted for permanent impairment in value.

**Sale of stakes in consolidated subsidiaries**

Gains or losses on sale of stakes inconsolidated subsidiaries are recorded in the income statementfor the amount corresponding to the difference between proceedsfrom the sale and the divested stake in net equity.

**Intercompany transactions**

All intercompany balances and transactions havebeen eliminated in consolidation.

**Foreign currency translation**

Assets and liabilities of foreign consolidatedcompanies have been translated at exchange rates prevailing atyear-end. Equity accounts of foreign consolidated companies aretranslated using the historic exchange rates. Income statementaccounts of foreign consolidated companies are translated at theaverage rates for the period (source: Ufficio Italiano Cambi).Related translation adjustments are reported as a component ofshareholders’ equity. Financial statements of foreignsubsidiaries which are translated into euro are denominated intheir functional currencies.

Monetary assets and liabilities denominated incurrencies other than the functional currency are translated intoeuro using the prevailing rate at the balance sheet date. Alldifferences are recognized in earnings in the period.

**Accounting principles**

**Cash and cash equivalents**

Eni considers cash and cash equivalents to beits cash on hand and in deposit with banks and short-terminvestments with original maturities of 90 days or less.

**Marketable securities**

Marketable securities are stated at the lowerof purchase cost or market value and are usually available forsale.

**Inventories**

Inventories, except for those relating tocontract work in progress, are stated at the lower of cost ormarket value. The cost of inventories of hydrocarbons (crude oiland natural gas) and petroleum products, representing 49% and 47%of Eni’s inventories at December 31, 2003 and 2004,respectively, is determined by the last-in, first-out (LIFO)method; the cost of inventories of the Petrochemicals segment,representing 19% and 21% of Eni’s inventories at December31, 2003 and 2004, respectively, is determined by the averagecost method.

Contract work in progress, representing 13% and12% of inventories at December 31, 2003 and 2004, respectively,is recorded using the percentage-of-completion method measured onthe cost-to-cost basis. Payments received in advance ofconstruction are subtracted from inventories and any excess ofsuch advances over the value of work performed is recorded as aliability. Contract work in progress not yet invoiced, whosepayment is agreed in a foreign currency, is translated into eurousing the current exchange rates at year-end and the effects arerecorded in the income statement. Future losses related tocontracts whose future costs exceed future revenues, are accruedfor as soon as the company becomes aware of such losses.

The remaining inventories are determined,generally, by the average cost method.

**Fixed assets**

Fixed assets are stated at cost as adjusted byrevaluations in accordance with various Italian laws;revaluations are included in consolidated shareholders’equity. Eni capitalizes interest on debt incurred in connectionwith specific projects. Cash requirements in excess of such debtsare satisfied primarily through funds generated and contributedin the period of construction.

Investment grants from Government agencies arerecorded in a contra asset account when authorized, if all therequired conditions have been met. Such grants are amortized overthe useful life of the assets.

Depreciation of fixed assets, except thoserelated to exploration and production activities, is computed onthe revalued cost, using the straight-line method by applyingdepreciation rates that are based on the estimated remaininguseful lives of the fixed assets.

Depreciation rates used are as follows:

| (%)                                                                              |   |   |   |
|----------------------------------------------------------------------------------|--------|--------|--------|
| Buildings                                                                        | 3      | -      | 10     |
| Plant and        machinery:                                                      |   |   |   |
| -        pipelines, distribution networks and related plant and        machinery | 2      | -      | 5      |
| - other        plant and machinery                                               | 4      | -      | 25     |
| Industrial        and commercial equipment                                       | 10     | -      | 25     |

Fixed assets are written down whenever eventsand changes in circumstances indicate that the carrying amountmay not be recoverable. Eni calculates the writedown as thedifference between the expected accumulated discounted cash flowand the book value of the asset.

When the circumstances causing impairment ceaseto exist, Eni reverses previously recorded impairment charges netof depreciation.

Renewals and improvements which extend assetlives are capitalized; maintenance and ordinary repairs areexpensed as incurred.

**Intangible assets**

Intangible assets are stated at cost, includinginterest on debt incurred in connection with specific projects asindicated previously for fixed assets.

Goodwill is recorded as an asset when purchaseconsideration exceeds the fair value of assets and liabilitiesacquired and is amortized at constant rates in the periods ofuse, provided it is no longer than 20 years from the year ofrecording.

Other intangible assets, except for thoserelated to exploration and production activities, are amortizedusing the straight-line method over the period of expectedbenefit. Intangibles are written down whenever events or changesin circumstances indicate that the carrying value may not berecoverable. Eni calculates the writedowns as the differencebetween the expected accumulated discounted cash flow and thebook value of the intangible assets. When the circumstancescausing impairment cease to exist, Eni reverses previouslyrecorded impairment charges net of amortization. However,goodwill and capitalized organizational costs are not revalued.

**Explorationand production activities**

*Acquisition of mineral rights*

Costs associated with the acquisition ofmineral rights, including reserves purchased in connection withsuch acquisitions, are capitalized. Mineral rights can alsoinclude exploration permits, among other items. Mineral rightsare amortized on a straight-line basis over the expected periodof benefit. Capitalized costs associated with proved reserves areamortized on a Unit-of-Production (UOP) basis, while capitalizedcosts related to other mineral rights are not amortized untilclassified as proved reserves. Capitalized costs related toabandoned drilling programs are expensed.

*Exploration*

Costs associated with exploratory activitiesfor oil and gas producing properties incurred to obtaininformation in order to characterize fields (such as acquisitionof seismic data from third parties, test wells and geophysicalsurveys) are recorded as intangible assets and amortized in fullin the period incurred (i.e. expensed as incurred for financialreporting purposes).

*Development*

Development costs are those costs incurred toobtain access to proved reserves and to provide facilities forextracting, gathering and storing oil and gas and are capitalizedand amortized on a UOP basis. Costs related to unsuccessfuldevelopment wells are expensed immediately as loss on disposal.

Writedowns and revaluations of developmentcosts are made on the same basis as those for fixed assets.

*Production*

Production costs are costs to operate andmaintain wells and field equipment and are expensed as incurred.

*Abandonment*

Eni regularly accrues costs expected to beincurred with respect to eventual well abandonment, includingcosts associated with site restoration, on a Unit-of-Productionbasis.

**Reserve for employee termination indemnitiesand other employee benefits**

Eni’s employees are eligible, immediatelyupon termination, for severance pay pursuant to Italian law. Eniaccrues a reserve for such employee termination liabilities overthe period of employment. The amount accrued at each balancesheet date reflects the aggregate liability for all eligibleemployees if terminated, net of applicable advances.

In addition, Eni makes contributions to certainemployee associations that provide medical and various otheremployee benefits to current employees. These plans are notadministered by Eni and contributions are determined inaccordance with the agreements negotiated with trade unions. Eniexpenses the contributions to the associations in the periods inwhich they are made.

Expenses relating to Eni’s pensionobligations of subsidiaries operating outside Italy are settledin relation to the period of employment in accordance with locallaws and work contracts.

**Treasury shares**

Treasury shares are recorded at costwritten-down for impairments in value as a reduction ofshareholders’ equity. When the reasons for the impairmentcease to exist, treasury shares can be revalued up to theoriginal cost basis.

**Recognition of revenues and costs**

Revenues from sales of products and servicesare recognized upon transfer of title or completion of service.In particular, revenues are recognized:

| - |   | for petroleum        products sold to retail distribution networks, generally        upon delivery to the service stations; for all the other        sales, generally, upon shipment; |
|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | for natural        gas when the natural gas leaves Eni’s distribution        network and is delivered to the customer;                                                           |
| - |   | for crude        oil, generally upon shipment;                                                                                                                                        |
| - |   | for chemicals        and all other sales, generally upon shipment.                                                                                                                    |

In all instances where revenue is recognizedupon shipment, all risk of loss is transferred to the buyer uponshipment.

Revenues from natural gas and crude oilproduction from properties in which Eni has an interest togetherwith other producers are recognized based on actual quantitiesproduced and sold on Eni’s behalf (sales method).Differences between Eni’s net working interest volumes andactual production volumes are not significant.

Revenuesrelated to long-term construction contracts are recognized usingthe percentage-of-completion method measured on the cost-to-costbasis. Long-term construction contracts denominated in currenciesother than euro are translated into the euro using the exchangerate of the day the percentage of completion are evaluated withthe purchaser or using the exchange rate of the day advances arepaid; long-term construction contracts not yet accepted by thepurchaser are translated using the year-end exchange rate; thesame criteria is used for the corresponding hedging derivatives.Provisions for anticipated losses on long-term contracts arerecorded in full when such losses become evident. Revenuesrelated to amounts in excess of the original contract price dueto the incurrence of unanticipated additional costs (i.e. Eniclaims against third parties), are recognized when it is probablethat the claim will result in additional contract revenues andthe amount of the claim can be reasonably estimated.

Costs are recognized when the related goods andservices are sold, consumed or allocated, or when their futureuseful lives cannot be determined.

Eni is a party to certain Production SharingAgreements whereby taxes are settled by joint venture partnerswhich are state-owned entities, in the name and on behalf of Eniout of Eni’s share of oil and gas production. The companyrecords such income taxes owed by Eni but paid on its behalf inrevenues and income tax expense.

Starting in 2003, stock grant and stock optionsgranted to Group managers were recognized as compensationexpense, as these amounts represent a part of employeecompensation. The cost of stock-based compensation is measured bythe fair value of the award at the grant date and recognized overthe vesting period1. The cost of related socialsecurity contributions and termination indemnity related to stockgrant plans are also recognized over the vesting period. The fairvalue of stock grants is represented by the market value of theshare at the grant date, less the present value of dividendsexpected in the vesting period. The fair value of stock optionsis represented by the value of the option determined with theBlack-Scholes model, which takes into account the conditions forthe exercise of the options, the present value of shares, theexpected volatility and the risk-free interest rate.The cost ofstock grants with the use of treasury shares and the relatedsocial security contributions and termination indemnity arerecognized as a contra-entry to the item "Reserve for risksand contingencies - Other" and the cost of stock options isrecognized as a contra-entry to the item "Disposablereserves".

Revenues and costs expressed in currenciesother than euro are translated at the exchange rate prevailing onthe day of the transaction.

**Accounting for Buy/Sell Contracts**

In January and February 2005, the Securitiesand Exchange Commission ("SEC") issued commentletters to Eni and other companies in the oil and gas industryrequesting disclosure of information related to the accountingfor buy/sell contracts. Eni routinely enters buy/sell contracts,principally in the downstream business in Italy, associatedmainly with refined products. For refined products, buy/sellarrangements are used to support the company’s refinedproducts marketing activity, which includes the production,purchase and sale of refined products in order to fulfill thecompany’s marketing needs and supply agreements to customerlocations and specifications.

Eni accounts for buy/sell transactions in theconsolidated income statement on a net basis, regardless whetherterms of the buy/sell agreements were established jointly, in asingle contract, or separately, in individual contracts that areentered into concurrently or in contemplation of one another witha single counterparty. This accounting is consistent with themost recent guidance of the SEC staff who considers that theaccounting for buy/sell contracts should be shown net on theincome statement.

The topic is under deliberation by the EmergingIssues Task Force (EITF) of the FASB as Issue No. 04-13,"Accounting for Purchases and Sales of Inventory with theSame Counterparty." The EITF first discussed this issue inNovember 2004. Additional research is being performed by theFASB staff, and the topic will be discussed again at a futureEITF meeting. While this issue is under deliberation, the SECstaff directed Eni and other oil companies in its February 2005comment letter to disclose on the face of the income statementthe amounts associated with buy/sell contracts and to discuss ina footnote to the financial statements the basis for theunderlying accounting.

In Eni’s consolidated income statement,"Net sales from operations" and "Purchases,services and other" for the three years endingDecember 31, 2004, were netted of euro 1,763 million,euro 1,490 million and euro 1,511 million, respectively, forthe above described buy/sell contracts.

----

| (1) |   | For stock        grants, the period between the grant date and the date of        assignation of shares; for stock options, the period        between the grant date and the date in which the option        can be exercised. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Income taxes**

Deferred tax assets or liabilities arerecognized for differences between the financial reporting andtax bases of assets and liabilities. Deferred tax liabilities arenot recognized if ultimate payment is not deemed probable.Deferred tax assets are recognized when there is a reasonableexpectation of their realization. Deferred tax liabilities arerecorded in the "Non-current income tax liabilities"account, while deferred tax assets are recorded in"Other" (non-current assets). Deferred tax assets areoffset against deferred tax liabilities if they relate to thesame tax paying entity.

**Derivatives**

With respect to interest rate, foreign exchangeand price risks, Eni enters into derivative transactions to hedgespecific transactions as well as net interest rate and foreigncurrency positions. See Note 23 for a description of Eni’soverall strategy and description of financial instrumentsutilized to mitigate market risk.

The interest differentials to be received orpaid on interest rate swaps, as well as interest differentials oninterest rate collars, are charged to the income statement on anaccrual basis. The interest differentials on forward rateagreements are recognized at the date of settlement of thecontract and charged to the income statement on an accrual basisover the period hedged. Such interest rate differentials, withthe exclusion of non-current securities, are recorded in"Accrued interest and other current assets" or"Accrued expenses and other" (current liabilities) asapplicable until recognized in the income statement as"Financial expense and exchange differences net". Gainson exchange on hedge derivatives of non-current securities arerecorded in income to compensate losses on exchange relating tothe hedged activities.

Foreign exchange hedge derivatives are valuedat the spot rate at year-end and the related gains and losses arerecorded in income as exchange gain and loss. Premiums ordiscounts are accrued over the life of the contract andclassified as exchange differences. With reference to options,the premiums paid are recorded as "Marketablesecurities" or "Other assets", depending on thematurity of the contract.

The gains on price risk hedge derivatives arerecorded in income to the extent of writedowns of hedged assets;losses are recorded in income if necessary to adjust the hedgedassets to the value attributed to them by the derivative whenthey are accrued, consistent with the evaluation of the hedgedassets. The gains and losses are classified consistently with theclassification of the sale of the hedged asset.

**Environmental expenditures**

Environmental expenditures are made in order toprevent, reduce, repair or control the environmental impact ofproduction activities. Environmental expenditures that improve orextend the useful lives and increase the production capacity orsafety of fixed assets are capitalized in the appropriate fixedasset accounts. Ongoing environmental compliance costs areexpensed as incurred. Reserves for environmental contingenciesare established when it becomes probable or certain that aliability has been incurred and the amount can be reasonablyestimated.

**Restructuring costs**

The costs of redundancy incentives are accruedwhen a workforce reduction program is defined and the conditionsrequired for its implementation have been satisfied.Restructuring charges also include the costs of closures offacilities and asset impairments. Such charges are recorded asextraordinary items.

**Research and development costs**

Research and development costs are generallyexpensed as incurred.

For the years ended December 31, 2002, 2003 and2004, total research and development costs were euro 175 million,euro 238 million and euro 257 million, respectively, and euro 11million, euro 52 million and euro 47 million as capitalizedcosts.

**Statements of cash flows**

The cash flow statements are prepared inaccordance with International Accounting Standards, using theindirect method.

Unless otherwise indicated, all monetaryamounts in the financial statements and in these notes arepresented in millions of euro, except share, per share, ADS andper ADS data.

 

**3 Marketable securities**

Marketable securities consist of the following:

| (million        euro)    |   |                                  |   |                                  |
|--------------------------|--------|---------------------------------------|--------|---------------------------------------|
|                     |   | **Net value at        Dec. 31, 2003** |   | **Net value at        Dec. 31, 2004** |
|                     |   |                                       |   |                                       |
| Investments              |   | 13                                    |   | 22                                    |
| Other        securities: |   |                                  |   |                                  |
| - Italian treasury bonds |   | 963                                   |   | 982                                   |
| - other                  |   | 301                                   |   | 288                                   |
|                     |   | **1,264**                             |   | **1,270**                             |
|                     |   | **1,277**                             |   | **1,292**                             |
|                     |   |                                       |   |                                       |

Investments of euro 22 million concern theshares of Saipem SpA which were purchased for stock option andstock grant plans.

On December 31, 2004, the due dates of othersecurities of euro 1,270 million were the following:

| (million        euro) |   |                                  |   |                                  |
|-----------------------|--------|---------------------------------------|--------|---------------------------------------|
|                  |   | **Net value at        Dec. 31, 2003** |   | **Net value at        Dec. 31, 2004** |
|                  |   |                                       |   |                                       |
| within 12 months      |   | 119                                   |   | 119                                   |
| within 5        years |   | 942                                   |   | 965                                   |
| beyond 5 years        |   | 203                                   |   | 186                                   |
|                  |   | **1,264**                             |   | **1,270**                             |
|                  |   |                                       |   |                                       |

Securities for euro 474 million are consideredcoverage of technical reserves of Padana Assicurazioni SpA (euro483 million at December 31, 2003).

 

**4 Receivables**

Receivables by type and due date consist of thefollowing:

 

| (million        euro) | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|-------------------|--------|-------------------|
|                  |                   |   |                   |

|               | **Current** |   | **Non-current** |   | **Total**  |   | **Current** |   | **Non-current** |   | **Total**  |
|--------------------|-------------|--------|-----------------|--------|------------|--------|-------------|--------|-----------------|--------|------------|
|               |             |   |                 |   |            |   |             |   |                 |   |            |
| Trade:             |        |   |            |   |       |   |        |   |            |   |       |
| -        customers | 9,243       |   | 233             |   | 9,476      |   | 10,369      |   | 160             |   | 10,529     |
| - other            | 296         |   |            |   | 296        |   | 256         |   |            |   | 256        |
|               | **9,539**   |   | **233**         |   | **9,772**  |   | **10,625**  |   | **160**         |   | **10,785** |
| Financing          | 551         |   | 1,098           |   | 1,649      |   | 525         |   | 893             |   | 1,418      |
| Other              | 2,787       |   | 989             |   | 3,776      |   | 3,054       |   | 946             |   | 4,000      |
|               | **12,877**  |   | **2,320**       |   | **15,197** |   | **14,204**  |   | **1,999**       |   | **16,203** |
|               |             |   |                 |   |            |   |             |   |                 |   |            |

"Trade" receivables of euro 10,785million increased by euro 1,013 million. This increase relatesprimarily to the Gas & Power (euro 274 million),Petrochemicals (euro 250 million) and Exploration &Production segments (euro 214 million).

"Financing" receivables of euro 1,418million include loans made for operating purposes for euro 1,178million (euro 1,409 million at December 31, 2003). The euro 231million decrease in loans made for operating purposes isprimarily due to the collection of the loans made on behalf ofTrans Austria Gasleitung GmbH (euro 65 million),Transmediterranean Pipeline Co Ltd (euro 57 million) and toexchange rate differences of euro 78 million due to thetranslation of financial statements prepared in currencies otherthan euro.

Repayment of such receivables of euro 42million (euro 32 million at December 31, 2003) is contingent uponthe outcome of financed activities, while a portion of the loansmay be converted into capital.

"Other" receivables consist of thefollowing:

| (million        euro)                                                |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|----------------------------------------------------------------------|--------|-------------------|--------|-------------------|
|                                                                 |   |                   |   |                   |
| Accounts receivable from:                                            |   |              |   |              |
| - Italian        tax authorities related to:                         |   |              |   |              |
|   . income tax        credits                              |   | 1,024             |   | 580               |
|   . value added tax (VAT)                                  |   | 149               |   | 396               |
|   . interest on        tax credits                         |   | 337               |   | 322               |
|   . other                                                  |   | 97                |   | 62                |
| - joint venture operators in exploration and        production       |   | 532               |   | 546               |
| -        insurance companies                                         |   | 278               |   | 349               |
| - foreign tax authorities                                            |   | 232               |   | 261               |
| - Italian        governmental entities                               |   | 198               |   | 216               |
| - receivables from affiliates and unconsolidated        subsidiaries |   | 77                |   | 69                |
| Prepayments        for services                                      |   | 150               |   | 215               |
| Receivables relating to factoring activities                         |   |              |   | 171               |
| Other        receivables                                             |   | 702               |   | 813               |
|                                                                 |   | **3,776**         |   | **4,000**         |
|                                                                 |   |                   |   |                   |

Receivables relating to factoring activitiesfor euro 171 million concern Serfactoring SpA which has beenincluded in the scope of consolidation from January 1, 2004.

The interest rate applicable to tax creditsfrom Italian tax authorities was 1.375% for each six month periodfrom July 1, 2003 (2.5% in the first half of 2003).

Approximately 43.8% of Eni’s non-currentreceivables at December 31, 2004 were denominated in currenciesother than the euro (56.5% at December 31, 2003).

Eni did not have any significant concentrationof credit risk as of December 31, 2003 and 2004.

The above amounts are net of the allowance fordoubtful accounts, which amounts to euro 778 million, 730 millionand 875 million at December 31, 2004, 2003 and 2002,respectively. The evolution of the allowance in the past threeyears is as follows:

 

| (million        euro) |   | **Balance        at the beginning        of the year** |   | **Additions** |   | **Deductions** |   | **Other        changes** |   | **Year-end        amount** |
|-----------------------|--------|--------------------------------------------------------|--------|---------------|--------|----------------|--------|--------------------------|--------|----------------------------|
|                  |   |                                                        |   |               |   |                |   |                          |   |                            |

| December 31, 2002        |   | 1,277 |   |   | 111 |   |   | (106 | ) |   | (407 | ) |   | 875 |   |
|--------------------------|--------|-------|--------|--------|-----|--------|--------|------|---|--------|------|---|--------|-----|--------|
| December        31, 2003 |   | 875   |   |   | 129 |   |   | (44  | ) |   | (230 | ) |   | 730 |   |
| December 31, 2004        |   | 730   |   |   | 86  |   |   | (27  | ) |   | (11  | ) |   | 778 |   |

|   |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|

**5 Inventories**

| (million        euro) | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|-------------------|--------|-------------------|
|                  |                   |   |                   |

|                                                       | **Crude oil, gas and petroleum products** |   | **Chemical products** |   | **Work in progress long-term contracts** |   | **Other** |   | **Total** |   | **Crude oil, gas and petroleum products** |   | **Chemical products** |   | **Work in progress long-term contracts** |   | **Other** |   | **Total** |
|------------------------------------------------------------|-------------------------------------------|--------|-----------------------|--------|------------------------------------------|--------|-----------|--------|-----------|--------|-------------------------------------------|--------|-----------------------|--------|------------------------------------------|--------|-----------|--------|-----------|
|                                                       |                                           |   |                       |   |                                          |   |           |   |           |   |                                           |   |                       |   |                                          |   |           |   |           |
| Raw and auxiliary materials and consumables                | 361                                       |   | 205                   |   |                                     |   | 466       |   | 1,032     |   | 377                                       |   | 199                   |   |                                     |   | 525       |   | 1,101     |
| Products        being processed and semi finished products | 66                                        |   | 15                    |   |                                     |   | 6         |   | 87        |   | 51                                        |   | 19                    |   |                                     |   | 2         |   | 72        |
| Work in progress long-term contracts                       |                                      |   |                  |   | 433                                      |   |      |   | 433       |   |                                      |   |                  |   | 404                                      |   |      |   | 404       |
| Finished        products and goods                         | 1,170                                     |   | 416                   |   |                                     |   | 41        |   | 1,627     |   | 1,130                                     |   | 482                   |   |                                     |   | 47        |   | 1,659     |
| Advances                                                   | 7                                         |   |                  |   | 1                                        |   | 106       |   | 114       |   |                                      |   |                  |   |                                     |   | 84        |   | 84        |
|                                                       | **1,604**                                 |   | **636**               |   | **434**                                  |   | **619**   |   | **3,293** |   | **1,558**                                 |   | **700**               |   | **404**                                  |   | **658**   |   | **3,320** |
|                                                       |                                           |   |                       |   |                                          |   |           |   |           |   |                                           |   |                       |   |                                          |   |           |   |           |

Oil and petroleum products inventories of euro623 million represent certain minimum quantities("compulsory stock") required by law (euro 682 millionat December 31, 2003) and natural gas inventories of euro 39million represent strategic stock (the same amount at December31, 2003), while natural gas inventories valued at euro 348million are used to satisfy peak demand (euro 465 million atDecember 31, 2003).

The excess of market value over the book valueof crude oil, petroleum products and purchased natural gas atyear-end was euro 1,014 million (euro 912 million at December 31,2003).

The above amounts are net of the valuationallowance amounting to euro 99 million, 107 million and 108million at December 31, 2004, 2003 and 2002, respectively. Theevolution of this allowance in the past three years is asfollows:

 

| (million        euro) |   | **Balance        at the beginning         of the year** |   | **Additions** |   | **Deductions** |   | **Other        changes** |   | **Year-end        amount** |
|-----------------------|--------|---------------------------------------------------------|--------|---------------|--------|----------------|--------|--------------------------|--------|----------------------------|
|                  |   |                                                         |   |               |   |                |   |                          |   |                            |

| December 31, 2002        |   | 159 |   |   | 47 |   |   | (60 | ) |   | (38 | )      |   | 108 |   |
|--------------------------|--------|-----|--------|--------|----|--------|--------|-----|---|--------|-----|--------|--------|-----|--------|
| December        31, 2003 |   | 108 |   |   | 25 |   |   | (17 | ) |   | (9  | )      |   | 107 |   |
| December 31, 2004        |   | 107 |   |   | 20 |   |   | (30 | ) |   | 2   |   |   | 99  |   |

|   |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|

**6 Fixed assets**

| (million        euro) |   | **Net value at Dec. 31, 2003** |   | **Investments** |   | **Depreciation** |   | **Writedown** |   | **Change        in scope of consolidation** |   | **Exchange rate differences** |   | **Other changes** |   | **Net value at Dec. 31, 2004** |   | **Reserve amortization writedown        at Dec. 31, 2004** |
|-----------------------|--------|--------------------------------|--------|-----------------|--------|------------------|--------|---------------|--------|---------------------------------------------|--------|-------------------------------|--------|-------------------|--------|--------------------------------|--------|------------------------------------------------------------|
|                  |   |                                |   |                 |   |                  |   |               |   |                                             |   |                               |   |                   |   |                                |   |                                                            |

| Buildings                             |   | 1,795      |   |   | 52        |   |   | (104       | )      |   | (12      | )     |   | (26      | )     |   | 6          |   |   | 36       |   |   | 1,747      |   |   | 1,740      |   |
|---------------------------------------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|--------|----------|-------|--------|----------|-------|--------|------------|--------|--------|----------|--------|--------|------------|--------|--------|------------|--------|
| Plant and        machinery            |   | 25,217     |   |   | 2,865     |   |   | (3,197     | )      |   | (119     | )     |   | (107     | )     |   | (792       | )      |   | 4,112    |   |   | 27,979     |   |   | 37,051     |   |
| Industrial and commercial equipment   |   | 522        |   |   | 149       |   |   | (122       | )      |   | (1       | )     |   | (32      | )     |   | (5         | )      |   | (91      | )      |   | 420        |   |   | 1,206      |   |
| Other        assets                   |   | 291        |   |   | 92        |   |   | (102       | )      |   | (1       | )     |   | (5       | )     |   | (6         | )      |   | 53       |   |   | 322        |   |   | 797        |   |
| Fixed assets in progress and advances |   | 8,535      |   |   | 3,613     |   |   |       |   |   | (178     | )     |   | (39      | )     |   | (302       | )      |   | (4,481   | )      |   | 7,148      |   |   | 558        |   |
|                                  |   | **36,360** |   |   | **6,771** |   |   | **(3,525** | **)**  |   | **(311** | **)** |   | **(209** | **)** |   | **(1,099** | **)**  |   | **(371** | **)**  |   | **37,616** |   |   | **41,352** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

Capital expenditure of euro 6,771 million (euro7,843 million in 2003) primarily relate to the Exploration &Production segment (euro 4,398 million), Gas & Power segment(euro 1,344 million), Refining & Marketing segment (euro 654million) and Oilfield Services, Construction and Engineeringsegment (euro 186 million, of which euro 176 million related tothe construction and drilling activity). Additional informationon capital expenditure is included in the "OperatingReview" of the "Report of the Directors".

Writedowns of euro 311 million concernprimarily the Exploration & Production segment (euro 266million), the Refining & Marketing segment (euro 20 million)and Syndial SpA (euro 18 million).

The changes in scope of consolidation of euro209 million concern, primarily, the sale of LukAgip NV (euro 95million), Agip do Brasil SA (euro 71 million), Stargas Italia SpA(euro 33 million) and Eni Nederland BV (euro 22 million). Thisdecrease is partially offset by the inclusion in the scope ofconsolidation of Marghera Servizi Industriali Srl (euro 15million).

Exchange rate differences due to thetranslation of financial statements prepared in currencies otherthan euro amount to euro 1,099 million related to companies whosefunctional currency is the US dollar (euro 1,173 million).

Other changes for euro 371 million relatedprimarily to the sale and elimination of businesses and assets(euro 457 million) mainly in the Exploration & Productionsegment (euro 301 million).

Monetary revaluations included in the gross andnet value of fixed assets, amount to euro 1,067 and 76 million,respectively (euro 1,084 million and euro 82 million respectivelyat December 31, 2003).

At December 31, 2004 fixed assets have beenpledged for euro 482 million primarily as collateral on debtincurred by Eni (euro 486 million at December 31, 2003).

##### **Fixedassets by segment**

| (million        euro)                                         |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|---------------------------------------------------------------|--------|-------------------|--------|-------------------|
|                                                          |   |                   |   |                   |
| Fixed assets, gross:                                          |   |              |   |              |
| -        Exploration & Production                         |   | 38,811            |   | 39,479            |
| - Gas & Power                                             |   | 18,926            |   | 20,038            |
| - Refining        & Marketing                             |   | 8,652             |   | 9,002             |
| - Petrochemicals                                              |   | 4,266             |   | 4,252             |
| - Oilfield        Services Construction and Engineering       |   | 3,531             |   | 3,644             |
| - Other activities                                            |   | 2,403             |   | 2,359             |
| -        Corporate and financial companies                    |   | 149               |   | 194               |
|                                                          |   | **76,738**        |   | **78,968**        |
| Accumulated        depreciation, amortization and writedowns: |   |              |   |              |
| - Exploration & Production                                |   | 18,473            |   | 18,899            |
| - Gas        & Power                                      |   | 9,426             |   | 9,593             |
| - Refining & Marketing                                    |   | 5,482             |   | 5,700             |
| -        Petrochemicals                                       |   | 3,085             |   | 3,098             |
| - Oilfield Services Construction and Engineering              |   | 1,790             |   | 1,912             |
| - Other        activities                                     |   | 2,065             |   | 2,064             |
| - Corporate and financial companies                           |   | 57                |   | 86                |
|                                                          |   | **40,378**        |   | **41,352**        |
| Fixed assets, net:                                            |   |              |   |              |
| -        Exploration & Production                         |   | 20,338            |   | 20,580            |
| - Gas & Power                                             |   | 9,500             |   | 10,445            |
| - Refining        & Marketing                             |   | 3,170             |   | 3,302             |
| - Petrochemicals                                              |   | 1,181             |   | 1,154             |
| - Oilfield        Services Construction and Engineering       |   | 1,741             |   | 1,732             |
| - Other activities                                            |   | 338               |   | 295               |
| -        Corporate and financial companies                    |   | 92                |   | 108               |
|                                                          |   | **36,360**        |   | **37,616**        |
|                                                          |   |                   |   |                   |

 

**7 Investments**

 

| (million        euro) |   | **Net value at Dec. 31, 2003** |   | **Acquisitions and subscriptions** |   | **Increase in value** |   | **Reduction in value** |   | **Exchange rate differences** |   | **Other changes** |   | **Net value at Dec. 31, 2004** |   | **Accumulated        impairment charges        at Dec. 31, 2004** |
|-----------------------|--------|--------------------------------|--------|------------------------------------|--------|-----------------------|--------|------------------------|--------|-------------------------------|--------|-------------------|--------|--------------------------------|--------|-------------------------------------------------------------------|
|                  |   |                                |   |                                    |   |                       |   |                        |   |                               |   |                   |   |                                |   |                                                                   |

| Investments in unconsolidated subsidiaries |   | 285       |   |   | 11      |   |   | 27      |   |   | (33      | )     |   | (7      | )     |   | (52     | )     |   | 231       |   |   | 273       |   |
|--------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|---------|--------|--------|----------|-------|--------|---------|-------|--------|---------|-------|--------|-----------|--------|--------|-----------|--------|
| Investments        in affiliates           |   | 2,562     |   |   | 240     |   |   | 173     |   |   | (184     | )     |   | (52     | )     |   | (27     | )     |   | 2,712     |   |   | 815       |   |
| Investments in other companies             |   | 313       |   |   | 65      |   |   |    |   |   | (9       | )     |   | (19     | )     |   | (11     | )     |   | 339       |   |   | 60        |   |
|                                       |   | **3,160** |   |   | **316** |   |   | **200** |   |   | **(226** | **)** |   | **(78** | **)** |   | **(90** | **)** |   | **3,282** |   |   | **1,148** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

Acquisitions and subscriptions for euro 316million concerned mainly the subscriptions of capital increase ofDarwin LNG Pty Ltd (euro 58 million), of EnBW - EniVerwaltungsgesellschaft mbH (euro 53 million), of Albacom SpA(euro 41 million) Raffineria di Milazzo ScpA (euro 35 million),and the acquisition of Acam Gas SpA by Italgas SpA (euro 44million, of which euro 9 million related to the subscriptions ofcapital increase).

Increases and reductions in value includeEni’s portion of equity earnings or losses on investmentsaccounted for under the equity method and changes in the value ofinvestments accounted for under the cost method. Specifically,the increase of euro 200 million relates primarily to TransAustria Gasleitung GmbH (euro 32 million), TransmediterraneanPipeline Co Ltd (euro 19 million) and Azienda Energia e ServiziTorino SpA (euro 19 million); reductions for euro 226 millionconcern primarily the decrease in the carrying value of companiesaccounted for under the equity method for the receipt ofdividends (euro 153 million, of which euro 31 million relate toGalp Energia SGPS SA, euro 29 million to Trans Austria GasleitungGmbH and euro 24 million to Transmediterranean Pipeline Co Ltd)and reductions of investments (euro 73 million, of which 41million relate to Albacom SpA).

Other changes for euro 90 million relateprimarily to the inclusion in the scope of consolidation of EniGas & Power CH SA (euro 19 million), Marghera ServiziIndustriali Srl (euro 12 million) and Serfactoring SpA (euro 10million) and to the sale of investments (euro 32 million).

Thenet value of euro 3,282 million (euro 3,160 million at December31, 2003) consists of the following companies:

| (million        euro) | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|-------------------|--------|-------------------|
|                  |                   |   |                   |

|                                            | **Net value** |   | **Eni’s interest** |   | **Accounting method** |   | **Net value** |   | **Eni’s interest** |   | **Accounting method** |
|-------------------------------------------------|---------------|--------|-------------------------|--------|-----------------------|--------|---------------|--------|-------------------------|--------|-----------------------|
|                                            |               |   |                         |   |                       |   |               |   |                         |   |                       |
| Unconsolidated subsidiaries:                    |          |   |                    |   |                  |   |          |   |                    |   |                  |
| -        Transmediterranean Pipeline Co Ltd     | 65            |   | 50.00                   |   | equity method         |   | 57            |   | 50.00                   |   | equity method         |
| - Eni BTC Ltd                                   | 52            |   | 100.00                  |   | equity method         |   | 48            |   | 100.00                  |   | equity method         |
| - Other (*)                                     | 168           |   |                    |   |                  |   | 126           |   |                    |   |                  |
|                                            | **285**       |   |                    |   |                  |   | **231**       |   |                    |   |                  |
| Affiliates:                                     |          |   |                    |   |                  |   |          |   |                    |   |                  |
| - Galp Energia SGPS SA                          | 602           |   | 33.34                   |   | equity method         |   | 568           |   | 33.34                   |   | equity method         |
| - Unión        Fenosa Gas SA               | 416           |   | 50.00                   |   | equity method         |   | 408           |   | 50.00                   |   | equity method         |
| - Azienda Energia e Servizi Torino SpA          | 168           |   | 49.00                   |   | equity method         |   | 171           |   | 49.00                   |   | equity method         |
| -        Raffineria di Milazzo ScpA             | 131           |   | 50.00                   |   | equity method         |   | 168           |   | 50.00                   |   | equity method         |
| - Eteria Parohis Aeriou Thessaloniki SA         | 151           |   | 49.00                   |   | equity method         |   | 151           |   | 49.00                   |   | equity method         |
| - EnBW -        Eni Verwaltungsgesellschaft mbH | 94            |   | 50.00                   |   | equity method         |   | 148           |   | 50.00                   |   | equity method         |
| - Blue Stream Pipeline Co BV                    | 125           |   | 50.00                   |   | equity method         |   | 116           |   | 50.00                   |   | equity method         |
| - Erg        Raffinerie Mediterranee Srl (a)    | 100           |   | 28.00                   |   | cost                  |   | 100           |   | 28.00                   |   | cost                  |
| - United Gas Derivatives Co                     | 82            |   | 33.33                   |   | equity method         |   | 97            |   | 33.33                   |   | equity method         |
| -        Superoctanos CA                        | 80            |   | 49.00                   |   | equity method         |   | 82            |   | 49.00                   |   | equity method         |
| - Fertilizantes Nitrogenados de Oriente CEC     | 66            |   | 20.00                   |   | equity method         |   | 75            |   | 20.00                   |   | equity method         |
| - Trans        Austria Gasleitung GmbH (b)      | 58            |   | 89.00                   |   | equity method         |   | 60            |   | 89.00                   |   | equity method         |
| - Supermetanol CA                               | 59            |   | 34.51                   |   | equity method         |   | 59            |   | 34.51                   |   | equity method         |
| - Toscana        Gas SpA                        | 49            |   | 46.07                   |   | equity method         |   | 56            |   | 46.10                   |   | equity method         |
| - Siciliana Gas SpA                             | 47            |   | 50.00                   |   | equity method         |   | 52            |   | 50.00                   |   | equity method         |
| - Acam Gas        SpA                           |          |   |                    |   |                  |   | 44            |   | 49.00                   |   | equity method         |
| - Eteria Parohis Aeriou Thessalia SA            | 39            |   | 49.00                   |   | equity method         |   | 41            |   | 49.00                   |   | equity method         |
| - Haldor        Topsøe A/S                 | 37            |   | 50.00                   |   | equity method         |   | 39            |   | 50.00                   |   | equity method         |
| - Distribuidora de Gas del Centro SA            | 36            |   | 31.35                   |   | equity method         |   | 36            |   | 31.35                   |   | equity method         |
| -        Transitgas AG                          | 32            |   | 45.99                   |   | equity method         |   | 32            |   | 46.00                   |   | equity method         |
| - Termica Milazzo Srl                           | 23            |   | 40,00                   |   | equity method         |   | 27            |   | 40,00                   |   | equity method         |
| - Other                                         | 167           |   |                    |   |                  |   | 182           |   |                    |   |                  |
|                                            | **2,562**     |   |                    |   |                  |   | **2,712**     |   |                    |   |                  |
| Other        companies:                         |          |   |                    |   |                  |   |          |   |                    |   |                  |
| - Darwin LNG Pty Ltd                            | 39            |   | 12.04                   |   | cost                  |   | 89            |   | 12.04                   |   | cost                  |
| - Nigeria        LNG Ltd                        | 92            |   | 10.40                   |   | cost                  |   | 86            |   | 10.40                   |   | cost                  |
| - Ceska Rafinerska AS                           | 33            |   | 16.33                   |   | cost                  |   | 30            |   | 16.33                   |   | cost                  |
| -        Interconnector (UK) Ltd                | 25            |   | 5.00                    |   | cost                  |   | 23            |   | 4.62                    |   | cost                  |
| - Discovery Producer Services Llc               | 28            |   | 16.67                   |   | cost                  |   | 19            |   | 16.67                   |   | cost                  |
| - Other (*)                                     | 96            |   |                    |   |                  |   | 92            |   |                    |   |                  |
|                                            | **313**       |   |                    |   |                  |   | **339**       |   |                    |   |                  |
|                                            | **3,160**     |   |                    |   |                  |   | **3,282**     |   |                    |   |                  |
|                                            |               |   |                         |   |                       |   |               |   |                         |   |                       |

___________________

(*) Each individual amount included herein doesnot exceed euro 25 million.(a) To the company was granted a call option for the purchasewith a fixed contract price (see Note 23 "Othercommitments").(b) The company is a joint venture.

The net value of investments in unconsolidatedsubsidiaries and affiliates includes the differences betweenpurchase price and Eni’s share of net assets of euro 474million. Such differences relate primarily to Unión Fenosa GasSA (euro 185 million), EnBW - Eni Verwaltungsgesellschaft mbH(euro 180 million) and Azienda Energia e Servizi Torino SpA (euro72 million).

The following are the amounts, according toEni’s interest, from the last available financial statementsof unconsolidated subsidiaries and affiliates:

 

| (million        euro) |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|--------|-------------------|--------|-------------------|
|                  |   |                   |   |                   |

|   |   | **Unconsolidated        subsidiaries** |   | **Affiliates** |   | **Unconsolidated        subsidiaries** |   | **Affiliates** |
|--------|--------|----------------------------------------|--------|----------------|--------|----------------------------------------|--------|----------------|
|   |   |                                        |   |                |   |                                        |   |                |

| Total assets             |   | 1,340 |   |   | 8,232 |   |   | 1,502 |   |   | 8,637 |   |
|--------------------------|--------|-------|--------|--------|-------|--------|--------|-------|--------|--------|-------|--------|
| Total        liabilities |   | 1,132 |   |   | 5,735 |   |   | 1,331 |   |   | 5,958 |   |
| Net sales                |   | 140   |   |   | 4,658 |   |   | 110   |   |   | 6,476 |   |
| Operating        income  |   | 5     |   |   | 278   |   |   | 20    |   |   | 330   |   |
| Net income               |   | (3    | )      |   | 123   |   |   | 18    |   |   | 150   |   |

|   |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|

Thereserve for losses related to investments, included in thereserve for contingencies (Note 12) concerns the followingcompanies:

| (million        euro)                                                  |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|------------------------------------------------------------------------|--------|-------------------|--------|-------------------|
|                                                                   |   |                   |   |                   |
| Industria Siciliana Acido Fosforico - ISAF SpA        (in liquidation) |   | 39                |   | 39                |
| Consorzio        Set Sviluppo Elettrico Trecate                        |   | 15                |   | 18                |
| Caspian Pipeline Consortium R - Closed Joint        Stock Company      |   | 13                |   | 16                |
| Lasmo        Petroleum Development BV                                  |   | 10                |   | 9                 |
| Other companies                                                        |   | 44                |   | 9                 |
|                                                                   |   | **121**           |   | **91**            |
|                                                                   |   |                   |   |                   |

 

**8 Intangible assets**

 

| (million euro) | **Net value         at Dec. 31, 2003** |   | **Investments** |   | **Amortization** |   | **Other changes** |   | **Net value        at Dec. 31, 2004** |   | **Reserve amortization        writedown        at Dec. 31, 2004** |
|----------------|----------------------------------------|--------|-----------------|--------|------------------|--------|-------------------|--------|---------------------------------------|--------|-------------------------------------------------------------------|
|           |                                        |   |                 |   |                  |   |                   |   |                                       |   |                                                                   |

| Organizational and financing costs                              | 20        |   |   | 2       |   |   | (10        | )      |   | (2       | )      |   | 10        |   |   | 63        |   |
|-----------------------------------------------------------------|-----------|--------|--------|---------|--------|--------|------------|--------|--------|----------|--------|--------|-----------|--------|--------|-----------|--------|
| Costs for        research and development                       | 167       |   |   | 550     |   |   | (608       | )      |   | (3       | )      |   | 106       |   |   | 740       |   |
| Industrial patent right and intellectual        property rights | 162       |   |   | 60      |   |   | (139       | )      |   | 91       |   |   | 174       |   |   | 808       |   |
| Concessions,        licenses, trademarks and similar items      | 934       |   |   | 10      |   |   | (108       | )      |   | (12      | )      |   | 824       |   |   | 1,346     |   |
| Goodwill                                                        | 1,982     |   |   | 13      |   |   | (135       | )      |   | (45      | )      |   | 1,815     |   |   | 416       |   |
| Intangible        assets in progress and advances               | 133       |   |   | 75      |   |   |       |   |   | (148     | )      |   | 60        |   |   | 5         |   |
| Other intangible assets                                         | 212       |   |   | 22      |   |   | (43        | )      |   | 10       |   |   | 201       |   |   | 335       |   |
|                                                            | **3,610** |   |   | **732** |   |   | **(1,043** | **)**  |   | **(109** | **)**  |   | **3,190** |   |   | **3,713** |   |

|   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

Organizational and financing costs of euro 10million concern costs for extraordinary corporate operations,costs for setting up or expanding production activities and costsfor share capital increases.

Costs for research and development of euro 106million concern mainly the purchase of mineral rights (euro 96million). This item also includes exploration expendituresamortized in the year for euro 491 million (euro 632 million in2003).

Concessions, licenses, trademarks and similaritems for euro 824 million concern primarily the transmissionrights for natural gas imported from Algeria (euro 664 million)and concessions for mineral exploration (euro 76 million).

Goodwill of euro 1,815 million concernsprimarily the Gas & Power segment (euro 788 million, of whicheuro 770 million relates to the Public Offering for Italgas SpAshares), the Oilfield Services, Construction and Engineeringsegment (euro 785 million, of which euro 754 million relates tothe purchase of Bouygues Offshore SA, now Saipem SA), theExploration & Production segment (euro 195 million relates tothe purchase of Lasmo Plc, now Eni Lasmo Plc), the Refining &Marketing segment (euro 46 million). Other changes of euro 45million relate primarily to the change in the scope ofconsolidation following the sale of Agip do Brasil SA (euro 51million).

Other intangible assets of euro 201 millionconcern primarily royalties for the use of licenses by PolimeriEuropa SpA (euro 90 million) and investments in assets of thirdparties (euro 16 million).

Changes in goodwill for the years indicated bysegment are as follows:

| (million        euro) |   | **Initial balance** |   | **Capital Expenditure** |   | **Depreciation Amort. charges** |   | **Change in Consolidation** |   | **Exchange difference conversion** |   | **Other changes** |   | **Final balance** |   | **Reserve for amort. depreciation** |
|-----------------------|--------|---------------------|--------|-------------------------|--------|---------------------------------|--------|-----------------------------|--------|------------------------------------|--------|-------------------|--------|-------------------|--------|-------------------------------------|
|                  |   |                     |   |                         |   |                                 |   |                             |   |                                    |   |                   |   |                   |   |                                     |

| **Dec. 31, 2003**                                     |   |      |   |   |   |   |   |     |   |   |    |   |   |    |   |   |    |   |   |      |   |   |    |   |
|-------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|---------|--------|
| Exploration        & Production                   |   | **250**   |   |   |   |   |   | (18      | )      |   |    |   |   | (19     | )      |   |    |   |   | **213**   |   |   | 54      |   |
| Gas & Power                                       |   | **77**    |   |   | 2      |   |   | (45      | )      |   | 4       |   |   | (4      | )      |   | 798     |   |   | **832**   |   |   | 49      |   |
| Refining        & Marketing                       |   | **93**    |   |   | 26     |   |   | (21      | )      |   |    |   |   | 1       |   |   | 10      |   |   | **109**   |   |   | 124     |   |
| Oilfield Services Construction and Engineering        |   | **880**   |   |   |   |   |   | (55      | )      |   |    |   |   | (7      | )      |   | 7       |   |   | **825**   |   |   | 97      |   |
| Other        segments                                 |   | **7**     |   |   |   |   |   | (2       | )      |   |    |   |   |    |   |   | (2      | )      |   | **3**     |   |   | 9       |   |
|                                                  |   | **1,307** |   |   | **28** |   |   | **(141** | **)**  |   | **4**   |   |   | **(29** | **)**  |   | **813** |   |   | **1,982** |   |   | **333** |   |
| **Dec. 31,        2004**                              |   |      |   |   |   |   |   |     |   |   |    |   |   |    |   |   |    |   |   |      |   |   |    |   |
| Exploration & Production                          |   | **213**   |   |   |   |   |   | (19      | )      |   |    |   |   | 1       |   |   |    |   |   | 195       |   |   | 71      |   |
| Gas &        Power                                |   | **832**   |   |   |   |   |   | (45      | )      |   |    |   |   | 5       |   |   | (4      | )      |   | 788       |   |   | 94      |   |
| Refining & Marketing                              |   | **109**   |   |   | 1      |   |   | (16      | )      |   | (51     | )      |   | 1       |   |   | 2       |   |   | 46        |   |   | 90      |   |
| Oilfield        Services Construction and Engineering |   | **825**   |   |   | 12     |   |   | (53      | )      |   |    |   |   |    |   |   | 1       |   |   | 785       |   |   | 150     |   |
| Other segments                                        |   | **3**     |   |   |   |   |   | (2       | )      |   |    |   |   |    |   |   |    |   |   | 1         |   |   | 11      |   |
|                                                  |   | **1,982** |   |   | **13** |   |   | **(135** | **)**  |   | **(51** | **)**  |   | **7**   |   |   | **(1**  | **)**  |   | **1,815** |   |   | **416** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

**9 Other non-current assets**

Other non-current assets consist of thefollowing:

| (million        euro)                |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------------------------------------|--------|-------------------|--------|-------------------|
|                                 |   |                   |   |                   |
| Securities held as long-term assets: |   |              |   |              |
| - Italian        treasury bonds      |   | 22                |   | 22                |
| - other securities                   |   | 1                 |   | 1                 |
| Other                                |   | 93                |   | 117               |
| Deferred tax assets                  |   | 2,167             |   | 2,203             |
|                                 |   | **2,283**         |   | **2,343**         |
|                                 |   |                   |   |                   |

 

Securities held as long-term assets are carriedat cost, adjusted for permanent impairment, and representsecurity deposits from customers of euro 22 million (euro 21million at December 31, 2003).

Deferred tax assets are described in Note 12"Reserves for contingencies and deferred and othernon-current tax liabilities".

 

**10 Taxes payable**

Taxes payable include the following:

| (million        euro)       |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------------|--------|-------------------|--------|-------------------|
|                        |   |                   |   |                   |
| Customs and excise duties   |   | 273               |   | 793               |
| Income taxes        payable |   | 1,262             |   | 1,213             |
| Other                       |   | 648               |   | 508               |
|                        |   | **2,183**         |   | **2,514**         |
|                        |   |                   |   |                   |

Taxes payable of euro 2,514 million increasedby euro 331 following the increase in customs and excise taxduties (euro 520 million) due to circumstance that in 2004 thefiscal measure providing the anticipated payment in December ofthe excise tax on petroleum products sold during the second halfof December has not been renewed. Such increase has beenpartially offset by the decrease in income taxes payable andother taxes payable (euro 189 million).

 

**11 Debt**

**Short-term debt**

Eni’s short-term debt is composed of thefollowing:

| (million        euro)          |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------------------------------|--------|-------------------|--------|-------------------|
|                           |   |                   |   |                   |
| Due to:                        |   |              |   |              |
| - banks                        |   | 3,633             |   | 2,196             |
| - other financing institutions |   | 151               |   | 233               |
| -        commercial paper      |   | 3,510             |   | 1,540             |
| - unconsolidated subsidiaries  |   | 65                |   | 54                |
| -        affiliates            |   | 69                |   | 92                |
|                           |   | **7,428**         |   | **4,115**         |
|                           |   |                   |   |                   |

Short-term debt by currency is as follows:

| (million        euro)   |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-------------------------|--------|-------------------|--------|-------------------|
|                    |   |                   |   |                   |
| Euro                    |   | 3,628             |   | 2,389             |
| US dollar               |   | 3,218             |   | 1,302             |
| British pound           |   | 84                |   | 253               |
| Norwegian        kroner |   | 278               |   | 21                |
| Other                   |   | 220               |   | 150               |
|                    |   | **7,428**         |   | **4,115**         |
|                    |   |                   |   |                   |

The average interest rate of Eni’sshort-term debt was 2.13% and 2.49% for the years ended December31, 2003 and 2004, respectively.

Short-term debt of euro 4,115 million decreasedby euro 3,313 million. Such decrease was primarily due to thebalance of payments and new liabilities (euro 3,622 million) andto the exchange rate differences related to the translation offinancial statement prepared in currencies other than euro (euro22 million). This decrease was partially offset by the inclusionin the scope of consolidation of Serfactoring SpA (euro 332million).

On December 31, 2004 Eni maintained committedand uncommitted unused lines of credit with various domestic andforeign banks for euro 5,304 and 7,771 million, respectively(euro 4,647 million and euro 4,799 million, respectively, atDecember 31, 2003). These agreements provide for interest chargesbased on prevailing market conditions. Commission fees on unusedlines of credit are not significant.

 

**Long-term debt**

Eni’s long-term debt, including currentmaturities, as of December 31, 2003 and 2004, and the relatedmaturity schedules are as follows:

 

| (million euro) |   |   | **Dec. 31** |   | **Current maturity** |   | **Long-term maturity** |
|----------------|--------|--------|-------------|--------|----------------------|--------|------------------------|
|           |   |   |             |   |                 |   |                        |

| **Type of        debt instrument**  | **Maturity range** |   | **2003**  |   | **2004**  |   | **2005** |   | **2006**  |   | **2007**  |   | **2008** |   | **2009** |   | **After** |   | **Total** |
|-------------------------------------|--------------------|--------|-----------|--------|-----------|--------|----------|--------|-----------|--------|-----------|--------|----------|--------|----------|--------|-----------|--------|-----------|
|                                |                    |   |           |   |           |   |          |   |           |   |           |   |          |   |          |   |           |   |           |
| Due to banks:                       |               |   |      |   |      |   |     |   |      |   |      |   |     |   |     |   |      |   |      |
| - ordinary        loans             | **2005-2017**      |   | 2,722     |   | 2,167     |   | 151      |   | 473       |   | 380       |   | 152      |   | 348      |   | 663       |   | 2,016     |
| - interest rate assisted loans      | **2005-2013**      |   | 137       |   | 101       |   | 74       |   | 14        |   | 4         |   | 3        |   | 2        |   | 4         |   | 27        |
| - other        financings           | **2005-2007**      |   | 359       |   | 286       |   | 2        |   | 59        |   | 225       |   |     |   |     |   |      |   | 284       |
|                                |               |   | **3,218** |   | **2,554** |   | **227**  |   | **546**   |   | **609**   |   | **155**  |   | **350**  |   | **667**   |   | **2,327** |
| Notes of        credit              | **2004**           |   | 33        |   |      |   |     |   |      |   |      |   |     |   |     |   |      |   |      |
| Ordinary bonds                      | **2005-2027**      |   | 4,793     |   | 5,331     |   | 660      |   | 860       |   | 406       |   | 125      |   | 496      |   | 2,784     |   | 4,671     |
| Other        financing institutions | **2005-2019**      |   | 782       |   | 725       |   | 49       |   | 89        |   | 107       |   | 34       |   | 120      |   | 326       |   | 676       |
|                                |               |   | **8,826** |   | **8,610** |   | **936**  |   | **1,495** |   | **1,122** |   | **314**  |   | **966**  |   | **3,777** |   | **7,674** |
|                                |                    |   |           |   |           |   |          |   |           |   |           |   |          |   |          |   |           |   |           |

Long-term debt of euro 8,610 million decreasedby euro 216 million. Such decrease was primarily due to theeffect of exchange rate differences on the translation offinancial statements prepared in currency other than euro (euro210 million) and to the effect of exchange rate differences onthe alignment to the year-end exchange rate of debts incurrencies other than functional currencies (euro 57 million).The increase was partially offset by the balance of payments andliabilities (euro 22 million).

Eni entered into financing arrangements withthe European Investment Bank, relating to bank debt that requiresmaintenance of certain financial ratios generally based onEni’s consolidated financial statements or of a rating notinferior to A - (S&P) and A3 (Moodys). At December 31, 2003and 2004, the amount of short and long-term debt subject torestrictive covenants was euro 865 million and euro 1,104million, respectively (of which, euro 300 million relating torating). Furthermore, Saipem SpA entered into financingarrangements with banks for euro 300 million, that requiremaintenance of certain financial ratios generally based onSaipem’s consolidated financial statements. Eni and Saipemare in compliance with the covenants contained in these financingarrangements.

Ordinary bondsof euro 5,331 million concern primarily notes issued by Eni inits Euro Medium Term Notes program for a total of euro 4,296million and other ordinary bonds for a total of euro 1,035million. Ordinary bonds, including the issuing entity, theexpiration dates and the interest rates, by currency, are asfollows:

|   |   |   |   |   | **Maturity** |   | **% rate** |
|--------|--------|--------|--------|--------|--------------|--------|------------|
|   |   |   |   |   |              |   |            |

| (million        euro)               | **Amount** |   | **Value**            |   | **from** |   | **to** |   | **from** |   | **to**   |
|-------------------------------------|------------|--------|----------------------|--------|----------|--------|--------|--------|----------|--------|----------|
|                                |            |   |                      |   |          |   |        |   |          |   |          |
| **Issuing entity**                  |       |   |                 |   |     |   |   |   |     |   |     |
| *Euro        Medium Term Notes:*    |       |   |                 |   |     |   |   |   |     |   |     |
| - Eni SpA                           | 1,500      |   | Euro                 |   |     |   | 2013   |   |     |   | 4.625    |
| - Eni        Coordination Center SA | 851        |   | British        pound |   | 2010     |   | 2019   |   | 4.875    |   | 5.250    |
| - Eni Coordination Center SA        | 696        |   | Euro                 |   | 2005     |   | 2015   |   |     |   | variable |
| - Eni SpA                           | 500        |   | Euro                 |   |     |   | 2010   |   |     |   | 6.125    |
| - Eni Coordination Center SA        | 213        |   | US dollar            |   | 2005     |   | 2007   |   |     |   | variable |
| - Enifin        SpA                 | 100        |   | Euro                 |   |     |   | 2005   |   |     |   | variable |
| - Eni Coordination Center SA        | 95         |   | US dollar            |   | 2005     |   | 2014   |   | 4.610    |   | 6.820    |
| - Eni        Coordination Center SA | 93         |   | Japanese        yen  |   | 2008     |   | 2019   |   | 0.810    |   | 2.320    |
| - Eni Coordination Center SA        | 92         |   | Swiss franc          |   | 2005     |   | 2007   |   |     |   | variable |
| - Eni        Coordination Center SA | 73         |   | Euro                 |   | 2008     |   | 2024   |   | 4.750    |   | 5.050    |
| - Eni Coordination Center SA        | 52         |   | Swiss franc          |   |     |   | 2006   |   |     |   | 1.750    |
| - Enifin        SpA                 | 31         |   | Euro                 |   |     |   | 2005   |   |     |   | 3.350    |
|                                | **4,296**  |   |                 |   |     |   |   |   |     |   |     |
| *Other        bonds:*               |       |   |                 |   |     |   |   |   |     |   |     |
| - Eni USA Inc                       | 294        |   | US dollar            |   |     |   | 2027   |   |     |   | 7.300    |
| - Eni USA        Inc                | 220        |   | US dollar            |   |     |   | 2006   |   |     |   | 7.500    |
| - Eni Lasmo Plc (*)                 | 212        |   | British pound        |   |     |   | 2009   |   |     |   | 10.375   |
| - Eni USA        Inc                | 147        |   | US dollar            |   |     |   | 2007   |   |     |   | 6.750    |
| - Enifin SpA                        | 129        |   | Euro                 |   |     |   | 2005   |   |     |   | variable |
| - Eni        Investment Plc         | 18         |   | British        pound |   |     |   | 2005   |   |     |   | variable |
| - Eni Finance Inc                   | 15         |   | US dollar            |   |     |   | 2005   |   |     |   | 10.300   |
|                                | **1,035**  |   |                 |   |     |   |   |   |     |   |     |
|                                | **5,331**  |   |                 |   |     |   |   |   |     |   |     |
|                                |            |   |                      |   |          |   |        |   |          |   |          |

___________________

(*) The bond is guaranteed by a fixed depositrecorded under non-current receivables (euro 234 million).

Ordinary bonds due within 18 months amount toeuro 953 million and concern Eni Coordination Center SA (euro 440million), Enifin SpA (euro 260 million), Eni USA Inc (euro 220million), Eni Investments Plc (euro 18 million) and Eni FinanceInc (euro 15 million). During 2004 Eni Coordination Center SAissued obligations for euro 712 million.

Long-term debt, including current maturitiesand average interest rates, by currency, is as follows:

|               | **Dec. 31, 2003** |   | **Average**       |   | **Dec. 31, 2004** |   | **Average**       |
|--------------------|-------------------|--------|-------------------|--------|-------------------|--------|-------------------|
|               | (million euro)    |   | **interest rate** |   | (million euro)    |   | **interest rate** |
|               |                   |   |                   |   |                   |   |                   |
| Euro               | 6,235             |   | 3.56              |   | 5,709             |   | 3.33              |
| US dollar          | 1,855             |   | 5.67              |   | 1,548             |   | 6.54              |
| British pound      | 517               |   | 6.47              |   | 1,082             |   | 6.09              |
| Swiss        franc | 146               |   | 0.47              |   | 146               |   | 1.14              |
| Japanese yen       | 40                |   | 0.65              |   | 96                |   | 1.37              |
| Other              | 33                |   | 9.99              |   | 29                |   | 8.74              |
|               | **8,826**         |   |              |   | **8,610**         |   |              |
|               |                   |   |                   |   |                   |   |                   |

At December 31, 2004 Eni maintains committedunused long-term lines of credit for euro 710 million (completelyused at December 31, 2003). These agreements provide for interestcharges based on prevailing market conditions. Commission fees onunused lines of credit are not significant.

In the normal course of business, Eni utilizesvarious derivative contracts to reduce risks arising frominterest rate and foreign currency exchange rate fluctuations,both for long and short-term debt. See Note 23 for a moredetailed discussion.

Certain debt, in the amount of euro 332 millionand euro 274 million at December 31, 2003 and 2004, respectively,is guaranteed by mortgages and liens on the fixed assets ofconsolidated companies and by pledges on marketable securitiesand fixed deposits.

 

**12 Reserves forcontingencies and deferred and other non-current tax liabilities**

| (million        euro) |   | **Amount at the beginning of the year** |   | **Additions** |   | **Deduction** |   | **Other changes** |   | **Year-end amount** |
|-----------------------|--------|-----------------------------------------|--------|---------------|--------|---------------|--------|-------------------|--------|---------------------|
|                  |   |                                         |   |               |   |               |   |                   |   |                     |

| **December 31, 2003**                                                                      |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
|--------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|----------|--------|--------|-----------|--------|
| Employee        retirement and similar obligations                                         |   | **128**   |   |   | **31**    |   |   | **(12**    | **)**  |   | **28**   |   |   | **175**   |   |
| Other reserves for contingencies:                                                          |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
| - site        restoration and abandonment                                                  |   | 1,980     |   |   | 173       |   |   | (51        | )      |   | (62      | )      |   | 2,040     |   |
| - environmental risks                                                                      |   | 1,608     |   |   | 97        |   |   | (143       | )      |   | 69       |   |   | 1,631     |   |
| - loss        adjustments and actuarial reserves for Eni’s        insurance companies |   | 593       |   |   | 16        |   |   | (21        | )      |   | 11       |   |   | 599       |   |
| - contract penalties and disputes reserve                                                  |   | 211       |   |   | 18        |   |   | (50        | )      |   | 2        |   |   | 181       |   |
| -        restructuring or decommissioning of production facilities                         |   | 304       |   |   | 50        |   |   | (61        | )      |   | (75      | )      |   | 218       |   |
| - losses related to investments                                                            |   | 106       |   |   | 55        |   |   | (24        | )      |   | (16      | )      |   | 121       |   |
| -        financial risks                                                                   |   | 8         |   |   | 3         |   |   | (6         | )      |   |     |   |   | 5         |   |
| - reserve for redundancy incentives                                                        |   | 42        |   |   | 39        |   |   | (33        | )      |   | 17       |   |   | 65        |   |
| - other        (*)                                                                         |   | 542       |   |   | 269       |   |   | (86        | )      |   | (52      | )      |   | 673       |   |
|                                                                                       |   | **5,394** |   |   | **720**   |   |   | **(475**   | **)**  |   | **(106** | **)**  |   | **5,533** |   |
| Non-current        income tax liabilities:                                                 |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
| - deferred taxation                                                                        |   | 2,386     |   |   | 802       |   |   | (1,276     | )      |   | 348      |   |   | 2,260     |   |
| - other        tax reserves                                                                |   | 225       |   |   | 24        |   |   | (73        | )      |   | 6        |   |   | 182       |   |
|                                                                                       |   | **2,611** |   |   | **826**   |   |   | **(1,349** | **)**  |   | **354**  |   |   | **2,442** |   |
|                                                                                       |   | **8,133** |   |   | **1,577** |   |   | **(1,836** | **)**  |   | **276**  |   |   | **8,150** |   |
| **December 31, 2004**                                                                      |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
| Employee        retirement and similar obligations                                         |   | **175**   |   |   | **57**    |   |   | **(11**    | **)**  |   | **9**    |   |   | **230**   |   |
| Other reserves for contingencies:                                                          |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
| - site        restoration and abandonment                                                  |   | 2,040     |   |   | 319       |   |   | (48        | )      |   | (254     | )      |   | 2,057     |   |
| - environmental risks                                                                      |   | 1,631     |   |   | 141       |   |   | (136       | )      |   | 3        |   |   | 1,639     |   |
| - loss        adjustments and actuarial reserves for Eni’s        insurance companies |   | 599       |   |   | 58        |   |   | (26        | )      |   | 62       |   |   | 693       |   |
| - contract penalties and disputes reserve                                                  |   | 181       |   |   | 32        |   |   | (16        | )      |   | 16       |   |   | 213       |   |
| -        restructuring or decommissioning of production facilities                         |   | 218       |   |   | 2         |   |   | (21        | )      |   | (20      | )      |   | 179       |   |
| - losses related to investments                                                            |   | 121       |   |   | 13        |   |   | (15        | )      |   | (28      | )      |   | 91        |   |
| - OIL        insurance                                                                     |   |      |   |   | 91        |   |   |       |   |   |     |   |   | 91        |   |
| - financial risks                                                                          |   | 5         |   |   | 64        |   |   |       |   |   | (5       | )      |   | 64        |   |
| - reserve        for redundancy incentives                                                 |   | 65        |   |   | 7         |   |   | (60        | )      |   | 24       |   |   | 36        |   |
| - other (*)                                                                                |   | 673       |   |   | 465       |   |   | (246       | )      |   | (83      | )      |   | 809       |   |
|                                                                                       |   | **5,533** |   |   | **1,192** |   |   | **(568**   | **)**  |   | **(285** | **)**  |   | **5,872** |   |
| Non-current income tax liabilities:                                                        |   |      |   |   |      |   |   |       |   |   |     |   |   |      |   |
| - deferred        taxation                                                                 |   | 2,260     |   |   | 797       |   |   | (208       | )      |   | (316     | )      |   | 2,533     |   |
| - other tax reserves                                                                       |   | 182       |   |   | 73        |   |   | (6         | )      |   | (14      | )      |   | 235       |   |
|                                                                                       |   | **2,442** |   |   | **870**   |   |   | **(214**   | **)**  |   | **(330** | **)**  |   | **2,768** |   |
|                                                                                       |   | **8,150** |   |   | **2,119** |   |   | **(793**   | **)**  |   | **(606** | **)**  |   | **8,870** |   |

|   |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

At December 31, 2004 deductions in reservesamounted to euro 568 million, of which euro 102 million relatedto deductions not corresponding to cash expenditures. The mostsignificant deductions not corresponding to cash expenditures in2004 primarily relate to: (i) the reserve created in 2002 byStoccaggi Gas Italia SpA following the difference of retroactivestorage tariffs relating to the decision No. 26/2002 of theAuthority for Electricity and Gas. Following compensation made tointerested customers in 2004 Eni believes further compensation tobe unlikely, for this reason the residual amount of the reserveis considered to be redundant (euro 28 million); and (ii) anadjustment by Padana Assicurazioni SpA to the "lossadjustment and actuarial reserve for Eni’s insurancecompanies" arising from estimates concerning accident ratesdiffering from actual experiences (euro 26 million). Otherdeductions not corresponding to cash expenditures relate tovarious immaterial items.

At December 31, 2003 deductions in reservesamounted to euro 475 million, of which euro 129 million relatedto deductions not corresponding to cash expenditures. The mostsignificant deductions not corresponding to cash expenditures in2003 primarily relate to: (i) an adjustment by PadanaAssicurazioni SpA to the "loss adjustment and actuarialreserve for Eni’s companies" arising from estimatesconcerning accident rates differing from actual experiences (euro21 million); and (ii) a reversal of the item "Contractpenalties and disputes reserve" (euro 19 million) due to thefact that previously Eni had accrued a provision for the paymentof contractual penalties related to the transmission and storageof natural gas. Following the issuing of a network code and abetter interpretation of the tariff regime established by theAuthority for Electricity and Gas, such penalties are no longerdue. Other deductions not corresponding to cash expendituresrelate to various immaterial items.

The "Site restoration andabandonment" reserve of euro 2,057 million representsprimarily the estimated costs for well-plugging, abandonment andsite restoration (euro 2,024 million). Other changes for euro 254million concern primarily the transfer of the site restorationand abandonment reserve due to the sale of mineral assets (euro221 million) and an exchange rate loss from the translation offinancial statements denominated in currencies other than theeuro (euro 27 million). The total estimated future siterestoration and abandonment costs for Eni’s worldwide oiland gas properties totaled approximately euro 2,964 million atDecember 31, 2004 (euro 2,700 million at December 31, 2003).

The "Environmental risks" reserve ofeuro 1,639 million represents primarily the estimated costs ofremediation in accordance with existing laws and regulations, ofactive production facilities for Syndial SpA (euro 1,275million), the Refining & Marketing segment (euro 233 million)and the Gas & Power segment (euro 64 million). Additions euro141 million relate primarily to the Refining & Marketing(euro 122 million) and Exploration & Production (euro 18million) segments.

The "Loss adjustment and actuarialreserves for Eni’s insurance companies" of euro 693million represents the liabilities accrued for claims oninsurance policies underwritten by Eni’s captive insurancecompany.

Contingent liabilities are included primarilyunder the caption "Contract penalties and disputesreserve".The balance of euro 213 million at December 31,2004 is comprised of numerous matters of differing nature.Accruals have been based on Eni’s best estimate of theexpected probable liability.

The "Restructuring or decommissioning ofproduction facilities" reserve of euro 179 million mainlyrepresents the estimated costs related to divestments andfacilities closures of Syndial SpA (euro 157 million). Otherchanges relate in particular to the reclassifications to"Reserve for redundancy incentives" made by Syndial SpA(euro 20 million).

The "Reserve for losses oninvestments" of euro 91 million represents losses oninvestments incurred to date in excess of their carrying value(Note 7).

The "OIL insurance" reserve of euro91 million include a provision related to the estimated chargesdue by Eni for the participation in the mutual insurance of OilInsurance Ltd, relating to accidents occurred in the past 5years.

The "Financial risks" reserve of euro64 million includes, essentially, the charge related to the saleto British Telecom Plc of a credit of euro 87 million towardsEni’s affiliate Albacom SpA (euro 62 million).

The "Reserve for redundancyincentives" of euro 36 million represents liabilitiesprimarily for the Refining & Marketing segment (euro 15million), the Oilfield Services, Construction and Engineeringsegment (euro 9 million) and the Petrochemicals segment (euro 8million). Other changes for euro 24 million concern primarily thereclassification from the "Restructuring or decommissioningof production facilities" reserve made by Syndial SpA (euro20 million).

With respect to the foregoing liabilities, Enidoes not expect any material, reasonably possible, additionalloss beyond the amounts accrued above.

"Net Deferred tax liabilities" ofeuro 2,533 million have already been reduced by deferred taxassets for which Eni possesses the legal right of offset. Otherchanges of euro 316 million concern, primarily, the set-off, foreach company, of tax assets and deferred tax liabilities (euro220 million) and net exchange differences due to the translationof financial statements prepared in currencies other than euro(euro 51 million).

**Net deferred income tax liabilities**

| (million        euro) |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|--------|-------------------|--------|-------------------|
|                  |   |                   |   |                   |

| Deferred income taxes                        |   | 4,032     |   |   | 4,560     |   |
|----------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Deferred        tax assets may be offset     |   | (1,772    | )      |   | (2,027    | )      |
|                                         |   | **2,260** |   |   | **2,533** |   |
| Deferred        tax assets may not be offset |   | (2,167    | )      |   | (2,203    | )      |
|                                         |   | **93**    |   |   | **330**   |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

 

The most significant temporary differencesgiving rise to net deferred tax liabilities are as follows:

| (million        euro) |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|--------|-------------------|--------|-------------------|
|                  |   |                   |   |                   |

| Deferred tax liabilities:                                                                                                                                                                             |   |       |   |   |       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| -        anticipated and accelerated depreciation                                                                                                                                                     |   | 3,132      |   |   | 3,778      |   |
| - differences between purchase cost and net book        value of acquired consolidated companies                                                                                                      |   | 448        |   |   | 294        |   |
| - reserve        for uncollectable receivables                                                                                                                                                        |   | 150        |   |   | 137        |   |
| - reserves for accelerated contingencies                                                                                                                                                              |   | 89         |   |   | 83         |   |
| - gains        taxable in the future                                                                                                                                                                  |   | 62         |   |   | 46         |   |
| - distributable reserves subject to taxes                                                                                                                                                             |   | 21         |   |   | 20         |   |
| - other                                                                                                                                                                                               |   | 130        |   |   | 202        |   |
|                                                                                                                                                                                                  |   | **4,032**  |   |   | **4,560**  |   |
| Deferred        tax assets:                                                                                                                                                                           |   |       |   |   |       |   |
| - accruals for doubtful accounts and reserve for        contingencies                                                                                                                                 |   | (1,869     | )      |   | (2,054     | )      |
| - tax loss        carryforwards                                                                                                                                                                       |   | (1,403     | )      |   | (1,124     | )      |
| - asset revaluations as per Law 342/2000                                                                                                                                                              |   | (760       | )      |   | (855       | )      |
| -        investment revaluations in accordance with Law 292/1993        and the allocation            of the merger difference arising from        the merger of Agip SpA into Eni SpA |   | (818       | )      |   | (818       | )      |
| - asset revaluations as per Law 448/2001                                                                                                                                                              |   | (424       | )      |   | (639       | )      |
| - losses        of investments and subsidiaries in excess of currently        allowable tax deductions                                                                                                |   | (644       | )      |   | (472       | )      |
| - future deductible amortization                                                                                                                                                                      |   | (272       | )      |   | (432       | )      |
| -        writeoffs of tangible, intangible assets and or        inventories deductible in the future                                                                                                  |   | (355       | )      |   | (255       | )      |
| - other                                                                                                                                                                                               |   | (724       | )      |   | (599       | )      |
|                                                                                                                                                                                                  |   | **(7,269** | **)**  |   | **(7,248** | **)**  |
| Less:                                                                                                                                                                                                 |   |       |   |   |       |   |
| Valuation        allowance                                                                                                                                                                            |   | 3,330      |   |   | 3,018      |   |
|                                                                                                                                                                                                  |   | **(3,939** | **)**  |   | **(4,230** | **)**  |
| **Net        deferred tax liabilities**                                                                                                                                                               |   | **93**     |   |   | **330**    |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

The valuation allowance for deferred tax assets(euro 3,330 and 3,018 million for the years ending December 31,2003 and 2004 respectively) mainly relates to consolidatedcompanies with accumulated fiscal losses which are not expectedto be recovered against future fiscal profits and to temporarydifferences which the company does not expect will be utilized.

**Tax loss carryforwards**

Under Italian tax regulations, losses may becarried forward for up to five years, with the exception of thelosses suffered in the first three periods, which have noexpiration date. For non-Italian tax loss carryforwards, theperiod generally averages up to 5 years, with a significantportion having no expiration date. Tax loss carryforwards reverseat a rate of 33% for Italian companies and an average rate of 36%for foreign companies.

Gross tax loss carryforwards of euro 3,413million expire as follows:

| (million        euro) |   | **Domestic** |   | **Foreign** |
|-----------------------|--------|--------------|--------|-------------|
|                  |   |              |   |             |
| 2005                  |   | 31           |   | 22          |
| 2006                  |   | 415          |   | 55          |
| 2007                  |   | 944          |   | 143         |
| 2008                  |   | 275          |   | 190         |
| 2009                  |   | 19           |   | 23          |
| over 2009             |   |         |   | 206         |
| without expiration    |   |         |   | 1,090       |
|                  |   | **1,684**    |   | **1,729**   |
|                  |   |              |   |             |

Tax loss carryforwards expected to be utilizedamount to euro 295 million and relate primarily to foreigncompanies (euro 206 million). The tax effect of such tax losscarryforward is euro 73 million.

Other tax reserves of euro 235 million includeprimarily estimated charges for unsettled tax claims related touncertain application of the tax regulation for the foreigncompanies of the Exploration & Production segment. All taxyears prior to 1999 have been settled, for direct taxes, withItalian tax authorities, by Eni SpA and most of its Italiansubsidiaries. The situation for foreign companies is morecomplex, however, with a few exceptions, all tax years prior to1999 have been settled.

 

**13 Shareholders’ equity**

**Share capital**

Eni SpA had 4,004,424,476 shares (nominal valueeuro 1 each) fully paid-up as of December 31, 2004 (4,002,922,176at December 31, 2003), of which: (i) 2,556,297,973 shares,corresponding to 63.84% are publicly held; (ii) 813,443,277shares, corresponding to 20.31% are held by the Ministry ofEconomy and Finance; (iii) 400,288,388 shares, corresponding to10% are held by Cassa depositi e prestiti SpA; (iv) 234,394,888shares, corresponding to 5.85% are held by Eni SpA. During 20041,502,300 shares subscribed by managers have been issued underthe stock grant plan following the expiration of the plan issuedin 2001 (1,344,750 shares) and the agreed termination ofemployment of some managers (157,550 shares, of which 112,450shares related to the plan issued in 2001 and 45,100 sharesrelated to the plan issued in 2002).

**Reserves**

The legal reserve of Eni SpA representsearnings restricted from the payment of dividends pursuant to theItalian Civil Code (the "Civil Code"). Under the CivilCode, with respect to income of any year, an amount equal to 5%of the net income of Eni SpA, as recorded in Eni SpA’sstatutory financial statements for such year, must be set asideuntil the cumulative legal reserve is equal to one-fifth of thenominal value of Eni SpA’s issued and outstanding sharecapital. Such dividend restriction also applies to each Italiansubsidiary of Eni.

Reserves include amounts received from theMinistry of Economy and Finance to reimburse Eni SpA forprincipal and interest payments on loans obtained and bondsissued in prior years, which under Laws No. 730/1983, No.749/1985 and No. 41/1986, were obligations of the Government.

The "Reserve for the issue of shares inaccordance with Article 2349 of the Italian Civil Code"contains earnings destined to increase share capital under thestock option plan. At December 31, 2004 the number of shares toassign for no consideration is 938,000 shares nominal value 1euro (2,443,050 shares at December 31, 2003).

Exchange rate differences due to thetranslation of financial statements prepared in currencies otherthan euro amounted to euro 697 million, of which euro 500 millionrelated to companies whose functional currency is the US dollar.

As provided by Italian law, dividends may bepaid by Eni SpA only out of retained earnings plus distributablereserves and statutory net income for the current year net of theamount to be allocated to the legal reserve in the subsequentyear.

Approximately euro 23,300 million wasunrestricted as to payment of dividends at December 31, 2004, aportion of which is subject to taxation upon distribution.Deferred tax liabilities for euro 20 million have been recordedin relation to the reserves expected to be distributed.

**Treasury shares**

Treasury shares amount to euro 3,229 million(euro 3,164 million at December 31, 2003) and consist of234,394,888 ordinary shares nominal value euro 1 owned by Eni SpA(230,568,453 ordinary shares nominal value euro 1 as of December31, 2003). Such shares are valued at cost and have beenrepurchased to increase shareholder’s value in accordancewith the decisions of Eni’s shareholders meeting.

**Reconciliationof statutory net income and shareholders’ equity toconsolidated net income and shareholders’ equity**

The statutory financial statements ofsubsidiaries reflect certain tax-driven entries. In addition, EniSpA’s statutory financial statements do not reflect theconsolidation of subsidiary companies.

Adjustments are made in consolidating thestatutory accounts of Eni SpA and subsidiary companies to reflectthe consolidation principles described in Note 2, Summary ofsignificant accounting and reporting policies. In addition,adjustments are made to eliminate the effects of certaintax-driven entries applied by subsidiary companies in theirrespective statutory accounts.

The reconciliation of net income andshareholders’ equity as reported in Eni SpA’s statutoryfinancial statements to those reported in the consolidatedfinancial statements is as follows:

| (million        euro) |   | **Net income** |   | **Shareholders’ equity** |
|-----------------------|--------|----------------|--------|-------------------------------|
|                  |   |                |   |                               |

|   |   | **2002** |   | **2003** |   | **2004** |   | **Dec. 31, 2002** |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-------------------|--------|-------------------|
|   |   |          |   |          |   |          |   |                   |   |                   |   |                   |

| **As recorded in Eni SpA’s financial        statements**                                                                                                                                            |   | **3,880** |   |   | **2,850** |   |   | **4,684** |   |   | **26,498** |   |   | **27,566** |   |   | **29,433** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Treasury        shares                                                                                                                                                                                   |   |      |   |   |      |   |   |      |   |   | (2,838     | )      |   | (3,164     | )      |   | (3,229     | )      |
| Difference between the equity value and result        of consolidated companies and the equity value and result        of consolidated companies as accounted for in Eni SpA        financial statements |   | 1,049     |   |   | 2,118     |   |   | 4,526     |   |   | 7,118      |   |   | 4,413      |   |   | 8,852      |   |
| Consolidation        adjustments:                                                                                                                                                                        |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |
| - difference between cost and underlying value        of equity                                                                                                                                          |   | (83       | )      |   | (169      | )      |   | (161      | )      |   | 1,131      |   |   | 2,873      |   |   | 2,745      |   |
| -        elimination of tax adjustments and compliance    with accounting policies                                                                                                        |   | 1,261     |   |   | 1,453     |   |   | (2,736    | )      |   | (1,218     | )      |   | (1,432     | )      |   | (4,816     | )      |
| - elimination of unrealized intercompany        (profits) losses                                                                                                                                         |   | (1,024    | )      |   | 132       |   |   | (103      | )      |   | (2,777     | )      |   | (2,409     | )      |   | (2,468     | )      |
| - deferred        taxation                                                                                                                                                                               |   | 120       |   |   | (138      | )      |   | 1,318     |   |   | 120        |   |   | 117        |   |   | 1,645      |   |
| - other adjustments                                                                                                                                                                                      |   | 19        |   |   | (92       | )      |   | 360       |   |   | 317        |   |   | 354        |   |   | 304        |   |
|                                                                                                                                                                                                     |   | **5,222** |   |   | **6,154** |   |   | **7,888** |   |   | **28,351** |   |   | **28,318** |   |   | **32,466** |   |
| Minority interest                                                                                                                                                                                        |   | (629      | )      |   | (569      | )      |   | (614      | )      |   | (2,094     | )      |   | (1,622     | )      |   | (2,128     | )      |
| **As        recorded in consolidated financial statements**                                                                                                                                              |   | **4,593** |   |   | **5,585** |   |   | **7,274** |   |   | **26,257** |   |   | **26,696** |   |   | **30,338** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

In 2004, other adjustments of net income ofeuro 360 million include euro 311 million, which is related tothe fact that the gains from the sale to Mediobanca SpA of sharesrepresenting 9.054% of the share capital of Snam Rete Gas SpAwere higher in the consolidated financial statements than in EniSpA financial statements.**14 Net sales from operations**

Net sales from operations are as follows:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| Gross sales from operations                 |   | 61,500     |   |   | 65,362     |   |   | 72,509     |   |
|---------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Change in        contract work in progress  |   | 1,127      |   |   | 1,150      |   |   | 1,108      |   |
| Less:                                       |   |       |   |   |       |   |   |       |   |
| - excise        tax                         |   | (13,139    | )      |   | (13,520    | )      |   | (14,060    | )      |
| - services billed to joint venture partners |   | (1,566     | )      |   | (1,505     | )      |   | (1,175     | )      |
|                                        |   | **47,922** |   |   | **51,487** |   |   | **58,382** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Net sales from operations for the three yearsending December 31, 2004, are netted of euro1,763 million, euro 1,490 million and euro 1,511million, respectively, for buy/sell contracts associated withcrude oil and refined products.**15 Purchases, services and other**

Purchases, services and other include thefollowing:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Production costs-raw, ancillary and consumable        materials and goods        |   | 22,658     |   |   | 24,087     |   |   | 27,489     |   |
|----------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Production        costs-services                                                 |   | 8,614      |   |   | 10,431     |   |   | 10,675     |   |
| Lease, rental and royalty expenses                                               |   | 1,454      |   |   | 1,407      |   |   | 1,600      |   |
| Other        expenses                                                            |   | 1,575      |   |   | 1,433      |   |   | 1,552      |   |
|                                                                             |   | **34,301** |   |   | **37,358** |   |   | **41,316** |   |
| less:                                                                            |   |       |   |   |       |   |   |       |   |
| - services billed to joint venture partners                                      |   | (1,566     | )      |   | (1,505     | )      |   | (1,175     | )      |
| -        capitalized direct costs associated with self-constructed        assets |   | (842       | )      |   | (1,277     | )      |   | (1,010     | )      |
| - repayment of royalties                                                         |   |       |   |   |       |   |   | (23        | )      |
| -        personnel seconded                                                      |   |       |   |   | (10        | )      |   | (16        | )      |
|                                                                             |   | **31,893** |   |   | **34,566** |   |   | **39,092** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Lease, rentals and royalty expenses includeroyalties on hydrocarbons extracted for euro 508 million, euro538 million and euro 744 million in 2002, 2003 and 2004respectively.

Production costs-raw, ancillary and consumablematerials and goods for the three years ending December 31,2004, 2003 and 2002 are netted of euro 1,763 million, euro1,490 million and euro 1,511 million, respectively, forbuy/sell contracts associated with crude oil and refinedproducts.**16 Payroll and related costs**

Payroll and related costs are analyzed asfollows:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Wages and salaries                                                        |   | 2,441     |   |   | 2,412     |   |   | 2,481     |   |
|---------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Social        security contributions                                      |   | 650       |   |   | 693       |   |   | 672       |   |
| Employee termination indemnities                                          |   | 121       |   |   | 126       |   |   | 124       |   |
| Pensions        and similar obligations                                   |   | 15        |   |   | 31        |   |   | 58        |   |
| Other costs                                                               |   | 119       |   |   | 91        |   |   | 99        |   |
|                                                                      |   | **3,346** |   |   | **3,353** |   |   | **3,434** |   |
| Plus:                                                                     |   |      |   |   |      |   |   |      |   |
| -        personnel seconded                                               |   |      |   |   | 10        |   |   | 16        |   |
| Less:                                                                     |   |      |   |   |      |   |   |      |   |
| - revenues        related to personnel costs                              |   | (53       | )      |   | (36       | )      |   | (35       | )      |
| - capitalized direct costs associated with        self-constructed assets |   | (190      | )      |   | (161      | )      |   | (151      | )      |
|                                                                      |   | **3,103** |   |   | **3,166** |   |   | **3,264** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**17 Depreciation, amortization and writedowns**

Depreciation, amortization and writedownsconsist of the following:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Depreciation and amortization:                                |   |      |   |   |      |   |   |      |   |
|---------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| -        intangible assets                                    |   | 1,423     |   |   | 1,266     |   |   | 1,043     |   |
| - fixed assets                                                |   | 3,543     |   |   | 3,447     |   |   | 3,525     |   |
|                                                          |   | **4,966** |   |   | **4,713** |   |   | **4,568** |   |
| Writedowns:                                                   |   |      |   |   |      |   |   |      |   |
| -        intangible assets                                    |   | 95        |   |   | 30        |   |   | 2         |   |
| - fixed assets                                                |   | 447       |   |   | 411       |   |   | 293       |   |
|                                                          |   | **542**   |   |   | **441**   |   |   | **295**   |   |
|                                                          |   | **5,508** |   |   | **5,154** |   |   | **4,863** |   |
| Less:                                                         |   |      |   |   |      |   |   |      |   |
| - direct costs associated with self-constructed        assets |   | (4        | )      |   | (3        | )      |   | (2        | )      |
|                                                          |   | **5,504** |   |   | **5,151** |   |   | **4,861** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**18 Financial income (expense) and exchange differences, net**

Financial expense and exchange differences,net, consist of the following:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Interest and other financial income  |   | 512      |   |   | 436      |   |   | 451     |   |
|--------------------------------------|--------|----------|--------|--------|----------|--------|--------|---------|--------|
| Securities        gains              |   | 44       |   |   | 34       |   |   | 31      |   |
| Interest and other financial expense |   | (737     | )      |   | (710     | )      |   | (729    | )      |
| Exchange        differences, net     |   | (30      | )      |   |     |   |   | (2      | )      |
| Less:                                |   |     |   |   |     |   |   |    |   |
| - interest capitalized               |   | 44       |   |   | 86       |   |   | 154     |   |
|                                 |   | **(167** | **)**  |   | **(154** | **)**  |   | **(95** | **)**  |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

Interest and other financial expense of euro729 million include the charge related to the sale to BritishTelecom Plc of a credit of euro 87 million towards Eni’saffiliate Albacom SpA (euro 62 million).

 

**19 Other income (expense) from investments**

Other income (expense) from investmentsconsists of the following:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Income from equity investments          |   | 178    |   |   | 180     |   |   | 199     |   |
|-----------------------------------------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Dividends                               |   | 32     |   |   | 22      |   |   | 72      |   |
| Gains on disposals                      |   | 55     |   |   | 39      |   |   | 36      |   |
| Other        revaluation of investments |   | 6      |   |   | 9       |   |   | 1       |   |
| Writedown of investments                |   | (222   | )      |   | (272    | )      |   | (81     | )      |
| Other                                   |   | (6     | )      |   | 5       |   |   | 2       |   |
|                                    |   | **43** |   |   | **(17** | **)**  |   | **229** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**20 Extraordinary income (expense)**

Extraordinary income (expense) consists of thefollowing:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| **Extraordinary income**               |   |     |   |   |     |   |   |     |   |
|----------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Gains on        disposals              |   | 257      |   |   | 290      |   |   | 661      |   |
| Other extraordinary income             |   | 112      |   |   | 273      |   |   | 44       |   |
|                                   |   | **369**  |   |   | **563**  |   |   | **705**  |   |
| **Extraordinary expense**              |   |     |   |   |     |   |   |     |   |
| Restructuring        cost:             |   |     |   |   |     |   |   |     |   |
| - provisions for risks                 |   | (157     | )      |   | (248     | )      |   | (601     | )      |
| - cost of        redundancy incentives |   | (114     | )      |   | (116     | )      |   | (54      | )      |
| - writedowns of fixed assets           |   | (55      | )      |   | (66      | )      |   | (20      | )      |
|                                   |   | **(326** | **)**  |   | **(430** | **)**  |   | **(675** | **)**  |
| Other extraordinary expenses           |   | (72      | )      |   | (84      | )      |   | (86      | )      |
|                                   |   | **(398** | **)**  |   | **(514** | **)**  |   | **(761** | **)**  |
|                                   |   | **(29**  | **)**  |   | **49**   |   |   | **(56**  | **)**  |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

**2004 Extraordinary items**

Gains on disposals of euro 661 million concernprimarily: (i) the sale to Mediobanca SpA of shares representing9.054% of the share capital of Snam Rete Gas SpA (euro 519million); (ii) the sale of the oil and LPG products distributioncompany Agip do Brasil SA (euro 94 million); (iii) the sale of abusiness related to the waste disposal in Ravenna (euro 27million); (iv) the sale of service stations in the Refining &Marketing segment (euro 12 million).

Provisions for risks of euro 601 million relateprimarily to: (i) charges for environmental remediation ofSyndial SpA (euro 162 million) and the Refining & Marketingsegment (euro 141 million); (ii) provisions for future risksrelated to the estimated charges due by Eni for the participationin the mutual insurance Oil Insurance Ltd relating to accidentsoccurred in the past 5 years (in particular, to substantialdamages recorded in 2004).This amount will be paid in the next 5years (euro 91 million); (iii) charges for liabilities consideredprobable relating to guarantees given in relation to saletransactions in the Refining & Marketing segment (euro 64million); (iv) provisions for tax proceedings due to a tax claimin Angola (euro 39 million) and restructuring costs (euro 14million) in relation to the rationalization of the presence ofthe Exploration & Production segment in the United Kingdom;(v) future operating costs of inactive sites in Syndial SpA (euro20 million).

Redundancy incentives of euro 54 millionconcern primarily the Refining & Marketing segment (euro 20million), the Gas & Power segment (euro 10 million), thePetrochemicals segment (euro 6 million) and the Corporate andfinancial companies segment (euro 11 million).

Writedowns and losses of euro 20 millionconcern essentially the writedown of the Fornovo plant followingthe reorganization of solvent production activities (euro 18million).

**2003 Extraordinary items**

Gains on disposals relate to the sale ofinvestments, businesses and fixed assets as a result ofrestructuring activities. In particular disposal gains of euro290 million are primarily due to the sale of service stations andland in the Refining & Marketing segment (euro 237 million)and the sale of fixed assets and the sea transport activity inthe Gas & Power segment (euro 52 million).

Other extraordinary income of euro 273 millionrelate primarily to the compensation paid by Edison SpA toSyndial SpA in relation to the Enimont dispute (euro 200million), the release of reserves for excess provisions and thedefinition of legal proceedings (euro 47 million, of which euro38 million relating to Syndial SpA).

Provisions for risks of euro 248 million relateprimarily to charges for environmental remediation of Syndial SpA(euro 82 million) and the Refining & Marketing segment (euro51 million) and to future operating costs of inactive sites inSyndial SpA (euro 48 million).

Redundancy incentives of euro 116 millionconcern primarily the Petrochemical segment (euro 37 million),the Refining & Marketing segment (euro 32 million), the Gas& Power segment (euro 15 million) and the Oilfield Services,Construction and Engineering segments (euro 15 million).

Writedowns and losses of euro 66 millioninclude the loss of concessions for highway service stations(euro 35 million) and the writedown of plants in thePetrochemicals segment (euro 11 million).

**2002 Extraordinary items**

Gains on disposals relate to sales ofinvestments, businesses and fixed assets as a result ofrestructuring activities. In particular gains on disposal of euro257 million are primarily due to: (i) the sale of servicestations in the Refining & Marketing segment in Italy (euro127 million); (ii) the sale of the share capital of Agip NigeriaLtd (euro 87 million); (iii) the sale of fixed assets (euro 28million, of which euro 21 million related to the Gas & Powersegment); (iv) the sale of consolidated businesses (euro 15million).

Other extraordinary income of euro 112 millionrelates primarily to the release of excess reserves, theconclusion of legal proceedings and the collection of receivablespreviously reserved for essentially in the Petrochemicals (euro72 million), Gas & Power (euro 23 million) and Refining &Marketing (euro 13 million) segments.

Provisions for risks of euro 157 million relateprimarily to environmental restoration and to charges forrestructuring and divestments in the Refining & Marketing(euro 79 million) and Petrochemicals (euro 71 million) segments.

Redundancy incentives of euro 114 millionconcern primarily the Petrochemical segment (euro 34 million),the Gas & Power segment (euro 27 million), the Refining &Marketing segment (euro 25 million) and the Oilfield Services,Construction and Engineering segments (euro 14 million).

Writedowns and losses of euro 55 millioninclude the writedown of fixed assets in the Petrochemicalsegment (euro 23 million), the loss on the sale of the Priolorefinery to Erg Raffinerie Mediterranee Srl (euro 22 million) andthe loss on the disposal of consolidated businesses and fixedassets (euro 10 million, of which euro 9 million related to theGas & Power segment).

 

**21 Income taxes**

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

| Current taxes:                                                                      |   |      |   |   |      |   |   |      |   |
|-------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| - Italian        subsidiaries                                                       |   | 1,451     |   |   | 1,583     |   |   | 1,138     |   |
| - foreign subsidiaries operating in the        Exploration & Production segment |   | 2,040     |   |   | 2,296     |   |   | 3,127     |   |
| - other        foreign subsidiaries                                                 |   | 163       |   |   | 201       |   |   | 231       |   |
|                                                                                |   | **3,654** |   |   | **4,080** |   |   | **4,496** |   |
| Less:                                                                               |   |      |   |   |      |   |   |      |   |
| - Tax credits on dividend distributions not        offset with current tax payment  |   |      |   |   |      |   |   | (39       | )      |
|                                                                                |   | **3,654** |   |   | **4,080** |   |   | **4,457** |   |
| Deferred taxes:                                                                     |   |      |   |   |      |   |   |      |   |
| - Italian        subsidiaries                                                       |   | (542      | )      |   | (904      | )      |   | 184       |   |
| - foreign subsidiaries operating in the        Exploration & Production segment |   | 53        |   |   | 67        |   |   | 13        |   |
| - other        foreign subsidiaries                                                 |   | (38       | )      |   | (2        | )      |   | (1        | )      |
|                                                                                |   | **(527**  | **)**  |   | **(839**  | **)**  |   | **196**   |   |
|                                                                                |   | **3,127** |   |   | **3,241** |   |   | **4,653** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Income taxes payable of euro 1,138 millionrelate to Ires (National income tax) for euro 863 million andIrap (Regional income tax) for euro 262 million and foreignincome taxes of euro 13 million.

The effective tax rate is 37.1% compared with astatutory tax rate of 38.5%, calculated by applying a 33% taxrate (Ires) to income before taxes and 4.25% tax rate (Irap) tothe net value of production as provided for by Italian laws.

The differencebetween the statutory and effective tax rate is due to thefollowing factors:

| (%)    |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| **Statutory tax rate**                                            |   | **42.1** |   |   | **39.9** |   |   | **38.5** |   |
|-------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Items        increasing (decreasing) statutory tax rate:          |   |     |   |   |     |   |   |     |   |
| - higher (lower) foreign subsidiaries tax rate                    |   | 2.7      |   |   | 7.4      |   |   | 5.4      |   |
| -        permanent differences                                    |   | 0.8      |   |   | (0.2     | )      |   | (0.9     | )      |
| - revaluation of anticipated taxes                                |   |     |   |   |     |   |   | (1.0     | )      |
| - effect        of the application of Law No. 448/2001            |   |     |   |   | (3.1     | )      |   | (2.0     | )      |
| - effect of the application of Law No. 342/2000                   |   | (4.7     | )      |   | (3.6     | )      |   | (2.1     | )      |
| - tax        benefit due to the application of favorable tax laws |   | (4.9     | )      |   | (1.4     | )      |   |     |   |
| - effect of the budget Law 2004                                   |   |     |   |   | (4.4     | )      |   |     |   |
| Other                                                             |   | 1.5      |   |   | (0.1     | )      |   | (0.8     | )      |
|                                                              |   | **(4.6** | **)**  |   | **(5.4** | **)**  |   | **(1.4** | **)**  |
| **Effective        tax rate**                                     |   | **37.5** |   |   | **34.5** |   |   | **37.1** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Permanent differences in 2004 concern mainlythe gain recorded in the consolidated financial statements due tothe sale of 9.054% of the share capital of Snam Rete Gas SpA(1.4%). The tax benefit due to the application of Law No.448/2001 relates to Stoccaggi Gas Italia SpA that aligned the taxbases of the assets received in 2001 by Eni SpA and Snam SpA tothe conferral value by paying a discounted tax rate of 9%. In2004, Eni recognized deferred tax assets on natural gasinventories, that had been previously depreciated, because theywere considered to not be recoverable with reasonable certaintyin the future, as Law No. 170/1974 did not envision limits forthe renewal of storage concessions. During 2004 Law No. 239/2004was approved, that provided that the holder of a storageconcession can have only two extensions of 10 years, thereforethere are no longer uncertainties about the recovery of deferredtax assets. The recording of deferred tax assets follows theinclusion of Syndial SpA in the Consolidato fiscale nazionale(National Consolidated tax return) that allows the recognition ofdeferred tax assets deriving mainly from reserves forcontingencies and the writedown of fixed assets that were notfiscally deducted. Tax benefits on revaluation of assets,relating to 2003, are due to the application of the budget Lawfor 2004 that allowed companies to revalue the assets withincertain limits made in accordance with tax laws by paying a lowertax rate of 19%.

 

**22 Earnings per share**

Earnings per share is calculated by dividing"Net income" by the weighted-average number of sharesissued and outstanding during the year, excluding treasuryshares.

In order to compare earnings per share in theyears presented, the number of shares issued through stock grantsmade in 2003 and 2004 has been added to the number of sharesoutstanding in the years 2002 and 2003. Based on this criterion,the number of shares outstanding was 3,828,447,971, 3,779,938,557and 3,771,692,584 in the years 2002, 2003 and 2004, respectively.

The dilutive effect of potential ordinaryshares on earnings per share, when stock options and stockgrants, are converted into ordinary shares, is not material.

 

**23 Commitments and contingencies**

**Derivative financial instruments**

Eni operates internationally in the oil andnatural gas, electricity generation, petrochemicals and oilfieldservices, construction and engineering businesses and is subjectto exposure to market risks from changes in interest rates,foreign exchange rates and commodity prices.

Derivative financial instruments are utilizedby Eni to reduce these risks, as explained below.

Eni’s treasury activities are managedprimarily by two captive finance companies operating in theItalian and international financial markets. Eni’s operatingsubsidiaries are required to reduce foreign exchange rate risk toa minimum level by coordinating their operations with suchfinance companies.

Eni’s Board of Directors has defined apolicy that requires the Treasury Department of Eni SpA todetermine the maximum level of foreign exchange rate and interestrate risks that can be assumed by Eni’s finance companies.Such policy also defines the eligible counterparties inderivative transactions. As far as interest rate and foreignexchange rate risks are concerned, the calculation andmeasurement techniques followed by Eni’s finance companiesare in accordance with established banking standards (suchstandards are established by the Basel Committee). However, thetolerable level of risk adopted by such companies is moreconservative than that defined by the Basel Committee. EniSpA’s Treasury Department is responsible for monitoringcompliance with Eni’s policy, as well as the correlationbetween the indicators adopted for measuring of the tolerablerisk level, the portfolio of financial instruments and marketconditions.

Eni does not enter into derivative transactionson a speculative basis.

*(a) Notional amounts and credit exposures ofderivatives*

The notional value of a derivative is thecontractual amount on the basis of which the differentials areexchanged; this amount can be expressed either on a value basisor on a physical quantities basis (such as barrels, tonnes,etc.). The amounts expressed in foreign currency are convertedinto euro applying the exchange rate at year-end.

The notional amounts of derivatives summarizedin the sections that follow do not represent amounts exchanged bythe parties and, thus, are not a measure of the credit exposureof Eni. The amounts exchanged are calculated on the basis of thenotional amounts and the other terms of the derivatives, whichrelate to interest rates, exchange rates and commodity prices.Therefore, the credit exposure of interest rate, foreign exchangeand commodity contracts is represented by the fair value ofcontracts with a positive fair value at year-end, reduced by theeffects of master netting agreements. Eni’s Board ofDirectors has approved policies which provide guidelines relatedto the criteria of eligible counterparties in derivativetransactions and permissible financing investments, includingpurchases of securities. Although Eni is exposed tocredit-related losses in the event of non-performance bycounterparties to derivative financial instruments, it does notexpect any counterparties to fail to meet their obligations giventhe high credit standings of such counterparties.

*(b) Interest rate risk management*

Eni enters into various types of interest ratecontracts in managing its interest rate risk, as indicated in thefollowing table:

| (million        euro)        |   | **Dec. 31, 2003 Notional amount** |   | **Dec. 31, 2004 Notional amount** |
|------------------------------|--------|-----------------------------------|--------|-----------------------------------|
|                         |   |                                   |   |                                   |
| Interest rate swaps          |   | 5,690                             |   | 5,663                             |
| Interest        rate collars |   | 74                                |   | 33                                |
|                         |   | **5,764**                         |   | **5,696**                         |
|                         |   |                                   |   |                                   |

Eni enters into interest rate derivatives,particularly interest rate swaps, to alter interest rateexposures arising from mismatches between assets and liabilities,to lower funding costs and to diversify sources of funding. Underinterest rate swaps, Eni agrees with other parties to exchange,at specified intervals, the difference between interest amountscalculated by reference to an agreed notional principal amountand agreed fixed or floating interest rates.

The following table indicates the types ofinterest rate swaps used and their weighted-average interestrates and maturities. Average variable rates are based on ratesat year-end and may change significantly, affecting future cashflows.

The comparison between weighted-average receiverate and weighted-average pay rate does not represent the resultof derivatives, such result is calculated on the basis of theunderlying hedged operation.

|                                                       |           |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|------------------------------------------------------------|----------------|--------|-------------------|--------|-------------------|
|                                                       |           |   |                   |   |                   |
| Receive-fixed/Pay-floating swaps-notional amount           | (million euro) |   | 867               |   | 745               |
| - weighted        average receive rate                     | (%)            |   | 6.03              |   | 5.78              |
| - weighted average pay rate                                | (%)            |   | 2.26              |   | 3.19              |
| - weighted        average maturity                         | (years)        |   | 2.97              |   | 2.26              |
| Receive-floating/Pay-floating swaps-notional        amount | (million euro) |   | 1,941             |   | 1,989             |
| - weighted        average receive rate                     | (%)            |   | 2.25              |   | 2.32              |
| - weighted average pay rate                                | (%)            |   | 2.91              |   | 3.00              |
| - weighted        average maturity                         | (years)        |   | 3.38              |   | 2.38              |
| Pay-fixed/Receive-floating swaps-notional amount           | (million euro) |   | 2,882             |   | 2,929             |
| - weighted        average pay rate                         | (%)            |   | 4.31              |   | 4.18              |
| - weighted average receive rate                            | (%)            |   | 1.77              |   | 2.25              |
| - weighted        average maturity                         | (years)        |   | 6.64              |   | 6.37              |
|                                                       |           |   |                   |   |                   |

Eni uses interest rate collars to manage itsinterest rate risk. An interest rate collar is a combination ofoptions that enable a predetermined interest rate band to belocked in. Eni also uses zero-cost collars that do not requirepayment of an option premium. At year-end 2004 Eni holds a singleinterest rate collar contract, that will expire on June 30, 2006.

*(c) Foreign exchange risk management*

Eni enters into various types of foreignexchange contracts in managing its foreign exchange risk, asindicated in the following table:

| (million        euro)      |   | **Dec. 31, 2003 Notional amount** |   | **Dec. 31, 2004 Notional amount** |
|----------------------------|--------|-----------------------------------|--------|-----------------------------------|
|                       |   |                                   |   |                                   |
| Forward exchange contracts |   | 6,165                             |   | 8,501                             |
| Purchased        options   |   | 550                               |   | 91                                |
|                       |   | **6,715**                         |   | **8,592**                         |
|                       |   |                                   |   |                                   |

Eni uses forward exchange contracts primarilyto hedge existing receivables and payables, including depositsand borrowings denominated in currency other than euro. Some ofthe contracts involve the exchange of currencies other than thelocal currency, according to the needs of foreign consolidatedsubsidiaries. Both buy and sell amounts of such contracts areindicated at the notional value. The term of forward exchangecontracts is normally not longer than one year. The increase ofeuro 2,336 million in forward exchange contracts is primarily dueto Enifin SpA’s transactions in order to hedge financialshort-term payables of Eni Coordination Center SA (euro 1,785million).

Eni generally uses a combination of currencyoptions that enable a predetermined risk rate band, related toexpenses denominated in currencies other than euro, to be lockedin. Currency options, purchased in the over-the-counter marketfor a premium, provide Eni with the right to buy or sell anagreed amount of currency at a specified exchange rate at the endof a specified period. The decrease of euro 459 million isessentially due to the expiration of options of the OilfieldServices, Construction and Engineering segment (euro 296 million)and Gas & Power segment (euro 144 million).

The tablebelow summarizes, by major currency, the contractual amounts ofEni’s forward exchange and option contracts.

| (million        euro) | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|-------------------|--------|-------------------|
|                  |                   |   |                   |

|                 | **Buy**   |   | **Sell**  |   | **Buy**   |   | **Sell**  |
|----------------------|-----------|--------|-----------|--------|-----------|--------|-----------|
|                 |           |   |           |   |           |   |           |
| US dollar            | 1,019     |   | 2,955     |   | 622       |   | 4,024     |
| British        pound | 1,432     |   | 342       |   | 3,065     |   | 107       |
| Norwegian kroner     | 140       |   | 299       |   | 267       |   | 162       |
| Euro                 | 100       |   | 126       |   | 71        |   | 113       |
| Japanese yen         | 99        |   | 11        |   | 97        |   | 2         |
| Swiss        franc   | 177       |   | 1         |   | 51        |   | 1         |
| Other                | 3         |   | 11        |   | 7         |   | 3         |
|                 | **2,970** |   | **3,745** |   | **4,180** |   | **4,412** |

|   |  |   |  |   |  |   |  |
|--------|--|--------|--|--------|--|--------|--|

 

*(d) Commodity price risk management*

Exchange traded crude oil and petroleum productderivative instruments are used to minimize the commodity pricevolatility.

In natural gas trading activity, Eni usesexchange traded crude oil forward contracts with the aim ofhedging the risk related to natural gas at fixed prices undersupply contracts. The purchase price of such hedging instrumentsis determined on the basis of a price basket with an indexationto petroleum products in the international markets.

In refining and marketing activities ofpetroleum products, Eni uses derivative instruments with the aimof reducing the risk of marketing activities related to theuncertainty of market prices in the period between the purchaseof crude oil, the refining and the trade of finished products.

The expiration date of contracts is less than 1year.

The table below summarizes trade derivativecontracts at December 31, 2003 and 2004.

|   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|-------------------|--------|-------------------|
|   |                   |   |                   |

|   | **Buy** |   | **Sell** |   | **Buy** |   | **Sell** |
|--------|---------|--------|----------|--------|---------|--------|----------|
|   |         |   |          |   |         |   |          |

| Crudes                   | (barrels)      |   | 6,629,544 |   | 1,146,000 |   | 1,497,121 |   | 2,949,000 |
|--------------------------|----------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Oil        products      | (tonnes)       |   | 159,849   |   | 381,200   |   | 434,150   |   | 287,411   |
| Oil products             | (gallons)      |   |      |   | 104,580   |   |      |   | 4,620     |
| Electrical        energy | (megawatthour) |   |      |   |      |   | 804,507   |   |      |

|   |  |   |  |   |  |   |  |
|--------|--|--------|--|--------|--|--------|--|

*(e) Sales of government bonds*

Eni sold Italian Government bonds to investors,primarily employees, and simultaneously entered into interestrate swaps with such investors wherein Eni receives the rate ofinterest on such Italian Government bonds and pays a floatingrate of interest linked to Euribor (Europe Interbank OfferedRate). Such investors may sell their securities back to Eni atany time for par value plus related interest with thesimultaneous cancellation of the related swaps. Eni also enteredinto an interest rate swap with a financial institution whereinit receives a floating rate which is considered more favorablefor its floating rate commitment to its investors. At December31, 2003 and 2004, euro 181 million and euro 183 million,respectively, worth of such securities remained in the hands ofemployees. For accounting purposes, this transaction was treatedas a sale of the bonds with gains recognized in current income.

**Guarantees**

Guarantees have been given by Eni to thirdparties. At December 31, 2003 and 2004, these guarantees were asfollows:

| (million        euro) | **At Dec. 31, 2003** |   | **At Dec. 31, 2004** |
|-----------------------|----------------------|--------|----------------------|
|                  |                      |   |                      |

|                        | **Unsecured guarantees** |   | **Other guarantees** |   | **Secured guarantees** |   | **Total**  |   | **Unsecured guarantees** |   | **Other guarantees** |   | **Secured guarantees** |   | **Total**  |
|-----------------------------|--------------------------|--------|----------------------|--------|------------------------|--------|------------|--------|--------------------------|--------|----------------------|--------|------------------------|--------|------------|
|                        |                          |   |                      |   |                        |   |            |   |                          |   |                      |   |                        |   |            |
| Unconsolidated subsidiaries | 7                        |   | 302                  |   |                   |   | 309        |   | 7                        |   | 532                  |   |                   |   | 539        |
| Affiliated        companies | 30                       |   | 1,685                |   | 77                     |   | 1,792      |   | 72                       |   | 1,834                |   | 40                     |   | 1,946      |
| Consolidated companies      | 4,894                    |   | 6,090                |   |                   |   | 10,984     |   | 4,894                    |   | 9,715                |   |                   |   | 14,609     |
| Others                      |                     |   | 198                  |   |                   |   | 198        |   | 5                        |   | 169                  |   |                   |   | 174        |
|                        | **4,931**                |   | **8,275**            |   | **77**                 |   | **13,283** |   | **4,978**                |   | **12,250**           |   | **40**                 |   | **17,268** |
|                        |                          |   |                      |   |                        |   |            |   |                          |   |                      |   |                        |   |            |

Unsecured guarantees and other guarantees givenon behalf of unconsolidated subsidiaries and affiliated companiesof euro 2,485 million (euro 2,101 million as of December 31,2003) consist primarily of: (i) unsecured guarantees, letters ofpatronage and other guarantees given to banks in relation toloans and lines of credit received for euro 1,699 million (euro1,473 million at December 31, 2003), of which euro 731 millionrelated to a contract released by Snam SpA (now merged in EniSpA) on behalf of Blue Stream Pipeline Co BV to a consortium offinancing institutions (euro 686 million as of December 31, 2003)and euro 404 million relating to unsecured guarantees given byEnifin SpA on behalf of Spanish Egyptian Gas Co SAE, a companycontrolled by Unión Fenosa Gas SA, (euro 238 million at December31, 2003); (ii) unsecured guarantees and letters of patronagegiven to customers in relation to contractual performance and bidbonds for euro 214 million (euro 242 million as of December 31,2003); (iii) the fulfilment of obligations related to hydrocarbonexploration activities given on behalf of Eni Middle East BVagainst the contractual commitments with the Government of theKingdom of Saudi Arabia for euro 367 million; (iv) performanceguarantees of euro 111 million (euro 104 million at December 31,2003) given on behalf of Unión Fenosa SA and Unión Fenosa GasSA (Eni’s interest 50%). These guarantees were given inrelation to contractual commitments related to the results ofoperations of Unión Fenosa Gas SA; (v) unsecured guaranteesgiven to third parties in relation to the construction of ahydrocarbon treatment plant in Libya for euro 17 million (euro160 million at December 31, 2003). The decrease of euro 143million regards primarily the partial extinguishment ofguarantees; (vi) secured guarantees of euro 40 million (euro 77million at December 31, 2003), relate to mortgages, liens andprivileges granted to banks in connection with loans toaffiliated and consolidated companies. As of December 31, 2004,the underlying commitment covered by such guarantees was euro1,825 million (euro 1,959 million as of December 31, 2003).

Guarantees given on behalf of consolidatedcompanies of euro 14,609 million (euro 10,984 million as ofDecember 31, 2003) consist primarily of: (i) a guarantee of euro4,894 million (the same amount as of December 2003) given by EniSpA to Treno Alta Velocità - TAV SpA for the proper and timelycompletion of a project relating to the Milano-Bologna train linkby the CEPAV (Consorzio Eni per l’Alta Velocità) Unoconsortium; consortium members gave Eni liability of suretyletters and bank guarantees amounting to 10% of their respectiveportion of the work; (ii) parent company guarantees givenrelating to contractual commitments for hydrocarbon explorationactivities for euro 4,601 million determined on the basis ofinvestment plans (euro 1,186 million at December 31, 2003). Theincrease of euro 3,415 million was primarily due to an increasein the guarantees given by Eni SpA on behalf of Agip Caspian SeaBV relating to contractual commitments for hydrocarbonexploration activities in the Republic of Kazakhstan for euro3,329 million; (iii) guarantees given to third parties relatingto bid bonds and performance bonds for euro 2,977 million (euro2,841 million as of December 31, 2003); (iv) VAT recoverable fromtax authorities for euro 1,196 million (euro 1,113 million as ofDecember 31, 2003); (v) insurance risk for euro 396 millionreinsured by Eni (euro 379 million as of December 31, 2003). Theunderlying commitment covered by such guarantees was euro 9,882million as of December 31, 2004 (euro 7,930 million as ofDecember 31, 2003).

Other guarantees given to third parties foreuro 174 million (euro 198 million as of December 31, 2003)regard essentially: (i) guarantees given by Eni to banks andother financing institutions in relation to loans and lines ofcredit on behalf of subsidiaries and companies sold for euro 95million (euro 96 million as of December 31, 2003); (ii)performance guarantees given on the behalf of Unión Fenosa SAand Unión Fenosa Inversiones SA in relation to contractualcommitments related to the results of operations of subsidiariesof Unión Fenosa Gas SA for euro 41 million (euro 73 million atDecember 31, 2003). The underlying commitment covered by suchguarantees was euro 76 million as of December 31, 2004 (euro 97million as of December 31, 2003).

**Other commitments**

Other commitments and potential risks consistprimarily of:

| - |   | Obligations        for purchase and sale of fixed assets of euro 324 million        (euro 355 million as of December 31, 2003) related to        marketable securities for euro 183 million (euro 181        million as of December 31, 2003) and investments for euro        141 million (euro 174 million as of December 31, 2003).        In particular, obligations related to marketable        securities concerned the placement on the market of        securities managed by Sofid Sim SpA. This company sold        Italian Government bonds to investors, primarily        employees, and simultaneously entered into interest rate        swaps with such investors wherein it receives the rate of        interest on such Italian Government bonds and pays a        floating rate of interest linked to Euribor. Such        investors may sell their securities back to Sofid Sim SpA        at any time for par value plus related interest with the        simultaneous cancellation of the related swaps. Against        the commitment related to interest rate swaps Sofid Sim        receives a variable rate more profitable than the one        renown by the shareholders. Obligations relating to        investments concerned primarily the concession to Erg SpA        of a call option for the purchase of a 28% share of Erg        Raffinerie Mediterranee SpA for euro 100 million (the        same amount as of December 31, 2003). |
|---|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | Commitments        of euro 319 million (euro 379 million as of December 31,        2003) primarily related to: (i) a memorandum of intent        signed with the Basilicata Region whereby Eni has agreed        to invest, also on account of Shell Italia E&P SpA,        euro 206 million in the future in connection with        Eni’s development plan of oil fields in Val        d’Agri (euro 217 million as of December 31, 2003);        (ii) agreements for the area of Porto Marghera between        Syndial SpA and various government entities, employee and        trade groups whereby Syndial SpA has committed to invest        approximately euro 90 million (euro 149 million as of        December 31, 2003) in order to further develop the        chemical segment and protect the environment with respect        to the Porto Marghera plant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| - |   | Risks of euro        1,151 million (euro 902 million as of December 31, 2003)        are primarily associated with: (i) contractual assurances        given to acquirors of certain investments and businesses        of Eni for euro 406 million (euro 400 million as of        December 31, 2003); (ii) potential risks associated with        the value of assets of third parties under the custody of        Eni for euro 551 million (euro 317 million as of December        31, 2003). The euro 234 million increase regards        primarily the increase in natural gas volumes stored by        Stoccaggi Gas Italia SpA (euro 236 million); (iii)        environmental damages for euro 137 million (the same        amount as of December 31, 2003); (iv) tax proceedings for        euro 37 million (euro 18 million as of December 31,        2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| - |   | Non-quantifiable        risks related to contractual assurances given to        acquirors of investments against certain unforeseeable        liabilities attributable to tax, state welfare        contributions and environmental matters applicable to        periods during which such investments were owned by Eni.        Eni believes such matters will not have a material        adverse effect on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

**Legal proceedings**

Eni is a party to a number of civil actions andadministrative proceedings arising in the ordinary course ofbusiness. Based on information available to date, and takingaccount of the existing risk reserves, Eni believes that theforegoing will not have an adverse effect on Eni’sconsolidated financial statements.

Following is a description of the mostsignificant proceedings currently pending; unless otherwiseindicated below, no provisions have been made for these legalproceedings as Eni believes that negative outcomes are notprobable or because the amount of the provision is not reasonablyquantifiable.

**Environment**

*Eni SpA*

In 1997, Grifil SpA summoned AgipPetroli SpA(merged into Eni SpA in 2002) before the Court of La Spezia.Grifil requested payment for the remediation of a polluted landparcel part of the La Spezia refinery (which was closed in 1985),sold to it in 1996 by Italiana Petroli SpA and later merged intoAgipPetroli SpA. The claims for these damages amount to euro 103million. At the end of 2002 Grifil and AgipPetroli reached anagreement under the terms of which AgipPetroli had to pay half ofthe clean-up costs, the total amount of which was set by anindependent appraisal at euro 19 million, with AgipPetroli’sshare corresponding to a maximum of euro 9.5 million, Grifil inturn had the obligation to remediate the polluted soil and torenounce any claims against Eni. Grifil did not fulfill itsobligations to remediate the polluted soil; however, maintainingthe possibility of precautionary requests and claims againstGrifil, Eni decided to remediate the polluted soil with theassistance of a company interested in developing the parcel ofland. The first action promoted by Grifil before the Court of LaSpezia is still pending. On January 7, 2004 the Municipality ofLa Spezia put Eni in possession of the area and from that dateEni started remediation works paying the relevant costs on itsown. Eni requested the conservative seizure of Grifil’s landparcel, up to a maximum value of euro 19 million. With twoadministrative measures, on December 2, 2003 and January 13, 2004respectively, the Court of Genova declared the right of Enilegitimate, based on the sale contract stipulated betweenItaliana Petroli and Grifil, to claim the payment of all clean-upexpenses that Eni will incur as Grifil did not fulfil itsobligation. The judge closed the inquiry phase and stated thatthe judgment can be brought to an end. The final decision isexpected for July 2005. As for the value attributable to theconservative seizure of Grifil’s land parcel (up to a valueof euro 19 million), the Court requested Eni to file thecontracts for the remediation work with the court, in which theamounts paid are recognized. The contract with an internationalcompany specializing in remediation was signed on April 15, 2004and immediately presented to the Court. In order to preserveGrifil’s asset as a way to recover its credit versus Grifil,Eni, which is paying for the remediation works, also filed anordinary revocation of title, so that, while waiting for theCourt’s ruling, Grifil will not be able to sell the landparcel to third parties. Recently, this international companyspecializing in remediation has updated the cost to be incurredfor the remediation of this land parcel on the basis of newinformation regarding the level of soil pollution. This newestimate amounts to euro 45 million, for which a relevant chargehas been accrued to the risk reserve.

In 1999, the public prosecutor of Gela startedan investigation in order to ascertain alleged soil and seapollution caused by the discharge of pollutants by Eni's Gelarefinery. In November 2002, "Italia Nostra" and theassociation "Amici della Terra" filed civil claimsrelated to this proceeding and requested the payment of damageclaims for a total of euro 15,050 million. In July 2003, therelevant Court decided for the transmission of the inquiries tothe public prosecutor, recognizing a violation of Article 440 ofthe penal code (water and food substances corruption). Thepreliminary hearing was carried out on May 24, 2005. The nexthearing is scheduled on October 18, 2005.

In 2000, the public prosecutor of Gela startedan investigation on alleged prohibited emissions from therefinery of Gela, which are purported to have had negativeeffects on the health of a number of citizens of Gela, and on alack of declaration of such emissions in violation ofPresidential Decree No. 203 of 1988. The investigation ended withan action for events occurred from 1997. The Municipality ofGela, the Province of Caltanissetta and others filed civil claimsin this proceeding and requested the payment of compensatorydamages for a total of euro 878 million. The judgment of firstdegree before the Court of Gela is pending.

In 2002, the public prosecutor of Gela startedan investigation in order to ascertain alleged pollution causedby emissions of the Gela plant, owned by Polimeri Europa SpA,Syndial SpA (former EniChem SpA) and Raffineria di Gela SpA. Aninquiry phase was closed on July 2, 2003. Some local publicentities, environmental NGOs and landowners will act as injuredparty. On January 17, 2005, a second inquiry phase commenced in2003 to ascertain which sort of emissions had eventually producedthe alleged pollution caused by the refinery of Gela, wascompleted.

In March 2002 the public prosecutor of Siracusastarted an investigation concerning the activity of the refineryof Priolo for intentional pollution of water used for humanconsumption and requested a technical opinion, not yet concluded,to ascertain alleged infiltrations of refinery products into thedeep water-bearing stratum used for human consumption purposes inthe Priolo area. The proceeding is still in the preliminaryinvestigation phase. In consideration of the complexity of theinvestigation, a qualified company has been given the task toverify the cause, the origin and the extension of theinfiltration. For protective purposes, actions have been takento: (i) create safety measures and clean-up all of the pollutedarea; (ii) reallocate wells for drinking water in an area fartherfrom and higher than the industrial site; and (iii) install apurification system for drinkable water. With a decision of June1, 2004 the seizure was lifted on the storage tanks that had beenseized on April 17, 2003, except for five storage tanks that arestill under seizure.

In June 2002, in connection with a fire in therefinery of Gela, a penal investigation began concerning arson,environmental crimes and crimes against natural heritage. On May12, 2004 the first hearing was held for an immediate decision.The proceeding is pending.

In 2002, the public prosecutor of Gela starteda penal investigation concerning the refinery of Gela toascertain the quality of ground water in the area of therefinery. On October 27, 2003 the prosecutor asked to ascertainthe state of the refinery’s storage tanks and the presenceof infiltrations of refinery products into the deep water-bearingstratum, due to a breakage in some tanks. The investigationconcerns the environmental rules about the pollution of water andsoil and illegal disposal of liquid and solid waste materials.With a decision of November 3, 2003, the Court for preliminaryinvestigation, in agreement with a request of the publicprosecutor of Gela, had already ordered the preventive seizure of92 storage tanks. The decree stopped activity at the refinery ofGela in November 17, 2003 following the inquiry phase and manyinvestigations, inspections and analyses were made by expertsappointed by the judge for the preliminary investigation. Theseexperts declared there had been no reasonable loss of productsfrom storage tanks. Thereafter, 42 storage tanks were reopenedand this allowed activity at the facility to restart of the onJanuary 19, 2004. Following this, another 38 tanks were reopened,12 remained under seizure at December 31, 2004.

In relation to the investigations concerning asubsidence phenomenon allegedly caused by hydrocarbonexploration, on May 21, 2004, following the decision of the Courtof Rovigo, the Nucleo Operativo Ecologico dei Carabinieri ofVenice placed under preliminary seizure the Dosso degli Angeli,Angela/Angelina - Ravenna Mare Sud fields and the related wellsand platforms. On June 10, 2004 the Court responded to the claimfiled by Eni and lifted the seizure of the Angela/Angelina -Ravenna Mare Sud fields and related wells and platforms. On March10, 2005, the Supreme Court confirmed the decision of the Courtof Rovigo lifting the seizure on Eni’s fields, thusrejecting the appeal presented by the Public Prosecutor. OnFebruary 5, 2003, a seizure had already been applied to theNaomi/Pandora platform, the Naomi 4 Dir, Naomi 2 Dir and 3 Dir -Pandora 2 Dir wells, and the underwater pipeline for thetransportation of gas to the Casalborsetti facility. Eni believesit has always acted in full compliance with existing laws underthe required authorizations. Taking account of the observationsof the consultants of the Court of Rovigo on which the PublicProsecutor based his case, Eni constituted an independent andinterdisciplinary scientific commission, chaired by Prof. EnzoBoschi, professor of seismology at the Università degli Studi diBologna and chairman of the Istituto nazionale di geofisica evulcanologia, composed of prominent and highly qualifiedinternational experts of subsidence caused by hydrocarbonexploration, with the aim of verifying the size and the effectsand any appropriate actions to reduce or to neutralize anysubsidence phenomenon in the Ravenna and North Adriatic area bothon land and in the sea. The commission produced a study whichdenies the possibility for any risk for human health and fordamage to the environment. It also states that no example isknown anywhere in the world of accidents that caused harm to thepublic safety caused by subsidence induced by hydrocarbonproduction. The study also shows that Eni employs the mostadvanced techniques for the monitoring, measuring and control ofthe soil.

*EniPower SpA*

In autumn 2004 the Public Prosecutor of Rovigostarted an investigation for alleged crimes related tounauthorized waste management activities in Loreo. Samples of thesoil taken from Loreo and from EniPower’s site in Mantovaare currently being examined.

*Polimeri Europa SpA*

In 2002, the public prosecutor of Gela starteda criminal action in order to ascertain alleged illegallydischarge of effluents produced by the Gela plant, owned byPolimeri Europa SpA, Syndial SpA (former EniChem SpA) andRaffineria di Gela SpA. In January 2005, the Court forpreliminary investigation, on the basis of the request of thepublic prosecutor, resolved to close this proceeding against allthe defendants.

Before the Court of Gela two criminal actionstook place, one in relation to the activity of the F3001 furnaceand the other concerning the ACN plant (disposal of FOK residue).In both cases the accused were found guilty. For the proceedingconcerning the F3001 furnace the sentence was passed to the civilcourt for the quantification of the damage to be paid to theCaltanissetta Province. Eni appealed the Court’s decision.

*Syndial SpA(former EniChem SpA)*

In 1992, the Ministry of Environment summonedEniChem SpA and Montecatini SpA before the Court of Brescia. TheMinistry requested, primarily, to require environmentalremediation for the alleged pollution caused by the Mantova plantfrom 1976 until 1990, and provisionally, in case there was nopossibility to remediate, require them to pay environmentaldamages. The amount is going to be determined during theproceeding, but it will not be lower than euro 136 million, ordetermined by the judge as compensatory liquidation. EniChemacquired the Mantova plant in June 1989, as part of the Enimontdeal. Edison SpA must hold Eni harmless or pay compensatorydamage for any damage caused to third parties by plant operationsbefore Montedison’s sale, even if the damage occurred later.

In 1997, an action was commenced before theCourt of Venice concerning the criminal charges brought by theVenice public prosecutor for alleged mismanagement of the PortoMarghera plant starting in the 1970s until 1995 and for thealleged pollution and health damage resulting therefrom. OnNovember 2, 2001 the Court of Venice acquitted all defendants.The appeal against the decision was presented by the publicprosecutor, the State Attorney on behalf of the Ministry ofEnvironment and the Council of Ministers, 5 public entities, 12associations and other entities and 48 individual persons. OnDecember 15, 2004 the Venice Court of Appeals confirmed thepreceding judgment, changing only some marginal parts. Asconcerns some defendants of Eni and Syndial, the Court of Appealsdecided not to proceed due to the statute of limitations for somecrimes, while it confirmed the preceding judgment for the othermatters. All plaintiffs appealed this decision before the courtof final instance. Eni recorded a provision to the risk reservefor this legal proceeding. 

In 2000, the Public Prosecutor of Brindisistarted a criminal action against 68 persons who are employees orformer employees of various companies that owned and managedplants for the manufacture of dichloroethane, vinyl chloridemonomer and vinyl polychloride from the early 1960s to date, someof which were managed by EniChem from 1983 to 1993. At the end ofthe preliminary investigation phase, the Public Prosecutor askedthe dismissal of the case in respect of the employees and themanagers of EniChem. The judge for preliminary investigation hasnot yet given his opinion. The relevant hearing is set forSeptember 23, 2005. 

On December 18, 2002 EniChem SpA, jointly withAmbiente SpA and European Vinyls Corporation Italia SpA, wassummoned before the Court of Venice by the province of Venice.The province requested compensation for environmental damages,not quantified, caused to the lagoon of Venice by the PortoMarghera plants, which were already the subject of two previousproceedings against employees and managers. In a related action,European Vinyls Corporation Italia presented an action forrecourse against EniChem and Ambiente. The requests for damage ofthe Province of Venice and that of EVC Italia to EniChem andAmbiente have not been quantified. In 2004, the proceedingscontinued with both parties presenting memoranda; the nexthearing is set on December 9, 2005.

On January 16, 2003 the Court of Siracusaissued personal cautionary measures against some employees ofEniChem SpA and Polimeri Europa SpA. They are accused of illicitmanagement relating to the production, disposal and treatment ofliquid and solid waste materials and of obtaining illicit income.Polimeri Europa and EniChem, as injured parties, named theirdefense attorneys. The collection of evidence effected before thehearing starts in Court has been concluded and preliminaryinvestigations have ended with the confirmation of accusations.

Press reports have suggested that the PublicProsecutor of Siracusa has started preliminary investigations onalleged malformations related to the ingestion of mercurycontaminated sea food.

On April 14, 2003 the President of the RegionalCouncil of Calabria, as Delegated Commissioner for EnvironmentalEmergency in the Calabria Region, started an action againstEniChem SpA related to environmental damages for about euro 129million and to financial and non-financial damages for euro 250million (plus interest and compensation) allegedly caused byPertusola Sud SpA (merged into EniChem) in the area of Crotone.On June 6, 2003 EniChem appeared before the court and requestedthe rejection of the damages and, as counterclaim, the payment ofthe total costs for the remediation works already underway. Therelevant hearing is set on July 5, 2005 in order to allow partiesto submit memoranda. The Province of Crotone entered theproceeding, claiming environmental damages for euro 300 million.Syndial was notified on October 21, 2004 of the request of theCalabria Region to appear before the Court of Milan in order toobtain a preliminary damage payment, in anticipation of theexpiration of the special office for managing emergency events inCalabria. The Region requested payments for over euro 800million. The first hearing is set on July 5, 2005.

In March 2004, Sitindustrie SpA, which in 1996purchased a plant in Paderno Dugnano from Enirisorse (now mergedinto Syndial SpA), summoned Syndial SpA before the Court ofMilan, requesting to establish the responsibility of Syndial SpAin the alleged pollution of soils around the plant and to requireit to pay environmental damages necessary for remediation.Syndial opposed the claim based on an absence of the right ofaction of the plaintiff. The judge has not yet decided onSyndial’s opposition.

In October 2004, Sitindustrie SpA started ananalogous proceeding against Syndial concerning the plant for themanufacture of products in copper and copper alloy at PieveVergonte. The relevant hearing is set on November 10, 2005;parties are allowed to submit memoranda prior to the hearing.

In May 2003 the Minister of the Environmentsummoned Syndial SpA before the Court of Turin and requestedenvironmental damages for euro 2,396 million in relation toalleged DDT pollution in the Lake Maggiore caused by the PieveVergonte plant. On September 23, 2004 the judge summoned theparties and defined the date for the submission of memoranda. Atthe hearing of March 25, 2005 the judge acquired the memoranda ofboth parties; the decision is still pending.

The municipality of Carrara started an actionat the Court of Genova requesting to Syndial SpA the remediationand reestablishment of the previous environmental conditions atthe Avenza site and the payment of environmental damage. Thisrequest is related to an accident occurred in 1984, as aconsequence of which EniChem Agricoltura SpA (later merged intoSyndial SpA), at the time owner of the site, had carried outsafety and remediation works. The Ministry of the Environmentjoined the action and requested the environmental damage payment– from a minimum of euro 53.5 million to a maximum of euro78.5 million – to be broken down among the various companiesthat managed the plant in the past. Previous managers includeSyndial, called into the action as a guarantor, Rumianca SpA, SirFinanziaria SpA and Sogemo SpA. A technical survey requested bythe Court is underway in order to ascertain the actualenvironmental damage to the site.

**Tax Proceedings**

*Eni SpA*

With a decree dated December 6, 2000 theLombardia Region decided that natural gas used for electricitygeneration is subject to an additional regional excise tax inrelation to which Snam SpA (merged into Eni SpA in 2002) willsubstitute for the tax authorities in its collection fromcustomers. Given interpretive uncertainties, the same decreeprovides the terms within which distributing companies areexpected to pay this excise tax without paying any penalty. SnamSpA and the other distributing companies of Eni believe thatnatural gas used for electricity generation is not subject tothis additional excise tax. For this reason, an officialinterpretation has been requested from the Ministry of Financeand Economy. With a decision of May 29, 2001, the Ministryconfirmed that this additional excise tax cannot be applied. TheRegion decided not to revoke its decree and Snam took appropriatelegal action. On the basis of action carried out by Snam, theCouncil of State decided on March 18, 2002 that the jurisdictionof the Administrative court did not apply to this case. In casethe Region should request payment, Eni will challenge thisrequest in the relevant Court. The Lombardia Region decided withregional Law No. 27/2001 that no additional tax is due fromJanuary 1, 2002 onwards, but still requested the payment of theadditional taxes due before that date. The period of foreclosurefor the formal assessment of the payment is up until five years,so it is possible that payment will be requested until December31, 2006.

During 2003, the Customs District of Tarantosent 147 formal assessments and amendments to bills of entry forfinished products and goods and semi finished products producedby Eni’s Taranto refinery in 2000, 2001 and 2002 to Eni SpA,as the successor entity of AgipPetroli SpA following its mergerinto Eni. The notification regards about euro 24 million ofcustoms duties not paid by the company because the importedproducts were not yet finished goods, but were destined toprocessing, for which ordinary customs tariffs allow exemption.The formal assessment does not contain the determination of anyadministrative penalties provided for by customs rules. Thepenalty can be from one to ten times the amount of taxes notpaid. The notification is based on the fact that the company doesnot have the administrative authorization to utilize the customsexemption. The company, believing it acted properly pursuant toCircular 20/D/2003, started a proceeding for an administrativeresolution, according to the customs rules. The company asked theRegional Director of Customs of Puglia for the annulment of thereceived assessments as a measure of self-protection. With adecision of November 26, 2004 the Regional Director acceptedEni’s appeal and ended the litigation by cancelling the 147formal assessments.

On March 12, 2004 the Comando Nucleo RegionalePolizia Tributaria of Puglia notified a verbal action ofobservation to the company. In this action there is an allegedoffense of smuggling and falsification of accounts for the sameimports, already subjected to the previous assessments of theCustoms District of Taranto and other occurrences between January1999 and February 2003. The verbal action made by a FiscalOfficer, sent to the Public Prosecutor in the Court of Taranto,reclaims the omitted payment of customs for about euro 26million. For the offense of smuggling, there is a penalty fromtwo to ten times the amount of tax not paid. The notification isbased on the same lack of administrative authorization, alreadycontested by the Customs District of Taranto, that was concludedin favor of Eni by the Regional Director.

*Agip Karachaganak BV*

In July 2004 relevant Kazakh authoritiesinformed Agip Karachaganak BV and Agip Karachaganak PetroleumOperating BV, shareholder and operator of the Karachaganakcontract, respectively, the final outcome of the tax auditsperformed for fiscal years 2000 to 2003. Claims by the Kazakhauthorities concern unpaid taxes for a total of dollar 43million, net to Eni, and the anticipated offsetting of VATcredits for dollar 140 million, net to Eni, as well as thepayment of interest and penalties for a total of dollar 128million. Both companies filed a counterclaim. With an agreementreached on November 18, 2004, the original amounts were reducedto dollar 22 million net to Eni; meetings are underway forfinding an agreement on residual matters. Eni recorded aprovision to the risk reserve for this matter.

*Snam Rete Gas SpA*

With Regional Law No. 2 of March 26, 2002, theSicilia Region introduced an environmental tax upon the owners ofprimary pipelines in Sicily (i.e. pipelines operating at amaximum pressure of over 24 bar). The tax was payable as of April2002. In order to protect its interests, Snam Rete Gas filed aclaim with the European Commission, aimed at opening a proceedingagainst the Italian Government and the Tax Commission of Palermo.The Authority for Electricity and Gas, although acknowledgingthat the tax burden is an operating cost for the transportactivity, subjected inclusion of the environment tax in tariffsto the final ruling on its legitimacy by relevant authorities.Therefore, for the 2002-2003 thermal year with DecisionNo.146/2002 and for the 2003-2004 thermal year with Decision No.71/2003, the Authority for Electricity and Gas published two setsof tariffs: one, in force, that does not take into account thetax, and the second one including it, that will be automaticallyapplied with retroactive effect should the tax be judgedlegitimate. On September 10, 2002, Snam Rete Gas filed a claimwith the Regional Administrative Court of Lombardia requestingthe immediate application of tariffs including the tax. With theruling of December 20, 2002, the Court judged the tax at variancewith European rules and therefore did not accept Snam ReteGas’s claim. In December 2002, Snam Rete Gas suspendedpayments based on the above Court ruling. Payments effected untilNovember 2002 totaled euro 86.1 million. In January 2003 theSicilia Region presented an appeal to the Council of Stateagainst the ruling of the Regional Administrative Court ofLombardia for the part that states the variance of the regionallaw with European rules. On December 16, 2003, the EuropeanCommission judged the tax instituted by the Republic of Italy,through the Sicilia Region, to be in contrast with European rulesand with the cooperation agreement between the European EconomicCommunity and the Peoples’ Democratic Republic of Algeria;the European Commission also stated that such environmental taxis in contrast with the common customs tariff because it modifiesthe equality of customs expenses on commodities imported fromthird countries and could create a deviation in trade with suchcountries and a distortion in access and competition rules. TheCommission initially requested the Italian Government to presentits observations about the argument and later with its opinionpresented on July 7, 2004 it formally requested Italy to cancelthe tax. The Italian Government must conform within two monthsfrom the reception of the opinion. As it did not conform, onDecember 20, 2004 the European Commission passed the case to theCourt of Justice requesting a ruling. With a decision datedJanuary 5, 2004, the Provincial Tax Commission of Palermodeclared the environmental tax of the Sicilia Region illegitimatebecause it is in contrast with European rules and thereforeaccepted Snam Rete Gas’s claim for the repayment of thefirst installment of euro 10.8 million, already paid in April2002, to the Sicilia Region. On May 4, 2004, the Sicilia Regionrepaid the first installment. On April 2, 2004 the Sicilia Regionpresented recourse to the Regional Tax Commission at Palermo,which, on January 5, 2005 rejected this appeal and confirmed theillegitimacy of the tax, condemning the Region to repay theamounts paid and interest accrued to Snam Rete Gas. On April 15,2005 the Sicilia Region presented recourse to the Regional TaxCommission at Palermo. On November 3, 2003, the Sicilia Region,following the procedure presented by Snam Rete Gas concerning theyearly liquidation of the tax for 2002, requested liquidation oftax, fines and interest (euro 14.2 million) relating to theunpaid December 2002 installment. On December 30, 2003 Snam ReteGas filed a claim with request of suspension of payment as aresult of the liquidation notice received from the Sicilia Regionwith the Provincial Tax Commission of Palermo, that, on June 25,2004 accepted Snam Rete Gas’s claim and decided thecancellation of the liquidation notice served by the SiciliaRegion. On September 13, 2004 the Sicilia Region appealed thisdecision with the Regional Tax Commission at Palermo, which, onMarch 7, 2005 rejected this appeal and confirmed the illegitimacyof the tax. In any case Snam Rete Gas will not have to pay thetax: if the tax is considered illegitimate in other Courts oflaw, the company will have the right to the restitution of themoney. If, to the contrary, the tax is considered legitimate bythe other Courts, the Authority for Electricity and Gas willinclude the tax (Decision No. 146/2002 and No. 71/2003) in tariffwith automatic and retroactive effects.

**Other judicial or arbitration proceedings**

*Syndial SpA (former EniChem SpA) -Serfactoring SpA*

In 1991, Agrifactoring SpA commencedproceedings against Serfactoring SpA, a company 49% owned bySofid SpA which is controlled by Eni SpA. The claim relates to anamount receivable of euro 182 million for fertilizer sales (plusinterest and compensation for inflation), originally owed byFederconsorzi to EniChem Agricoltura SpA (later Agricoltura SpA -in liquidation), and Terni Industrie Chimiche SpA (merged intoAgricoltura SpA (in liquidation), that has been merged intoEniChem SpA (now Syndial SpA)). Such receivables were transferredby Agricoltura and Terni Industrie Chimiche to Serfactoring,which appointed Agrifactoring as its agent to collect payments.Agrifactoring guaranteed to pay the amount of such receivables toSerfactoring, regardless of whether or not it received payment atthe due date. Following payment by Agrifactoring to Serfactoring,Agrifactoring was placed in liquidation and the liquidator ofAgrifactoring commenced proceedings in 1991 against Serfactoringto recover such payments (equal to euro 182 million) made toSerfactoring based on the claim that the foregoing guaranteebecame invalid when Federconsorzi was itself placed inliquidation. Agricoltura and Terni Industrie Chimiche broughtcounterclaims against Agrifactoring (in liquidation) for damagesamounting to euro 97 million relating to acts carried out byAgrifactoring SpA as agent. The amount of these counterclaims hassubsequently been reduced to euro 46 million following partialpayment of the original receivables by the liquidator ofFederconsorzi and various setoffs. These proceedings, which haveall been joined, were decided with a partial judgment, depositedon February 24, 2004: the request of Agrifactoring has beenrejected and the company has been ordered to pay the sumrequested by Serfactoring and damages in favor of Agricoltura, tobe determined following the decision. Agrifactoring appealedagainst this partial decision, requesting in particular theannulment of the first step judgement, the reimbursment of theeuro 180 million amount from Serfactoring along with therejection of all its claims and the payment of all expense of theproceeding. The appeal pending will be discussed in a hearing setfor March 16, 2007. The judge of the Court of Rome, responsiblefor the determination of the amount of damages to be paid toSerfactoring and Agricoltura decided on May 18, 2005 to suspendthis determination until the publication of the decision of theCourt of Appeals, in accordance with Article 295 of the Code ofcivil procedure.

*Syndial SpA (former EniChem SpA)*

In 2002, EniChem SpA was summoned by ICRIntermedi Chimici di Ravenna Srl before the Court of Milan inrelation to a breach of a preliminary agreement for the purchaseof an industrial area in Ravenna. ICR requested payment ofcompensatory damages for approximately euro 46 million, of whicheuro 3 million are compensatory damages and euro 43 million arefor loss of profits. During 2004 the preliminary inquiry wascompleted. Conclusions were filed by the parties on the relevanthearing of May 26, 2005. The procedure is due for a decision.

*Snamprogetti SpA*

In December 2002, Snamprogetti SpA made arequest for an arbitration proceeding against FertilizantesNitrogenados de Venezuela – Fertinitro CEC – to theInternational Chamber of Commerce of Paris. In December 2004,Fertinitro and Snamprogetti reached an agreement that providesfor: (i) the acceptance of the plant in Jose, Venezuela, and inreturn, the Stand-by Letter of Credit it provided to Fertinitro;(ii) the recovery of the Stand-By Letter of Credit; (iii) asettlement between the parties for the payables related to theawarding of licenses from Snamprogetti and a dollar 6.5 millioncompensation to be paid to Fertinitro; and (iv) the decision ofboth parties to supersede all requests/claims made to thearbitration court. In December 2004 Snamprogetti executed theagreement.

**Antitrust, EU Proceedings, actions of theAuthority for Electricity and Gas and of other regulatoryAuthorities**

*Eni SpA*

In March 1999, the Antitrust Authorityconcluded its investigation started in 1997; and (i) verifiedthat Snam SpA (merged in Eni SpA in 2002) abused its dominantposition in the market for the transportation and primarydistribution of natural gas relating to the transportation anddistribution tariffs applied to third parties and the access ofthird parties to infrastructure; (ii) fined Snam euro 2 million;and (iii) ordered a review of these practices relating to suchabuses. Snam believes it has complied with existing legislationand appealed the decision with the Regional Administrative Courtof Lazio requesting its suspension. On May 26, 1999, stating thatthese decisions are against Law No. 9/1991 and the EuropeanDirective 98/30/CE, this Court granted the suspension of thedecision. The Antitrust Authority did not appeal this decision.The decision on this dispute is still pending.

With a decision of December 9, 2004, theItalian Antitrust Authority started an inquiry on thedistribution of jet fuel against six Italian companies, includingEni and some of its subsidiaries, that store and load jet fuel inthe Rome Fiumicino, Milan Linate and Milan Malpensa airports. Theinquiry intends to ascertain the existence of alleged limitationsto competition as oil companies would agree to divide amongthemselves the supplies to airlines. The date set for the closingof the inquiry March 31, 2006.

Detailed information on the investigations bythe Antitrust Authority (BluGas, closed in October 2004 and TTPC,started in February 2005) is included in the "OperatingReview – Gas & Power segment – RegulatoryFramework", which is considered an integral part of theseNotes.

*GNL Italia SpA*

With Decision No. 16/2004 published on February16, 2004, the Italian Authority for Electricity and Gas initiateda formal investigation of GNL Italia SpA concerning the refusalto Gas Natural Vendita Italia SpA to access on an annual basisthe regasification service at Eni’s Panigaglia terminal forvolumes amounting to about 220 million cubic meters of naturalgas.

On November 19, 2003 GNL Italia informed theAuthority for Electricity and Gas, in accordance with Article 24paragraph 3 of Legislative Decree No. 164/2000, of the requestfor regasification services on a continuous basis from GasNatural Vendita Italia for about 220 million cubic meters ofnatural gas. GNL Italia offered only spot capacity as the wholeregasification capacity had been conferred to Eni SpA under acontract signed on January 29, 2002 and filed with the sameAuthority for Electricity and Gas, and approved with Decision No.38/2002. With Decision No. 120 of July 22, 2004 the Authority forElectricity and Gas ordered GNL Italia to provide continuouscapacity to Gas Natural Vendita and initiated a formalinvestigation aimed at requesting a fine under Article 2,paragraph 20, letter c of Law No. 481/1995 in violation ofArticles 14 and 15 of Decisions No. 120/2001 and 38/2002 of theAuthority for Electricity and Gas. In order to execute therequirements of Decision No. 120/2004, GNL Italia: (i) obtainedby Eni a change in its contract planning of discharges of shipsin order to allow Gas Natural Vendita Italia to access theregasification services in August and September with onedischarge a month; (ii) assigned capacity to Gas Natural VenditaItalia and entered a regasification contract with Gas NaturalVendita Italia that provide for a discharge per month in themonths of August and September 2004. On November 19, 2004 Enifiled a claim against this decision with the RegionalAdministrative Court of Lombardia. This claim, concerning inparticular the Authority for Electricity and Gas’s decisionson access to regasification services at the Panigaglia terminalis still pending. With decision No. 2 of January 12, 2005 theAuthority for Electricity and Gas fined GNL Italia euro 50,000that the company paid on February 21, 2005.

*Polimeri Europa SpA and Syndial SpA*

In December 2002, inquiries were commencedconcerning alleged anti-competitive agreements in the area ofelastomers. These inquiries were commenced concurrently byEuropean and U.S. authorities. The first product under scrutinywas EP(D)M: the European Commission submitted to inspection themanufacturing companies of that product, among which PolimeriEuropa SpA and Syndial and requested information to those twocompanies and to their controlling company, Eni SpA. After theinquiries the Commission decided to open a procedure forviolation of competition laws and notified Eni, Polimeri Europaand Syndial to that effect on March 8, 2005. Syndial filedmemoranda. EP(D)M manufacture is also under scrutiny in theUnited States, where the Department of Justice of San Franciscorequested information and documents to Polimeri Europa AmericasInc, a U.S. subsidiary of Polimeri Europa and to its deputychairman and sales manager. Class actions were filed claimingdamages in relation to the alleged violation. The investigationwas also extended to the following products: NBR, CR, BR, SSBRand SBR. The European Commission started an investigationregarding BR, SBR, SSBR. On January 26, 2005 the Commissiondropped the charges in relation to SSBR, while for the otherproducts the Commission started an infraction procedure. NBR andCR are under scrutiny in Europe and the USA, where class actionshave been started. With regard to CR, Syndial entered into a pleaagreement with the Department of Justice pursuant to whichSyndial would agree to pay a fine of US dollar 9 million, whilethe Department of Justice would agree that it will not bringfurther criminal charges against Syndial or against its affiliatecompanies. A court hearing has been scheduled for June 27, 2005for the approval of the plea agreement and sentencing. Enirecorded a provision for this matter. The European Commissionrequested Eni, Polimeri Europa and Syndial to provide informationabout CR.

*Stoccaggi Gas Italia SpA*

With Decision No. 26 of February 27, 2002, theAuthority for Electricity and Gas determined tariff criteria formodulation, mineral and strategic storage services for the periodstarting on April 1, 2002 until March 31, 2006 and effectiveretroactively from June 21, 2000. On March 18, 2002 Stoccaggi GasItalia SpA (Stogit) filed its proposal of tariff for modulation,mineral and strategic storage for the first regulated period.With Decision No. 49 of March 26, 2002, the Authority forElectricity and Gas repealed Stogit’s proposal and definedtariffs for the first regulated period. Stogit applied the tariffdetermined by the two decisions, but filed an appeal against bothAuthority for Electricity and Gas decisions with the RegionalAdministrative Court of Lombardia requesting their cancellation.With a decision dated September 29, 2003, that Court rejected theappeal presented by Stogit. On February 3, 2004, Stogit filed anappeal to the Council of State against the sentence of firstinstance.

*Distribuidora de Gas Cuyana SA*

The agency entrusted with the regulations forthe natural gas market in Argentina ("Enargas") starteda formal investigation on some operators, among theseDistribuidora de Gas Cuyana SA, a company controlled by Eni.Enargas stated that the company has applied improperly calculatedconversion factors to volumes of natural gas invoiced tocustomers and requested the company to apply the conversionfactors imposed by local regulations from the date of the defaultnotification (March 31, 2004) without prejudice to any damagepayment and fines that may be decided after closing theinvestigation. On April 27, 2004, Distribuidora de Gas Cuyanapresented a defense memorandum to Enargas, without prejudice toany possible appeal. At this date it is not possible to quantifyany negative effects deriving from this action, given its veryearly phase.

 

 

**Other commitments and risks not included in the balancesheet**

Commitments regarding long-term natural gassupply contracts stipulated by Eni, which contain take or payclauses, are described in "Item 4 – Information on theCompany – Gas & Power". Non-quantifiable risksrelated to contractual assurances given to acquirors ofinvestments against certain unforeseeable liabilitiesattributable to tax, state welfare contributions andenvironmental matters applicable to periods during which suchinvestments were owned by Eni. Eni believes such matters will nothave a material adverse effect on its consolidated financialstatements.

**Environmental Regulations**

Together with other companies in the industriesin which it operates, Eni is subject to numerous EU, national,regional and local environmental laws and regulations concerningits oil and gas operations, products and other activities,including legislation that implements international conventionsor protocols. In particular, these laws and regulations requirethe acquisition of a permit before drilling for hydrocarbons maycommence, restrict the types, quantities and concentration ofvarious substances that can be released into the environment inconnection with exploration, drilling and production activities,limit or prohibit drilling activities on certain protected areas,and impose criminal or civil liabilities for pollution resultingfrom oil, natural gas, refining and petrochemical operations.These laws and regulations may also restrict emissions anddischarges to surface and subsurface water resulting from theoperation of natural gas processing plants, petrochemical plants,refineries, pipeline systems and other facilities that Eni owns.In addition, Eni’s operations are subject to laws andregulations relating to the generation, handling, transportation,storage, disposal and treatment of waste materials. Environmentallaws and regulations have a substantial impact on Eni’soperations. Some risk of environmental costs and liabilities isinherent in particular operations and products of Eni, as it iswith other companies engaged in similar businesses, and there canbe no assurance that material costs and liabilities will not beincurred. Although management, considering the actions alreadytaken with the insurance policies to cover environmental risksand the provision for risks accrued, does not currently expectany material adverse effect upon Eni’s consolidatedfinancial statements as a result of its compliance with such lawsand regulations, there can be no assurance that there will not bea material adverse impact on Eni’s consolidated financialstatements due to: (i) the possibility of as yet unknowncontamination; (ii) the results of the on-going surveys and theother possible effects of statements required by Decree No.471/1999 of the Ministry of Environment; (iii) the possibleeffect of future environmental legislation and rules, like thedecree of the Ministry of Environment published in January 8,2004, that regards the fixing of new quality standards foraquatic environment and dangerous substances and the legislativedecree on integrated environmental authorization already approvedby Parliament, but not yet published on the Official Gazette, aswell as the effects that may derive from the legislative decreeyet to be issued for implementing Directive 2000/60/CE whichestablishes a European framework on waters and of the legislativedecrees that shall be issued in order to implement: a) Law No.308 of December 15, 2004 which delegated to the Government thereorganization of all regulations concerning waste management andremediation of polluted sites, protection of water bodies frompollution and management of water resources, indemnities forenvironmental damage, procedures for the environmental impactevaluation and strategic environmental evaluation, as well asprotection of air and reduction of emissions into the atmosphere;b) a law approved by the Chamber of Deputies and currently beingexamined by the Senate which implements Directive 2003/87/CE onemission trading in Europe and Directive 2004/35/CE onenvironmental responsibility in terms of prevention andremediation of environmental damage; (iv) the effect of possibletechnological changes relating to future remediation; (v) thepossibility of litigation and the difficulty of determiningEni’s liability, if any, as against other potentiallyresponsible parties with respect to such litigation and thepossible insurance recoveries.

 

**24 Segment information**

Segment information is presented in accordancewith the revised IAS 14. Intersegment sales are conducted on anarm’s length basis.

**Information by industry segment**

Following the merger of EniData SpA into EniSpA, segment information related to this company for the years2002 and 2003 were moved from "Other activities" to thesegment "Corporate and financial companies" in whichICT activities have been concentrated.

| (million        euro) |   | **Exploration & Production** |   | **Gas & Power** |   | **Refining & Marketing** |   | **Petrochemicals** |   | **Oilfield Services Construction and        Engineering** |   | **Other activities** |   | **Corporate and financial companies** |   | **Total** |
|-----------------------|--------|----------------------------------|--------|---------------------|--------|------------------------------|--------|--------------------|--------|-----------------------------------------------------------|--------|----------------------|--------|---------------------------------------|--------|-----------|
|                  |   |                                  |   |                     |   |                              |   |                    |   |                                                           |   |                      |   |                                       |   |           |

| **2002**                                  |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Net sales from operations (a)             |   | 12,877  |   |   | 15,297 |   |   | 21,546 |   |   | 4,516  |   |   | 4,546  |   |   | 1,449  |   |   | 586    |   |   |   |   |
| Less: intersegment sales                  |   | (8,795  | )      |   | (623   | )      |   | (1,037 | )      |   | (746   | )      |   | (479   | )      |   | (748   | )      |   | (467   | )      |   |   |   |
| Net sales to customers                    |   | 4,082   |   |   | 14,674 |   |   | 20,509 |   |   | 3,770  |   |   | 4,067  |   |   | 701    |   |   | 119    |   |   | 47,922 |   |
| Operating income                          |   | 5,175   |   |   | 3,244  |   |   | 321    |   |   | (126   | )      |   | 298    |   |   | (214   | )      |   | (196   | )      |   | 8,502  |   |
| Identifiable assets (b)                   |   | 23,686  |   |   | 12,482 |   |   | 7,634  |   |   | 2,821  |   |   | 5,026  |   |   | 901    |   |   | 327    |   |   | 52,877 |   |
| Unallocated assets                        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 12,931 |   |
| Identifiable liabilities (c)              |   | 4,764   |   |   | 2,969  |   |   | 2,861  |   |   | 631    |   |   | 2,741  |   |   | 2,221  |   |   | 887    |   |   | 17,074 |   |
| Unallocated liabilities                   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,383 |   |
| Capital expenditure                       |   | 5,615   |   |   | 1,315  |   |   | 550    |   |   | 145    |   |   | 233    |   |   | 119    |   |   | 71     |   |   | 8,048  |   |
| Depreciation, amortization and writedowns |   | (3,884  | )      |   | (512   | )      |   | (494   | )      |   | (231   | )      |   | (267   | )      |   | (53    | )      |   | (63    | )      |   | (5,504 | )      |
| Interest income                           |   | 59      |   |   | 14     |   |   | 64     |   |   | 2      |   |   | 7      |   |   | 38     |   |   | 138    |   |   | 322    |   |
| Interest expense                          |   | (185    | )      |   | (37    | )      |   | (26    | )      |   | (11    | )      |   | (10    | )      |   | (3     | )      |   | (296   | )      |   | (568   | )      |
| **2003**                                  |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales from operations (a)             |   | 12,746  |   |   | 16,067 |   |   | 22,148 |   |   | 4,487  |   |   | 6,306  |   |   | 1,178  |   |   | 700    |   |   |   |   |
| Less: intersegment sales                  |   | (8,468  | )      |   | (450   | )      |   | (621   | )      |   | (438   | )      |   | (897   | )      |   | (733   | )      |   | (538   | )      |   |   |   |
| Net sales to customers                    |   | 4,278   |   |   | 15,617 |   |   | 21,527 |   |   | 4,049  |   |   | 5,409  |   |   | 445    |   |   | 162    |   |   | 51,487 |   |
| Operating income                          |   | 5,746   |   |   | 3,627  |   |   | 583    |   |   | (176   | )      |   | 311    |   |   | (293   | )      |   | (281   | )      |   | 9,517  |   |
| Identifiable assets (b)                   |   | 23,433  |   |   | 15,824 |   |   | 8,025  |   |   | 2,523  |   |   | 5,361  |   |   | 856    |   |   | 614    |   |   | 56,636 |   |
| Unallocated assets                        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10,700 |   |
| Identifiable liabilities (c)              |   | 4,629   |   |   | 3,007  |   |   | 2,835  |   |   | 612    |   |   | 3,463  |   |   | 2,139  |   |   | 984    |   |   | 17,669 |   |
| Unallocated liabilities                   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 21,349 |   |
| Capital expenditure                       |   | 5,681   |   |   | 1,760  |   |   | 730    |   |   | 141    |   |   | 278    |   |   | 70     |   |   | 142    |   |   | 8,802  |   |
| Depreciation, amortization and writedowns |   | (3,360  | )      |   | (567   | )      |   | (494   | )      |   | (248   | )      |   | (271   | )      |   | (107   | )      |   | (104   | )      |   | (5,151 | )      |
| Interest income                           |   | 37      |   |   | 7      |   |   | 18     |   |   | 1      |   |   | 21     |   |   | 3      |   |   | 110    |   |   | 197    |   |
| Interest expense                          |   | (141    | )      |   | (20    | )      |   | (16    | )      |   | (7     | )      |   | (14    | )      |   | (2     | )      |   | (374   | )      |   | (574   | )      |
| **2004**                                  |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales from operations (a)             |   | 15,349  |   |   | 17,258 |   |   | 26,094 |   |   | 5,417  |   |   | 6,494  |   |   | 1,279  |   |   | 851    |   |   |   |   |
| Less: intersegment sales                  |   | (10,231 | )      |   | (450   | )      |   | (759   | )      |   | (499   | )      |   | (888   | )      |   | (800   | )      |   | (733   | )      |   |   |   |
| Net sales to customers                    |   | 5,118   |   |   | 16,808 |   |   | 25,335 |   |   | 4,918  |   |   | 5,606  |   |   | 479    |   |   | 118    |   |   | 58,382 |   |
| Operating income                          |   | 8,017   |   |   | 3,463  |   |   | 965    |   |   | 271    |   |   | 260    |   |   | (244   | )      |   | (269   | )      |   | 12,463 |   |
| Identifiable assets (b)                   |   | 23,348  |   |   | 16,998 |   |   | 8,330  |   |   | 2,799  |   |   | 5,191  |   |   | 709    |   |   | 1,166  |   |   | 58,541 |   |
| Unallocated assets                        |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10,571 |   |
| Identifiable liabilities (c)              |   | 4,406   |   |   | 3,121  |   |   | 3,175  |   |   | 630    |   |   | 3,174  |   |   | 2,073  |   |   | 1,615  |   |   | 18,194 |   |
| Unallocated liabilities                   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 18,452 |   |
| Capital expenditure                       |   | 4,912   |   |   | 1,446  |   |   | 669    |   |   | 99     |   |   | 209    |   |   | 48     |   |   | 120    |   |   | 7,503  |   |
| Depreciation, amortization and writedowns |   | (3,286  | )      |   | (579   | )      |   | (469   | )      |   | (109   | )      |   | (251   | )      |   | (60    | )      |   | (107   | )      |   | (4,861 | )      |
| Interest income                           |   | 30      |   |   | 5      |   |   | 9      |   |   | 1      |   |   | 10     |   |   | 2      |   |   | 144    |   |   | 201    |   |
| Interest expense                          |   | (118    | )      |   | (17    | )      |   | (10    | )      |   | (4     | )      |   | (22    | )      |   | (1     | )      |   | (403   | )      |   | (575   | )      |

|   |   |  |   |  |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

__________________

(a) Before elimination of intersegment sales.(b) Includes assets directly related to the generation ofoperating income.(c) Includes liabilities directly related to the generation ofoperating income.

**Geographicfinancial information**

*Assets and Investments by geographic area oforigin*

| (million        euro)                             |   | **Italy** |   | **Other EU** |   | **Rest of Europe** |   | **Africa** |   | **Americas** |   | **Asia** |   | **Other areas** |   | **Total** |
|---------------------------------------------------|--------|-----------|--------|--------------|--------|--------------------|--------|------------|--------|--------------|--------|----------|--------|-----------------|--------|-----------|
|                                              |   |           |   |              |   |                    |   |            |   |              |   |          |   |                 |   |           |
| **2002**                                          |   |      |   |         |   |               |   |       |   |         |   |     |   |            |   |      |
| Identifiable        assets (a)                    |   | 24,524    |   | 7,150        |   | 3,519              |   | 9,122      |   | 3,432        |   | 4,385    |   | 745             |   | 52,877    |
| Investments in fixed and intangible assets        |   | 2,396     |   | 567          |   | 284                |   | 2,497      |   | 721          |   | 1,333    |   | 250             |   | 8,048     |
| **2003**                                          |   |      |   |         |   |               |   |       |   |         |   |     |   |            |   |      |
| Identifiable assets (a)                           |   | 27,355    |   | 7,229        |   | 3,466              |   | 10,509     |   | 2,921        |   | 4,801    |   | 355             |   | 56,636    |
| Investments        in fixed and intangible assets |   | 2,708     |   | 1,067        |   | 302                |   | 3,026      |   | 369          |   | 795      |   | 535             |   | 8,802     |
| **2004**                                          |   |      |   |         |   |               |   |       |   |         |   |     |   |            |   |      |
| Identifiable        assets (a)                    |   | 28,578    |   | 8,540        |   | 2,843              |   | 10,927     |   | 2,288        |   | 5,086    |   | 279             |   | 58,541    |
| Investments in fixed and intangible assets        |   | 2,613     |   | 370          |   | 387                |   | 2,626      |   | 356          |   | 1,073    |   | 78              |   | 7,503     |
|                                              |   |           |   |              |   |                    |   |            |   |              |   |          |   |                 |   |           |

___________________

(a) Includes assets directly related to thegeneration of operating income.

Geographic information relating to 2002 and2003 was reorganized due to the entry into the European Union of10 new States. In particular, euro 344 million and euro 539million, respectively, relating to "Identifiableassets" and euro 21 million and euro 32 million,respectively, relating to "Investments in tangible andintangible assets", were moved from "Rest ofEurope" into "Other European Union".

*Sales from operations by geographic area ofdestination*

| (%)                         |   | **2002**   |   | **2003**   |   | **2004**   |
|-----------------------------|--------|------------|--------|------------|--------|------------|
|                        |   |            |   |            |   |            |
| Italy                       |   | 23,797     |   | 25,491     |   | 27,096     |
| Other        European Union |   | 8,974      |   | 10,785     |   | 13,469     |
| Americas                    |   | 5,317      |   | 2,778      |   | 5,790      |
| Africa                      |   | 2,478      |   | 5,854      |   | 4,105      |
| Rest of Europe              |   | 4,188      |   | 3,303      |   | 3,743      |
| Asia                        |   | 3,154      |   | 3,245      |   | 3,631      |
| Other areas                 |   | 14         |   | 31         |   | 548        |
|                        |   | **47,922** |   | **51,487** |   | **58,382** |
|                        |   |            |   |            |   |            |

Sales from operations by geographic area ofdestination relating to 2002 and 2003 were reorganized due to theentry into the European Union of 10 new States. In particular,euro 524 million and euro 790 million, respectively, were movedfrom "Rest of Europe" into "Other EuropeanUnion"

 

**25 Fair value of financial instruments**

In the normal course of its business, Eniutilizes various types of financial instruments. Theseinstruments include recorded assets and liabilities, as well asitems that principally involve off-balance sheet risk.Information about the fair value of Eni’s financialinstruments is presented below.

| - |   | Marketable        securities: the fair values of marketable securities are        based upon market value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | Non-current        investments carried at cost: such investments are not        publicly traded and do not have quoted market prices. An        estimate of fair value has not been made because the        amount of the investment is not significant and the        estimation of fair value would require incurring        excessive costs.                                                                                                                                                                                                                                                         |
| - |   | Current        investments: such investments are publicly traded and        their fair value is represented by their market price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| - |   | Non-current        receivables: the fair values of non-current receivables        are estimated based on the discounted value of future        cash flows expected to be paid, considering rates of        interest which Eni could earn on similar credit. The        differences between the carrying and market values of        non-current receivables at December 31, 2003 and 2004,        excluding tax credits with Italian tax authorities, were        not significant. In relation to tax credits, the interest        rate of 1.375% is aligned with the average market rate        trend. |
| - |   | Current        receivables: the carrying values of current receivables        approximate their fair value considering the short period        that incurs between the concession and their expiration        date.                                                                                                                                                                                                                                                                                                                                                                                     |
| - |   | Bonds        payable, current portion of long-term debt and long-term        debt: the fair values of bonds payable and long-term        debt, including current maturities, are based on        discounted cash flow analyses.                                                                                                                                                                                                                                                                                                                                                                         |
| - |   | Short-term        debt: the carrying value of short-term debt approximates        fair value because of the short period of time between        the origination and maturity of the borrowings.                                                                                                                                                                                                                                                                                                                                                                                                         |
| - |   | Non-current        payables: the fair values of non-current payables are        estimated based on the discounted value of future cash        flows. The differences between the carrying and market        values of non-current payables at December 31, 2003 and        2004 were not significant.                                                                                                                                                                                                                                                                                                   |

 

|   |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

| (million        euro)                                             |   | **Carrying Value** |   | **Fair Value** |   | **Carrying Value** |   | **Fair Value** |
|-------------------------------------------------------------------|--------|--------------------|--------|----------------|--------|--------------------|--------|----------------|
|                                                              |   |                    |   |                |   |                    |   |                |
| Marketable securities and current investments                     |   | 1,300              |   | 1,317          |   | 1,315              |   | 1,345          |
| Bonds and        long-term debt, including current maturities (1) |   | 8,826              |   | 9,099          |   | 8,610              |   | 8,824          |
|                                                              |   |                    |   |                |   |                    |   |                |

___________________

(1) The carrying value is increased by the fairvalue of fixed interest rate financial debt acquired, recorded inaccrued expenses and deferred income, and decreased by implicitinterest recorded in accrued income and prepaid expenses.

 

| - |   | Derivative        financial instruments: the fair value of derivatives        generally reflects the estimated amounts that Eni would        pay or receive to terminate the contracts at the        reporting date, thereby taking into account the current        unrealized gains or losses of open contracts. Dealer        quotes or appropriate pricing models have been used to        estimate the fair value for Eni’s derivatives. The        carrying value, compared with the fair value, represents        the amount of interest rate and exchange rate        differentials recognized but not yet paid at year-end.        For foreign exchange derivatives related to monetary        assets and liabilities, the carrying value also        represents the adjustment using current exchange rates at        year-end. The difference between carrying value and fair        value is therefore not significant. |
|---|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|   |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

| (million        euro) |   | **Carrying Value** |   | **Fair Value** |   | **Carrying Value** |   | **Fair Value** |
|-----------------------|--------|--------------------|--------|----------------|--------|--------------------|--------|----------------|
|                  |   |                    |   |                |   |                    |   |                |

| Interest rate derivatives:    |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| - assets                      |   | 22     |   |   | 72     |   |   | 39     |   |   | 39     |   |
| - liabilities                 |   | (17    | )      |   | (117   | )      |   | (18    | )      |   | (135   | )      |
| Foreign exchange derivatives: |   |   |   |   |   |   |   |   |   |   |   |   |
| - assets                      |   | 175    |   |   | 289    |   |   | 277    |   |   | 344    |   |
| - liabilities                 |   | (104   | )      |   | (71    | )      |   | (118   | )      |   | (46    | )      |

|   |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|

 

**26 Transactions with related parties**

According to rules issued by Consob, theItalian Stock Exchange Commission on February 20, 1997 No.97001574 and subsequent amendments, the following is adescription of transactions with related parties.

In the ordinary course of its business Enienters into transactions concerning the exchange of goods,provision of services and financing with affiliated companies andnon-consolidated subsidiaries as well as with entities owned orcontrolled by the Government. All such transactions are conductedon an arm’s lenght basis in the interest of Eni companies.

Relevant transactions carried out with entitiescontrolled by the Italian government are only those with Enel,the Italian National Electric Company.

The following is a description of trade andfinancing transactions with related parties.

**2004 Tradeand other transactions**

 

| (million        euro) |   | **Dec. 31, 2004** |   | **2004** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

|   |   | **Costs** |   | **Revenues** |
|--------|--------|-----------|--------|--------------|
|   |   |           |   |              |

| **Name**                                                                                            |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Commitments** |   | **Goods** |   | **Services** |   | **Goods** |   | **Services** |
|-----------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------------|--------|----------------|--------|-----------------|--------|-----------|--------|--------------|--------|-----------|--------|--------------|
|                                                                                                |   |                 |   |              |   |                |   |                 |   |           |   |              |   |           |   |              |
| **Affiliated companies**                                                                            |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Agip Oil        Co Ltd                                                                              |   | 4               |   | 163          |   |           |   |            |   |      |   | 53           |   |      |   |         |
| Albacom SpA                                                                                         |   | 8               |   | 14           |   |           |   |            |   | 3         |   | 35           |   |      |   | 8            |
| Azienda        Energia e Servizi Torino SpA                                                         |   | 1               |   | 18           |   |           |   |            |   |      |   | 68           |   |      |   | 3            |
| Bayernoil Raffineriegesellschaft mbH                                                                |   |            |   | 39           |   |           |   |            |   | 2         |   | 791          |   | 1         |   |         |
| Bernhard        Rosa Inh. Ingeborg Plochinger GmbH                                                  |   | 10              |   |         |   |           |   |            |   |      |   |         |   | 108       |   |         |
| Blue Stream Pipeline Co BV                                                                          |   | 43              |   | 10           |   |           |   |            |   |      |   | 121          |   |      |   | 5            |
| Bronberger        & Kessler Handelsgesellschaft U. Gilg & Schweiger        GmbH & Co Kg |   | 13              |   |         |   |           |   |            |   |      |   |         |   | 141       |   |         |
| Erg Raffinerie Mediterranee Srl                                                                     |   | 30              |   | 30           |   |           |   | 100             |   | 1,043     |   | 10           |   | 412       |   | 9            |
| Gruppo        Distribuzione Petroli Srl                                                             |   | 16              |   |         |   |           |   |            |   |      |   |         |   | 45        |   |         |
| Karachaganak Petroleum Operating BV                                                                 |   | 21              |   | 12           |   |           |   |            |   |      |   | 104          |   |      |   | 42           |
| Petrobel        Belayim Petroleum Co                                                                |   |            |   | 83           |   |           |   |            |   |      |   | 240          |   |      |   |         |
| Promgas SpA                                                                                         |   | 27              |   | 23           |   |           |   |            |   | 230       |   |         |   | 259       |   |         |
| Raffineria        di Milazzo ScpA                                                                   |   | 6               |   | 4            |   |           |   |            |   |      |   | 245          |   | 62        |   |         |
| Supermetanol CA                                                                                     |   |            |   | 24           |   |           |   |            |   | 79        |   | 10           |   |      |   |         |
| Superoctanos        CA                                                                              |   |            |   | 55           |   |           |   |            |   | 212       |   | 11           |   |      |   | 1            |
| Trans Austria Gasleitung GmbH                                                                       |   |            |   | 15           |   |           |   |            |   |      |   | 167          |   |      |   | 3            |
| Trans        Europa Naturgas Pipeline GmbH                                                          |   |            |   | 9            |   |           |   |            |   |      |   | 51           |   |      |   |         |
| Transitgas AG                                                                                       |   |            |   | 2            |   |           |   |            |   |      |   | 59           |   |      |   |         |
| Unión        Fenosa Gas SA                                                                     |   |            |   |         |   | 111            |   |            |   |      |   |         |   |      |   | 1            |
| Other (*)                                                                                           |   | 83              |   | 70           |   | 98             |   |            |   | 11        |   | 85           |   | 105       |   | 16           |
|                                                                                                |   | **262**         |   | **571**      |   | **209**        |   | **100**         |   | **1,580** |   | **2,050**    |   | **1,133** |   | **88**       |
| **Non consolidated subsidiaries**                                                                   |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Eni BTC        Ltd                                                                                  |   |            |   |         |   | 143            |   |            |   |      |   |         |   |      |   |         |
| Eni Gas BV                                                                                          |   | 30              |   | 40           |   | 17             |   |            |   |      |   | 5            |   |      |   | 1            |
| Eni Middle        East BV                                                                           |   |            |   |         |   | 367            |   |            |   |      |   |         |   |      |   |         |
| Transmediterranean Pipeline Co Ltd                                                                  |   | 1               |   | 1            |   |           |   |            |   |      |   | 90           |   |      |   |         |
| Other (*)                                                                                           |   | 32              |   | 4            |   | 10             |   |            |   | 5         |   | 22           |   | 2         |   | 20           |
|                                                                                                |   | **63**          |   | **45**       |   | **537**        |   |            |   | **5**     |   | **117**      |   | **2**     |   | **21**       |
|                                                                                                |   | **325**         |   | **616**      |   | **746**        |   | **100**         |   | **1,585** |   | **2,167**    |   | **1,135** |   | **109**      |
| **Entities owned or controlled by the        Government**                                           |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Enel                                                                                                |   | 234             |   | 3            |   |           |   |            |   | 2         |   | 20           |   | 1,287     |   | 350          |
|                                                                                                |   | **559**         |   | **619**      |   | **746**        |   | **100**         |   | **1,587** |   | **2,187**    |   | **2,422** |   | **459**      |
|                                                                                                |   |                 |   |              |   |                |   |                 |   |           |   |              |   |           |   |              |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

Engineering, construction and maintenanceservices were acquired from the Cosmi Holding Group, related toEni through a member of the Board of Directors, for a total ofapproximately euro 29 million and 28 million in 2003 and 2004,respectively.

Mostsignificant transactions concern:

| - |   | specialized        services in upstream activities to Agip Oil Co Ltd, Eni        Gas BV, Karachaganak Petroleum Operating BV, Petrobel        Belayim Petroleum Co; services are invoiced on the basis        of incurred costs; exclusively with Eni Gas BV, the        unsecured guarantees in relation to the construction of a        hydrocarbon treatment plant in Libya and receivables and        payables for investment activities and with Karachaganak        Petroleum Operating BV, the providing of services by        Eni’s construction and drilling activity;                                                                                                                                                                                                                   |
|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | communication        services, data transmission and concessions of optical        fibers with Albacom SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| - |   | transportation        and distribution activities with Azienda Energia e        Servizi Torino SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| - |   | sale of        petrochemical products, supply of crude oil, refining        activities and fuel additive purchase from Bayernoil        Raffineriegesellschaft GmbH, Bernhard Rosa Inh. Ingeborg        Plochinger GmbH, Bronberger & Kessler        Handelsgesellschaft U. Gilg & Schweiger GmbH Co Kg,        Gruppo Distribuzione Petroli Srl, Supermetanol CA and        Superoctanos CA;                                                                                                                                                                                                                                                                                                                                                                                                   |
| - |   | acquisition        of natural gas transport services outside Italy from Blue        Stream Pipeline Co BV, Trans Europa Naturgas Pipeline        GmbH and Transmediterranean Pipeline Co Ltd and only with        Blue Stream Pipeline Co BV the providing of services by        Eni’s construction and drilling activity;        transactions related to the acquisition of natural gas        transport services are regulated on the basis of tariffs,        which permit the recovery of operating expenses and        capital employed; transactions related to the providing        of services by Eni’s construction and drilling        activities are regulated on the basis of compensation        calculated following the same criteria used in third        party transactions; |
| - |   | acquisition        of refining services from Erg Raffinerie Mediterranee Srl        and Raffineria di Milazzo ScpA on the basis of general        conditions applied to third parties for Erg Raffinerie        Mediterranee Srl and of incurred costs for Raffineria di        Milazzo ScpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| - |   | sale and        acquisition of natural gas outside Italy with Promgas        SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| - |   | acquisition        of natural gas transport services outside Italy from        Trans Austria Gasleitung GmbH and Transitgas AG,        transactions are regulated on the basis of general        conditions applied to third parties;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| - |   | performance        guarantees given on behalf of Unión Fenosa Gas SA in        relation to contractual commitments related to the        results of operations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| - |   | guarantees        given in relation to the construction of an oil pipeline        on behalf of Eni BTC Ltd;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| - |   | guarantees        given to Eni Middle East BV against contractual        commitments with the Government of the Kingdom of Saudi        Arabia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

Transactions with Enel concern the sale andtransportation of natural gas, sale of fuel oil and sale andpurchase of electricity.

**2004 Financing transactions**

 

| (million        euro) |   | **Dec. 31, 2004** |   | **2004** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

| **Name** |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Charges** |   | **Gains** |
|----------|--------|-----------------|--------|--------------|--------|----------------|--------|-------------|--------|-----------|
|     |   |                 |   |              |   |                |   |             |   |           |

| **Affiliated companies**                      |   |    |   |    |   |      |   |   |   |   |
|-----------------------------------------------|--------|---------|--------|---------|--------|-----------|--------|--------|--------|--------|
| Albacom        SpA                            |   | 22      |   |    |   | 88        |   |   |   |   |
| Blue Stream Pipeline Co BV                    |   |    |   | 2       |   | 768       |   |   |   | 29     |
| EnBW - Eni        Verwaltungsgesellschaft mbH |   |    |   |    |   | 250       |   |   |   |   |
| Planta de regassificaciòn de Sagunto SA  |   |    |   |    |   | 65        |   |   |   |   |
| Raffineria        di Milazzo ScpA             |   |    |   |    |   | 107       |   |   |   |   |
| Spanish Egyptian Gas Co SAE                   |   |    |   |    |   | 404       |   |   |   | 9      |
| Trans        Austria Gasleitung GmbH          |   | 389     |   |    |   |      |   |   |   | 9      |
| Other (*)                                     |   | 52      |   | 90      |   | 55        |   | 6      |   | 8      |
|                                          |   | **463** |   | **92**  |   | **1,737** |   | **6**  |   | **55** |
| **Non consolidated subsidiaries**             |   |    |   |    |   |      |   |   |   |   |
| Transmediterranean        Pipeline Co Ltd     |   | 197     |   |    |   |      |   |   |   | 9      |
| Other (*)                                     |   | 68      |   | 54      |   | 2         |   | 4      |   | 2      |
|                                          |   | **265** |   | **54**  |   | **2**     |   | **4**  |   | **11** |
|                                          |   | **728** |   | **146** |   | **1,739** |   | **10** |   | **66** |
|                                          |   |         |   |         |   |           |   |        |   |        |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

 

Most significant transactions concern:

| - |   | lendings and        guarantees to Albacom SpA and Serfactoring SpA;                                                                                                                                                                                                                        |
|---|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | bank debt        guarantees to Blue Stream Pipeline Co BV, EnBW - Eni        Verwaltungsgesellschaft mbH, Planta de Regasificaciòn de        Sagunto SA, Raffineria di Milazzo ScpA and Spanish        Egyptian Gas Co SAE;                                                           |
| - |   | the financing        of the Austrian section of the gasline from the Russian        Federation to Italy and the construction of natural gas        transmission facilities and transport services with Trans        Austria Gasleitung GmbH and Transmediterranean Pipeline        Co Ltd. |

During the year, business transactions haveoccured between Eni and unconsolidated subsidiaries andaffiliates for non significant amounts.

 

**2003 Tradeand other transactions**

 

| (million        euro) |   | **Dec. 31, 2003** |   | **2003** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

|   |   | **Costs** |   | **Revenues** |
|--------|--------|-----------|--------|--------------|
|   |   |           |   |              |

| **Name**                                                                                            |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Commitments** |   | **Goods** |   | **Services** |   | **Goods** |   | **Services** |
|-----------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------------|--------|----------------|--------|-----------------|--------|-----------|--------|--------------|--------|-----------|--------|--------------|
|                                                                                                |   |                 |   |              |   |                |   |                 |   |           |   |              |   |           |   |              |
| **Affiliated companies**                                                                            |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Agip Oil        Co Ltd                                                                              |   | 19              |   | 47           |   |           |   |            |   |      |   | 61           |   |      |   | 1            |
| Albacom SpA                                                                                         |   | 11              |   | 31           |   |           |   |            |   | 3         |   | 33           |   | 1         |   | 8            |
| Azienda        Energia e Servizi SpA                                                                |   | 3               |   | 30           |   |           |   |            |   |      |   | 74           |   |      |   | 2            |
| Bayernoil Raffineriegesellschaft mbH                                                                |   |            |   | 36           |   |           |   |            |   | 2         |   | 713          |   | 1         |   |         |
| Bernhard        Rosa Inh. Ingeborg Plochinger GmbH                                                  |   | 9               |   |         |   |           |   |            |   |      |   | 41           |   | 96        |   |         |
| Blue Stream Pipeline Co BV                                                                          |   | 51              |   |         |   |           |   |            |   |      |   | 63           |   |      |   | 43           |
| Bronberger        & Kessler Handelsgesellschaft U. Gilg & Schweiger        GmbH & Co Kg |   | 13              |   |         |   |           |   |            |   |      |   | 67           |   | 135       |   |         |
| Erg Raffinerie Mediterranee Srl                                                                     |   | 14              |   | 28           |   |           |   | 100             |   | 567       |   | 92           |   | 210       |   |         |
| Gruppo        Distribuzione Petroli Srl                                                             |   | 14              |   |         |   |           |   |            |   |      |   |         |   | 73        |   |         |
| Karachaganak Petroleum Operating BV                                                                 |   | 46              |   | 50           |   |           |   |            |   |      |   | 53           |   |      |   | 183          |
| Petrobel        Belayim Petroleum Co                                                                |   |            |   | 78           |   |           |   |            |   |      |   | 138          |   |      |   |         |
| Promgas SpA                                                                                         |   | 21              |   | 22           |   |           |   |            |   | 230       |   |         |   | 250       |   |         |
| Raffineria        di Milazzo ScpA                                                                   |   | 3               |   | 3            |   |           |   |            |   |      |   | 161          |   | 58        |   |         |
| Serfactoring SpA                                                                                    |   |            |   | 128          |   |           |   |            |   |      |   |         |   |      |   |         |
| Supermetanol        CA                                                                              |   |            |   | 12           |   |           |   |            |   | 59        |   | 9            |   |      |   |         |
| Superoctanos CA                                                                                     |   | 2               |   | 20           |   |           |   |            |   | 142       |   | 11           |   |      |   |         |
| Trans        Austria Gasleitung GmbH                                                                |   |            |   | 5            |   |           |   |            |   |      |   | 171          |   |      |   |         |
| Trans Europa Naturgas Pipeline GmbH                                                                 |   | 3               |   | 10           |   |           |   |            |   |      |   | 38           |   |      |   |         |
| Transitgas        AG                                                                                |   |            |   | 6            |   |           |   |            |   |      |   | 55           |   |      |   |         |
| Unión Fenosa Gas SA                                                                            |   |            |   |         |   | 104            |   |            |   |      |   |         |   |      |   |         |
| Other (*)                                                                                           |   | 36              |   | 44           |   | 117            |   |            |   | 15        |   | 66           |   | 63        |   | 18           |
|                                                                                                |   | **245**         |   | **550**      |   | **221**        |   | **100**         |   | **1,018** |   | **1,846**    |   | **887**   |   | **255**      |
| **Non        consolidated subsidiaries**                                                            |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Eni BTC Ltd                                                                                         |   |            |   |         |   | 120            |   |            |   |      |   |         |   |      |   |         |
| Eni Gas BV                                                                                          |   | 91              |   | 191          |   | 160            |   |            |   |      |   | 2            |   |      |   |         |
| Transmediterranean Pipeline Co Ltd                                                                  |   |            |   |         |   |           |   |            |   |      |   | 104          |   |      |   |         |
| Other (*)                                                                                           |   | 37              |   | 48           |   | 22             |   |            |   | 4         |   | 43           |   | 8         |   | 30           |
|                                                                                                |   | **128**         |   | **239**      |   | **302**        |   |            |   | **4**     |   | **149**      |   | **8**     |   | **30**       |
|                                                                                                |   | **373**         |   | **789**      |   | **523**        |   | **100**         |   | **1,022** |   | **1,995**    |   | **895**   |   | **285**      |
| **Entities owned or controlled by the        Government**                                           |   |            |   |         |   |           |   |            |   |      |   |         |   |      |   |         |
| Enel                                                                                                |   | 261             |   | 2            |   |           |   |            |   |      |   | 31           |   | 1,465     |   | 341          |
|                                                                                                |   | **634**         |   | **791**      |   | **523**        |   | **100**         |   | **1,022** |   | **2,026**    |   | **2,360** |   | **626**      |
|                                                                                                |   |                 |   |              |   |                |   |                 |   |           |   |              |   |           |   |              |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

Engineering, construction and maintenanceservices were acquired from the Cosmi Holding Group, related toEni through a member of the Board of Directors, for a total ofapproximately euro 18 million and 29 million in 2002 and 2003,respectively.

Mostsignificant transactions concern:

| - |   | specialized        services in upstream activities to Petrobel Belayim        Petroleum Co, Karachaganak Petroleum Operating BV, Eni        Oil Co Ltd and Eni Gas BV; services are invoiced on the        basis of incurred costs; exclusively with Karachaganak        Petroleum Operating BV, the providing of services by        Eni’s construction and drilling activity, and with        Eni Gas BV, the unsecured guarantees in relation to the        construction of a hydrocarbon treatment plant in Libya        and receivables and payables for investment activities; |
|---|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | communication        services, data transmission and concessions of optical        fibers with Albacom SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| - |   | transportation        and distribution activities with Azienda Energia e        Servizi SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| - |   | sale of        petrochemical products, supply of crude oil, refining        activities and fuel additive purchase from Bronberger        & Kessler Handelsgesellschaft U. Gilg & Schweiger        GmbH Co Kg, Bernhard Rosa Inh. Ingeborg Plochinger GmbH,        Gruppo Distribuzione Petroli Srl, Bayernoil        Raffineriegesellschaft GmbH and Superoctanos CA;                                                                                                                                                                                                            |
| - |   | acquisition        of natural gas transport services outside Italy from Blue        Stream Pipeline Co BV and services for the completion of        a pipeline between Turkey and the Russian Federation;                                                                                                                                                                                                                                                                                                                                                                                |
| - |   | acquisition        of refining services from Raffineria di Milazzo ScpA and        Erg Raffinerie Mediterranee Srl on the basis of incurred        costs for Raffineria di Milazzo ScpA, and general        conditions applied to third parties for Erg Raffinerie        Mediterranee Srl; the concession to Erg SpA of an option        for the purchase of the 28% of Erg Raffinerie        Mediterranee Srl;                                                                                                                                                                         |
| - |   | sale and        purchase of natural gas outside Italy with Promgas SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| - |   | factoring        activities with Serfactoring SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| - |   | acquisition        of natural gas transport services outside Italy from        Trans Austria Gasleitung GmbH, Transitgas AG and Trans        Europa Naturgas Pipeline GmbH, transactions are regulated        on general conditions applied to third parties;                                                                                                                                                                                                                                                                                                                            |
| - |   | performance        guarantees given on behalf of Unión Fenosa Gas SA in        relation to contractual commitments related to the        results of operations;                                                                                                                                                                                                                                                                                                                                                                                                                     |
| - |   | guarantees        given in relation to the construction of an oil pipeline        on behalf of Eni BTC Ltd;                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| - |   | acquisition        of natural gas transport services outside Italy from        Transmediterranean Pipeline Co Ltd; transactions are        regulated on the basis of tariffs, which permit the        recovery of operating expenses and capital employed.                                                                                                                                                                                                                                                                                                                               |

Transactions with Enel concern the sale andtransportation of natural gas, sale of fuel oil and sale andpurchase of electricity.

 

**2003 Financing transactions**

 

| (million        euro) |   | **Dec. 31, 2003** |   | **2003** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

| **Name**                                      |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Charges** |   | **Gains** |
|-----------------------------------------------|--------|-----------------|--------|--------------|--------|----------------|--------|-------------|--------|-----------|
|                                          |   |                 |   |              |   |                |   |             |   |           |
| **Affiliated companies**                      |   |            |   |         |   |           |   |        |   |      |
| Albacom        SpA                            |   | 54              |   |         |   | 88             |   | 13          |   |      |
| Blue Stream Pipeline Co BV                    |   |            |   | 4            |   | 725            |   |        |   | 26        |
| EnBW - Eni        Verwaltungsgesellschaft mbH |   |            |   |         |   | 275            |   |        |   | 4         |
| Raffineria di Milazzo ScpA                    |   |            |   |         |   | 113            |   |        |   |      |
| Serfactoring        SpA                       |   | 50              |   |         |   |           |   |        |   | 1         |
| Trans Austria Gasleitung GmbH                 |   | 399             |   |         |   |           |   |        |   | 14        |
| Other (*)                                     |   | 50              |   | 65           |   | 104            |   | 3           |   | 6         |
|                                          |   | **553**         |   | **69**       |   | **1,305**      |   | **16**      |   | **51**    |
| **Non        consolidated subsidiaries**      |   |            |   |         |   |           |   |        |   |      |
| Transmediterranean Pipeline Co Ltd            |   | 241             |   |         |   |           |   |        |   | 11        |
| Other (*)                                     |   | 90              |   | 65           |   | 7              |   | 18          |   | 2         |
|                                          |   | **331**         |   | **65**       |   | **7**          |   | **18**      |   | **13**    |
|                                          |   | **884**         |   | **134**      |   | **1,312**      |   | **34**      |   | **64**    |
|                                          |   |                 |   |              |   |                |   |             |   |           |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

Most significant transactions concern:

| - |   | lendings and        guarantees to Albacom SpA and Serfactoring SpA;                                                                                                                                                                                                                        |
|---|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | bank debt        guarantees to Blue Stream Pipeline Co BV, EnBW - Eni        Verwaltungsgesellschaft mbH and Raffineria di Milazzo        ScpA;                                                                                                                                            |
| - |   | the financing        of the Austrian section of the gasline from the Russian        Federation to Italy and the construction of natural gas        transmission facilities and transport services with Trans        Austria Gasleitung GmbH and Transmediterranean Pipeline        Co Ltd. |

During the year, business transactions haveoccured between Eni and unconsolidated subsidiaries andaffiliates for non significant amounts.

 

**2002 Tradeand other transactions**

 

| (million        euro) |   | **Dec. 31, 2002** |   | **2002** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

|   |   | **Costs** |   | **Revenues** |
|--------|--------|-----------|--------|--------------|
|   |   |           |   |              |

| **Name**                                                                                     |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Goods** |   | **Services** |   | **Goods** |   | **Services** |
|----------------------------------------------------------------------------------------------|--------|-----------------|--------|--------------|--------|----------------|--------|-----------|--------|--------------|--------|-----------|--------|--------------|
|                                                                                         |   |                 |   |              |   |                |   |           |   |              |   |           |   |              |
| **Affiliated companies**                                                                     |   |            |   |         |   |           |   |      |   |         |   |      |   |         |
| Bayernoil        Raffineriegesellschaft mbH                                                  |   |            |   | 28           |   |           |   |      |   | 652          |   | 1         |   |         |
| Promgas SpA                                                                                  |   | 23              |   | 25           |   |           |   | 212       |   |         |   | 227       |   |         |
| Erg        Raffinerie Mediterranee Srl                                                       |   | 27              |   | 30           |   |           |   | 14        |   | 137          |   | 69        |   |         |
| Petrobel Belayim Petroleum Co                                                                |   |            |   | 86           |   |           |   |      |   | 164          |   |      |   |         |
| Raffineria        di Milazzo ScpA                                                            |   | 6               |   | 6            |   |           |   |      |   | 159          |   | 55        |   | 1            |
| Superoctanos CA                                                                              |   | 4               |   | 18           |   |           |   | 181       |   |         |   |      |   |         |
| Trans        Austria Gasleitung GmbH                                                         |   |            |   | 12           |   |           |   |      |   | 176          |   |      |   |         |
| Bronberger & Kessler Handelsgesellschaft U.        Gilg & Schweiger GmbH & Co Kg |   | 10              |   |         |   |           |   |      |   | 60           |   | 117       |   |         |
| Albacom        SpA                                                                           |   | 22              |   | 12           |   |           |   | 2         |   | 53           |   | 1         |   | 8            |
| Serfactoring SpA                                                                             |   | 2               |   | 94           |   |           |   |      |   |         |   |      |   |         |
| Bernhard        Rosa Inh. Ingeborg Plochinger GmbH                                           |   | 8               |   |         |   |           |   |      |   | 35           |   | 84        |   |         |
| Azienda Energia e Servizi SpA                                                                |   | 2               |   | 22           |   |           |   |      |   | 55           |   | 2         |   | 2            |
| Gruppo        Distribuzione Petroli Srl                                                      |   | 16              |   |         |   |           |   |      |   |         |   | 66        |   |         |
| Karachaganak Petroleum Operating BV                                                          |   | 40              |   | 13           |   |           |   |      |   | 52           |   |      |   | 214          |
| Transitgas        AG                                                                         |   |            |   | 7            |   |           |   |      |   | 56           |   |      |   |         |
| Trans Europa Naturgas Pipeline GmbH                                                          |   |            |   | 9            |   |           |   |      |   | 43           |   |      |   |         |
| Blue        Stream Pipeline Company BV                                                       |   | 50              |   |         |   |           |   |      |   |         |   |      |   | 489          |
| Agip Oil Co Ltd                                                                              |   | 27              |   | 12           |   |           |   |      |   | 83           |   |      |   |         |
| Other (*)                                                                                    |   | 32              |   | 67           |   | 147            |   | 55        |   | 57           |   | 105       |   | 14           |
|                                                                                         |   | **269**         |   | **441**      |   | **147**        |   | **464**   |   | **1,782**    |   | **727**   |   | **728**      |
| **Non        consolidated subsidiaries**                                                     |   |            |   |         |   |           |   |      |   |         |   |      |   |         |
| AgipGas BV                                                                                   |   | 13              |   | 94           |   | 412            |   |      |   | 3            |   |      |   |         |
| Agip (Btc)                                                                                   |   |            |   |         |   | 206            |   |      |   |         |   |      |   |         |
| Transmediterranean Pipeline Co Ltd                                                           |   | 6               |   | 1            |   |           |   |      |   | 122          |   |      |   |         |
| Other (*)                                                                                    |   | 26              |   | 18           |   | 39             |   | 7         |   | 35           |   | 8         |   | 32           |
|                                                                                         |   | **45**          |   | **113**      |   | **657**        |   | **7**     |   | **160**      |   | **8**     |   | **32**       |
|                                                                                         |   | **314**         |   | **554**      |   | **804**        |   | **471**   |   | **1,942**    |   | **735**   |   | **760**      |
| **Entities owned or controlled by the        Government**                                    |   |            |   |         |   |           |   |      |   |         |   |      |   |         |
| Enel                                                                                         |   | 42              |   | 5            |   |           |   |      |   | 76           |   | 1,475     |   | 308          |
|                                                                                         |   | **356**         |   | **559**      |   | **804**        |   | **471**   |   | **2,018**    |   | **2,210** |   | **1,068**    |
|                                                                                         |   |                 |   |              |   |                |   |           |   |              |   |           |   |              |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

Engineering, construction and maintenanceservices were acquired from the Cosmi Holding Group, related toEni through a member of the Board of Directors for a total ofapproximately euro 18 million in 2002.

The mostsignificant transactions related to:

| - |   | acquisition        of natural gas transport services outside Italy from        Trans Austria Gasleitung GmbH, Transitgas AG, Trans        Europa Naturgas Pipeline GmbH e Transmediterranean        Pipeline Co Ltd, transactions are regulated on the basis        of tariffs, which permit the recovery of operating        expenses and employed capital;                     |
|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | sale of        natural gas outside Italy with Promgas SpA;                                                                                                                                                                                                                                                                                                                       |
| - |   | specialized        services in upstream activities to Petrobel Belayim        Petroleum Co, Karachaganak Petroleum Operating BV, Agip        Oil Co Ltd and AgipGas BV; services are invoiced on the        basis of incurred costs; and exclusively with        Karachaganak Petroleum Operating BV, services are        provided by Eni’s oilfield services;              |
| - |   | acquisition        of refining services from Raffineria di Milazzo ScpA and        Erg Raffinerie Mediterranee Srl on the basis of incurred        costs for Raffineria di Milazzo ScpA, and general        conditions applied to third parties for Erg Raffinerie        Mediterranee Srl;                                                                                      |
| - |   | sale of        petrochemical products, supplying of crude oil refining        activities and fuel additive purchases from Bronberger        & Kessler Handelsgesellschaft U. Gilg & Schweiger        GmbH Co Kg, Bernhard Rosa Inh. Ingeborg Plochinger GmbH,        Gruppo Distribuzione Petroli Srl, Bayernoil        Raffineriegesellschaft GmbH and Superoctanos CA; |
| - |   | communication        services, data transmission and concessions of optical        fibers with Albacom SpA;                                                                                                                                                                                                                                                                      |
| - |   | the        construction of a pipeline between Turkey and the Russian        Federation for Blue Stream Pipeline Co BV;                                                                                                                                                                                                                                                           |
| - |   | factoring        activities with Serfactoring SpA;                                                                                                                                                                                                                                                                                                                               |
| - |   | transportation        and distribution activities with Azienda Energia e        Servizi SpA;                                                                                                                                                                                                                                                                                     |
| - |   | guarantees        given in relation to the construction of an oil pipeline        by Agip (Btc).                                                                                                                                                                                                                                                                                 |

Transactions with Enel concern the sale andtransportation of natural gas, sale of fuel oil and sale andpurchase of electricity.

 

**2002 Financing transactions**

 

| (million        euro) |   | **Dec. 31, 2002** |   | **2002** |
|-----------------------|--------|-------------------|--------|----------|
|                  |   |                   |   |          |

| **Name**                                    |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Charges** |   | **Gains** |
|---------------------------------------------|--------|-----------------|--------|--------------|--------|----------------|--------|-------------|--------|-----------|
|                                        |   |                 |   |              |   |                |   |             |   |           |
| **Affiliated companies**                    |   |            |   |         |   |           |   |        |   |      |
| Blue        Stream Pipeline Co BV           |   |            |   | 15           |   | 874            |   |        |   | 30        |
| Transitgas AG                               |   | 655             |   |         |   |           |   |        |   | 10        |
| Trans        Austria Gasleitung GmbH        |   | 448             |   |         |   |           |   |        |   | 15        |
| EnBW - Eni Verwaltungsgesellschaft mbH      |   | 264             |   |         |   |           |   |        |   |      |
| Serfactoring        SpA                     |   | 46              |   |         |   |           |   |        |   | 2         |
| Superoctanos CA                             |   | 2               |   |         |   | 40             |   |        |   |      |
| Bayernoil        Raffineriegesellschaft mbH |   | 24              |   |         |   |           |   |        |   |      |
| Other (*)                                   |   | 72              |   | 80           |   | 91             |   | 9           |   | 7         |
|                                        |   | **1,511**       |   | **95**       |   | **1,005**      |   | **9**       |   | **64**    |
| **Non consolidated subsidiaries**           |   |            |   |         |   |           |   |        |   |      |
| Transmediterranean        Pipeline Co Ltd   |   | 326             |   |         |   | 95             |   |        |   | 18        |
| Agip (Btc)                                  |   | 27              |   |         |   |           |   |        |   |      |
| Other (*)                                   |   | 47              |   | 68           |   | 5              |   | 7           |   | 2         |
|                                        |   | **400**         |   | **68**       |   | **100**        |   | **7**       |   | **20**    |
|                                        |   | **1,911**       |   | **163**      |   | **1,105**      |   | **16**      |   | **84**    |
|                                        |   |                 |   |              |   |                |   |             |   |           |

___________________

(*) Each individual amount included herein doesnot exceed euro 50 million.

 

The most significant transactions related to:

| - |   | guarantees        provided to banks and related fees to Turkey, the        financing of the doubling of the Italy/the Netherlands        pipeline in the Swiss section and the financing of the        Austrian section of the gasline from the Russian        Federation to Italy and the construction of natural gas        transmission facilities and transport services with Blue        Stream Pipeline Co BV, Transitgas AG, Trans Austria        Gasleitung GmbH and Transmediterranean Pipeline Co Ltd; |
|---|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | concessions        of loans to EnBW - Eni Verwaltungsgesellschaft mbH for        the acquisition of Gasversorgung Süddeutschland GmbH;                                                                                                                                                                                                                                                                                                                                                                      |
| - |   | concessions        and guarantees provided to banks in relation to lendings        to Serfactoring SpA, Bayernoil Raffineriegesellschaft        mbH, Superoctanos CA and Agip (Btc).                                                                                                                                                                                                                                                                                                                             |

 

**27 Summary of significantdifferences between Italian accounting principles and U.S. GAAP**

Eni’s financial statements have beenprepared in accordance with Italian GAAP, which differs incertain respects from U.S. GAAP. A description of the significantdifferences and their effects on net income andshareholders’ equity is set forth in the following notes.Those differences described below that are not included in thereconciliations of net income or shareholders’ equity (seeNote 28), either had no effect, or their effect was notsignificant. See also Note 2, Summary of significant accountingand reporting policies for additional information on theaccounting principles that Eni follows.

**A) Consolidation policy**

Eni’s consolidation policy is describedunder "Principles of consolidation" of the Notes to theConsolidated Financial Statements. In particular, under ItalianGAAP, the consolidated financial statements include alsocompanies in which Eni holds less than 50% of the voting rights,but over which it exercises control in shareholders’meetings.

Under U.S. GAAP, investments of less than 50%are accounted for by applying the equity method. Saipem SpA(43.0%), and its subsidiaries which are controlled by Eni withoutholding the majority of voting rights, have been consolidatedunder the equity method for U.S. GAAP purposes.

In addition, U.S. GAAP also requires an entitywho absorbs the majority of a variable interests entity’s("VIE") expected losses or, in the absence of this, themajority of a VIE’s expected residual returns (such anentity being the "Primary Beneficiary") to consolidatethe VIE. A VIE is an entity that meets any of the followingcriteria: (i) it has a total equity investment at risk that isnot sufficient to finance its activities without additionalsubordinated financial support from other parties; (ii) theequity owners do not have the ability to make significantdecisions about the entity’s activities through voting orsimilar rights; (iii) the equity owners do not have an obligationto absorb the entity’s expected losses, or (iv) the equityowners do not have the right to receive the entity’sexpected residual returns. This difference in consolidationpolicies, as it was applied to entities created by Eni afterJanuary 31, 2003, did not result in any differences between U.S.GAAP and Italian GAAP.

**B) Exploration & Production activities**

*Exploration*

Under Italian GAAP, exploration costs,including successful exploratory wells, are recorded asintangible assets and are amortized in full in the periodincurred (i.e. expensed as incurred for financial reportingpurposes). Costs for the acquisition of exploration permits arecapitalized and amortized over the expected period of benefit.

Under U.S. GAAP, costs relating to exploratorywells are initially capitalized as "incomplete wells andother" until it is determined if commercial quantities ofreserves have been discovered ("successful effortsmethod"). That determination is made after completion ofdrilling the well, and the capitalized costs are either chargedto expense or reclassified as part of Eni’s proved mineralinterests. Costs of exploratory wells that have foundcommercially producible quantities of reserves that cannot beclassified as proved remain capitalized if such wells have foundsufficient quantities of reserves to justify their completion ifthe required capital expenditure is made, and the Company haseither firm plans to drill additional wells necessary todetermine the existence of proved reserves or is awaitingregulatory approvals. Otherwise, exploratory well costs aregenerally expensed upon the earlier of determining that provedreserves have not been found, or within one year of completingdrilling. Capitalized well costs related to proved properties areamortized over proved developed reserves on the basis of units ofproduction. Other exploration costs, including geological andgeophysical surveys, are expensed when incurred. See theparagraph "Suspended exploratory wells" in Note No. 29"Additional Information" for a discussion of FASB StaffPosition on Statement 19 (FSP FAS 19-1) of April 4, 2005.

*Development*

Development costs are those costs incurred toobtain access to proved reserves and to provide facilities forextracting, treating, gathering and storing oil and gas. Costs tooperate and maintain wells and field equipment are expensed asincurred.

Under Italian GAAP, costs of unsuccessfuldevelopment wells are expensed immediately. Costs of successfuldevelopment wells are capitalized and amortized on the basis ofunits of production.

Under U.S. GAAP, costs of productive wells anddevelopment dry holes, both tangible and intangible, arecapitalized and amortized with the unit-of-production method.

**C) Valuation of assets and subsequentrevaluation**

Both Italian and U.S. GAAP require that assetswhich are impaired be written down to their fair value. However,under Italian GAAP, in order to determine whether an impairmentexists, the book value of an asset in question is compared to thesum of the discounted cash flows expected to be generated by suchasset. If the sum of such discounted cash flows is less than thecarrying value of the asset, an impairment exists.

Under U.S. GAAP, SFAS 144 requires theperformance of the same analysis using undiscounted cash flows.

In addition, under Italian GAAP impairmentcharges are reversed when the situation giving rise to animpairment ceases to exist. Under U.S. GAAP reversals ofimpairment charges are not permitted.

**D) Monetary revaluation of assets**

Under Italian GAAP, certain assets have beenrevalued at various times in accordance with various Italianlaws.

Under U.S. GAAP, such revaluations are notpermitted.

**E) Deferred tax assets and liabilities**

Under Italian GAAP deferred taxes are recordedif recoverable with reasonable certainty. Taxes payable relatingto certain potential distributions from shareholders’ equityor upon liquidation of a company are accrued only to the extentsuch distributions are planned. Any timing difference betweenpurchase price and the tax basis of an asset acquired does notresult in the recording of an adjustment to the carrying value ofsuch asset.

Under U.S. GAAP, deferred tax assets arerecorded if their recovery is more likely than not. The potentialtaxes on equity reserves are considered deferred tax liabilitiesand are accrued accordingly. Deferred income taxes have not beenprovided on undistributed earnings of foreign subsidiaries assuch earnings are expected to be permanently reinvested. Inaddition, under U.S. GAAP, in situations where the purchase priceof assets is not equal to the tax basis, deferred taxes must beprovided for such differences and recorded as part of theacquisition.

The adjustments included in the reconciliationsto U.S. GAAP take into account the realizability of deferred taxassets, based on the more likely than not criteria rather thanthe certainty of their recovery, deferred taxes on undistributedearnings of subsidiaries and deferred taxes on acquired temporarydifferences. The adjustments also include the deferred tax effectof U.S. GAAP adjustments.

**F) Depreciation of fixed assets**

Under Italian GAAP, until 1999, in accordancewith Italian practice, depreciation of natural gas pipelines,natural gas distribution networks and related plant andmachinery, was accounted for by applying rates on a straight-linebasis established by Italian tax authorities on the basis oftechnical studies conducted for homogeneous industries.

Under U.S. GAAP, depreciation expense isrecognized based on the estimated economic useful lives of theassets.

The publication of Legislative Decree No. 164of May 23, 2000, which imposed the separation of transmission anddistribution activities from other natural gas activities and setthe criteria for the determination of transport and distributiontariffs by the Authority for Electricity and Gas led companiesoperating in this segment to re-evaluate the useful lives of theassets. The useful lives calculated by Eni (40 years forpipelines and 50 for distribution networks) were confirmed by anindependent appraisal and by the documents issued by theAuthority for Electricity and Gas. Therefore, from 2000 assetsrelated to transmission and distribution activities areamortized, both under Italian GAAP and U.S. GAAP, based on thesenew useful lives.

**G) Intangible assets**

Under Italian GAAP, goodwill is amortized on astraight-line basis in the utilization period, over a maximumperiod of twenty years. Other intangible assets are amortizedsystematically in relation to their residual useful life.

Under U.S. GAAP goodwill and intangible assetswith an indefinite useful life are not amortized; these assetsare subject to a yearly evaluation in order to define therelevant impairment if needed.

Identifiable intangible assets acquired as partof a business combination with finite useful lives are amortizedby the straight line method over their useful lives.

Under Italian GAAP, such intangible assets arenot recorded separately from goodwill.

**H) Capitalized interest expense**

Under Italian GAAP, Eni capitalizes interestexpense only if certain conditions are met in theself-construction of assets.

Under U.S. GAAP, interest is capitalized to theextent a company has fixed assets under construction during thereporting period and has outstanding interest bearing debt.

**I) Derivatives**

Under Italian GAAP, derivative contracts areevaluated differently if they are used as hedging or asspeculative instruments. Eni values derivatives that are used forhedging purposes, but that are not designated against specifictransactions, according to the nature of the hedged assets. Inparticular, interest differences on derivatives hedging interestrates and premiums and discounts on exchange rate risk hedgingcontracts are recorded in the income statement over the term ofthe contracts. The currency component of exchange rate riskhedging is recorded in the income statement in the year in whichthe hedged asset/liability is first recorded. Profits onderivative contracts on price risks are recorded in the incomestatement as offsetting the depreciation of the hedged asset.Losses are recorded when incurred. Derivative contracts used asspeculative instruments are recorded at fair value and therelated effects are recorded in the income statement.

Under U.S. GAAP, SFAS 133 "Accounting forDerivative Instruments and Hedging Activities" establishesaccounting and reporting for derivative instruments and hedgingactivities. In general SFAS 133 requires that companies recognizeall derivatives as either assets or liabilities on the balancesheet and measure those instruments at fair value. Eni adoptedSFAS 133 for U.S. reporting purposes on January 1, 2001. Eni usesderivative instruments to manage the risk of fluctuations incommodity prices, interest rates and foreign currency (see Note23). SFAS 133 requires that derivative instruments that hedge thevariability of expected cash flow, the fair value of anunderlying, or currency other than euro related to a specificrisk are designated as a cash flow hedge, fair value hedge, orforeign currency hedge, respectively. Changes in the fair valueof derivative instruments designated and effective as fair valuehedges are recognized through earnings and changes in the fairvalue of cash flow hedges are recognized through equity as acomponent of other comprehensive income.

For U.S. GAAP purposes, upon adoption of SFAS133, the current U.S. GAAP hedging relationships for Eni’sexisting derivative instruments were de-designated; movements inthe fair value of derivative instruments have been recorded asadjustments to U.S. GAAP net income as reflected in Note 28.

**J) Stock compensation**

Under Italian GAAP, stock grant and optionplans issued and offered to employees for no considerationbeginning in 2003 by using treasury shares have been recorded ascompensation expense on the basis of the fair value and arerecognized under a pro rata mechanism during their vestingperiod.

The accounting method adopted under ItalianGAAP is consistent with the requirements of SFAS 123 with theexception that under U.S. GAAP the costs related to stock grantsare recorded as contra accounts within the equity accounts andthe treasury shares remain recorded at cost.

Both under U.S. GAAP and Italian GAAP, the newcriteria have been applied prospectively in compliance withStatement of Financial Accounting No. 148 "Accounting forStock Based Compensation – Transition and disclosure"(SFAS 148). Eni has applied the fair value method of grants made,modified or settled on or after January 1, 2003.

Prior to January 1, 2003, under Italian GAAP,stock grant and option plans offered to employees for noconsideration were recorded when the shares were issued or sold.In particular, stock grants made for no cash consideration wererecorded at nominal value as a debit against the specific equityreserve; shares issued after exercise of options were recorded:(i) as capital increase for the nominal value and as an increasein the special reserve for the difference between amounts paidfor exercising the options and the nominal value of issuedshares, if the plan requires a capital increase; (ii) as adecrease in treasury shares charging to income statement thedifference between the strike price and book value of soldshares, if the plan requires the utilization of treasury shares.

Prior to January 1, 2003, under U.S. GAAP,stock grant and option plans offered to employees were recordedas compensation expense for the excess of the market value overthe exercise price of the stock on the measurement date. Suchcompensation expense was recorded over the period of benefit.

Costs related to stock grant and option plansoffered to employees for no consideration until December 31, 2002have been included in the adjustment of net income under U.S.GAAP (see Note 28).

Eni does not give stock compensation inexchange of goods and services from non-employees.

**K) Stock issuance costs**

Under Italian GAAP, direct costs for issuancesof equity are capitalized by Eni in the account "Intangibleassets - organizational and financing costs" and amortizedover their economic useful lives, not to exceed 5 years.

Under U.S. GAAP, costs associated withobtaining new capital by issuing common or preferred stock areconsidered as a reduction of the related proceeds and recorded asa net amount in equity.

**L) Marketable securities**

Under Italian GAAP, marketable securities arecarried at the lower of purchase cost or market value.

Under U.S. GAAP, the accounting for investmentsin marketable securities uses a fair market value methodology.Eni’s marketable securities would be classified asavailable-for-sale with changes in market value recorded ascomprehensive income which is a component of shareholders’equity.

**M) Costs related to site restoration andabandonment**

Under Italian GAAP, costs related to siterestoration and abandonment are evaluated annually on the basisof costs expected to be incurred for laws and regulations andcontractual obligations.

Under Italian GAAP, Eni accrues its abandonmentand restoration costs, estimated on an undiscounted basis,rateably over the productive lives of its assets using theunits-of-production method.

Under U.S. GAAP, SFAS 143 requires entities torecord the fair value of a liability for an asset retirementobligations (ARO) in the period when it is incurred (typically atthe time the asset is installed at the productions location).When the liability is initially recorded, the capitalized costsof the related fixed assets will be increased by an equalcorresponding amount. Over time, the liabilities are increasedfor the change in their present value each period, and theinitial capitalized costs are depreciated over the useful livesof the related assets.

The recognized asset retirement obligationsliability amounts are based upon future retirement cost estimatesand incorporate many assumptions such as expected recoverablequantities of crude oil and natural gas, time to abandonment,future inflation rates and the risk-free rate of interestadjusted for the Company’s credit costs.

No significant legal obligations to retirerefining, transportation, marketing (downstream) and chemicallong-lived assets were generally recognized, as indeterminatesettlement dates for the asset retirements prevented estimationof the fair value of the associated asset retirement obligations.The company performs periodic reviews of its downstream andchemical long-lived assets for any changes in facts andcircumstances that might require recognition of a retirementobligation, either under U.S. GAAP or Italian GAAP.

**N) Treasury shares**

Under Italian GAAP, treasury shares, acquiredas long-term investments, are recorded at cost adjusted forimpairment. When the reasons for the impairment cease to exist,treasury shares are revalued. From 2003 treasury shares purchasedin relation to group incentive plans are carried at the lower ofpurchase cost or fair value for stock grants and at the lower ofpurchase cost or strike price for stock options. Treasury sharespurchased in relation to incentive plans to be issued are carriedat the lower of purchase cost or market value.

Under U.S. GAAP, all treasury shares arerecorded at cost. Such difference did not generate differencesbetween U.S. GAAP and Italian GAAP in 2002 and 2004 and did notgenerate significant differences between U.S. GAAP and ItalianGAAP in 2003.

**O) Extraordinary income and expense**

All items recorded by Eni as extraordinaryunder Italian GAAP in the periods presented herein would notqualify as extraordinary under U.S. GAAP. Such items have beenreclassified to the appropriate income statement captions asdetermined by U.S. GAAP, certain of which have been included inthe determination of operating income by segment. In addition,under U.S. GAAP, extraordinary items are presented net of tax.

**P) Sales ofgovernment bonds**

Eni accounted for government bonds transferredprimarily to employees at par value, with the repurchasingcommitment at the same value, as sales of bonds, and recognizedthe related gains in current income. For U.S. GAAP purposes, theterms of these transactions would result in their treatment asfinancing transactions and consequently in a cash flow statementprepared under U.S. GAAP, these cash flows would be included infinancing activities. Under this method, the bonds would remainas assets and the proceeds from the "sales" would betreated as financing obligations. Gains and losses from suchsales are not significant.

**Q) Reclassification of inventory**

Compulsory stock relates primarily to theItalian operations. Under Italian law Eni is required to retaincertain strategic quantities of natural gas and petroleumproducts ("compulsory stock") in its storage facilitiesat all times. Eni values natural gas and petroleum products heldas compulsory stock as inventories that are subject to lower ofcost or market valuations annually.

Under U.S. GAAP, current assets, such asinventories, are reasonably expected to be realized in cash orsold or consumed during the normal operating cycle of thebusiness, which for Eni is twelve months. As Eni’scompulsory stock is not expected to be sold or consumed withinthe next twelve months, compulsory stock amounts are recorded,for U.S. GAAP purposes, in non-current assets under the captionNon-current Inventories (Compulsory Stock).

**R) Comprehensive Income**

Under Italian GAAP disclosure of ComprehensiveIncome and its component is not required.

U.S. GAAP requires the reporting and display ofcomprehensive income and its components in accordance withStatement of Financial Standard No. 130, "ReportingComprehensive Income" ("SFAS 130"). Components ofother comprehensive income include variations in equity accountsnot attributable to transactions already recorded in income ortransaction with shareholders. The required information pursuantto SFAS 130 is presented in the reconciliation that follows.Deferred tax effects of exchange differences from the translationof functional currency financial statements have not beenrecorded as provided for by SFAS 109, which permits the exclusionof the calculation of taxes on equity reserves of foreignsubsidiaries when the reserves are not expected to be released.

**S) Earnings per share**

Under Italian GAAP prior year earnings pershare is recalculated each year to include in theweighted-average number of shares the number of shares issuedthrough stock grants made in 2004, related to stock grant plansapproved by Eni as of December 31, 2002.

Under U.S. GAAP prior year earnings per shareis not adjusted for the exercise of stock grants in 2004.

This difference did not generate a significantdifference between U.S. GAAP and Italian GAAP.

Beginning in 2003 stock grant and option plansapproved by Eni have been recorded with equivalent criteria bothunder Italian GAAP and U.S. GAAP. For this reason there are nodifferences in the calculation of earnings per share between U.S.GAAP and Italian GAAP.

**T) Guarantees**

Under Italian GAAP guarantees are recorded inother memorandum accounts; when it is probable or certain that aguarantee will produce a liability, its estimated amount isaccrued in a specific reserve as a component of equity.

U.S. GAAP requires a company to recognize aliability for the obligations it has undertaken in issuingguarantees. This liability is to be recorded at the inception ofa guarantee and would be measured at fair value.

This difference did not generate a significantdifference between U.S. GAAP and Italian GAAP.

**U) Liabilities for redundancies**

Under Italian GAAP, expected liabilities forredundancy incentives are accrued in "Reserves forcontingencies - Other", when a workforce reduction programis defined, the legislation is issued or, if necessary,agreements of negotiated contracts with trade unions are made andthe liability can be reasonably estimated. Costs relating toclosures of facilities are recorded when the liability isprobable and it can be reasonably estimated.

Under U.S. GAAP, expected liabilities forinvoluntary redundancy incentives are expensed when the liabilityhas been incurred and when it can be measured at fair value. Theadjustment to U.S. GAAP represents redundancy costs recognizedunder Italian GAAP, which did not meet the U.S. GAAP criteria foraccruing a liability.

 

**28 Reconciliations betweennet income and shareholders’ equity determined under ItalianGAAP to U.S. GAAP**

The following is a summary of the significantadjustments to net income for the years ended December 31, 2002,2003 and 2004 and to shareholders’ equity as of December 31,2003 and 2004 that would be required if U.S. GAAP had beenapplied instead of Italian GAAP in the consolidated financialstatements.

**Reconciliation of net income**

 

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Net income according to the financial        statements prepared under Italian GAAP**                                                          |   | **4,593** |   |   | **5,585** |   |   | **7,274** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Items        increasing (decreasing) reported net income:                                                                                        |   |      |   |   |      |   |   |      |   |
| A. effect of the differences related to        companies consolidated under Italian GAAP but carried at        equity method under U.S. GAAP (a) |   | 56        |   |   | 44        |   |   | 33        |   |
| A. effect        of the differences related to companies carried on the        equity method                                                     |   | 106       |   |   | 107       |   |   | 134       |   |
| B. successful-efforts accounting                                                                                                                 |   | 222       |   |   | 23        |   |   | (79       | )      |
| C. asset        impairments and revaluations                                                                                                     |   | 71        |   |   | 74        |   |   | (5        | )      |
| D. effect of the elimination of monetary        revaluations                                                                                     |   | 37        |   |   | (30       | )      |   | 4         |   |
| E.        deferred income taxes                                                                                                                  |   | (16       | )      |   | 286       |   |   | (928      | )      |
| F. use of different depreciation rates                                                                                                           |   | (67       | )      |   | (179      | )      |   | (116      | )      |
| G.        adjustment for the amortization of goodwill                                                                                            |   | 29        |   |   | 94        |   |   | 80        |   |
| G. differences in fair value assigned to assets        acquired in the purchase of a business                                                    |   |      |   |   | (6        | )      |   | (5        | )      |
| H.        capitalized interest expense                                                                                                           |   | (33       | )      |   | 1         |   |   | 6         |   |
| I. derivative contracts                                                                                                                          |   | 54        |   |   | (51       | )      |   | (106      | )      |
| J. stock        grants and options awarded to employees                                                                                          |   | (9        | )      |   | (15       | )      |   | (18       | )      |
| K. effect of the elimination of stock issuance        costs                                                                                      |   | 6         |   |   | 8         |   |   | 7         |   |
| M.        differences in the accrual for site restoration and        abandonment liabilities                                                     |   |      |   |   | (53       | )      |   | 109       |   |
| U. differences in reserves for contingencies                                                                                                     |   | 60        |   |   | 56        |   |   | 12        |   |
| Other        adjustments                                                                                                                         |   |      |   |   |      |   |   | 52        |   |
| Adjustments of gains on the sale of an interest        in a consolidated subsidiary(b)                                                           |   |      |   |   |      |   |   | (215      | )      |
| Effect of        U.S. GAAP adjustments on minority interest (c)                                                                                  |   | 183       |   |   | 154       |   |   | 162       |   |
| **Net adjustment**                                                                                                                               |   | **699**   |   |   | **513**   |   |   | **(873**  | **)**  |
| **Net        income in accordance with U.S. GAAP before cumulative        effect of change in accounting principles**                            |   | **5,292** |   |   | **6,098** |   |   | **6,401** |   |
| Effect of the initial application of SFAS 143 (d)                                                                                                |   |      |   |   | 198       |   |   |      |   |
| **Net        income in accordance with U.S. GAAP**                                                                                               |   | **5,292** |   |   | **6,296** |   |   | **6,401** |   |
| **Net income per share before cumulative effect        of change in accounting principles**(e)                                                   |   |      |   |   | **1.61**  |   |   |      |   |
| **Net        income per share resulting from the cumulative effect of        the initial application of SFAS 143**(e)                            |   |      |   |   | **0.05**  |   |   |      |   |
| **Net income per share including the cumulative        effect of the initial application of SFAS 143**(e)                                        |   | **1.38**  |   |   | **1.67**  |   |   | **1.70**  |   |
| **Net        income per ADS (based on five shares per ADS)**(e)                                                                                  |   | **6.92**  |   |   | **8.33**  |   |   | **8.49**  |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

___________________

| (a) |   | Adjustment        includes the aggregate effect of all differences between        Italian GAAP and U.S. GAAP related to companies fully        consolidated under Italian GAAP but accounted for under        the equity method under U.S. GAAP; specifically this        refers to Saipem SpA and its subsidiaries for the years        2004 and 2003 and to Italgas SpA and Saipem SpA and their        subsidiaries for the year 2002. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | This item refers to a        downward adjustment of the gain on the sale of a 9.054%        interest in the subsidiary Snam Rete Gas due to an        increase of net book value of this subsidiary due to the        use of different rates of depreciation for natural gas        pipelines and other adjustment under U.S. GAAP.                                                                                                       |
| (c) |   | Adjustment to        account for minority interest portion of differences B        through U, which include 100% of the differences between        Italian GAAP and U.S. GAAP on less than wholly-owned        subsidiaries.                                                                                                                                                                                                              |
| (d) |   | Total effect        for the years before January 1, 2003 net of income taxes        for euro 207 million.                                                                                                                                                                                                                                                                                                                                 |
| (e) |   | Amounts in        euro.                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

**Discontinuedoperations**

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| Analysis of net income between:   |   |      |   |   |      |   |   |      |   |
|-----------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| -        continuing operations    |   | 5,300     |   |   | 6,226     |   |   | 6,217     |   |
| - discontinuing operations        |   | (8        | )      |   | 70        |   |   | 184       |   |
| **Net        income (U.S. GAAP)** |   | **5,292** |   |   | **6,296** |   |   | **6,401** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**Amounts per share/ADS**

| (euro) |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| Net income per share:            |   |   |   |   |   |   |   |   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| -        continued operations    |   | 1.38   |   |   | 1.65   |   |   | 1.65   |   |
| - discontinued operations        |   | 0.00   |   |   | 0.02   |   |   | 0.05   |   |
| Net income        per ADS:       |   |   |   |   |   |   |   |   |   |
| - continued operations           |   | 6.93   |   |   | 8.24   |   |   | 8.25   |   |
| -        discontinued operations |   | (0.01  | )      |   | 0.09   |   |   | 0.24   |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Within the rationalization strategy of itsmineral asset portfolio, aimed at increasing its value byfocusing on strategic areas with good growth potential andleaving marginal areas, in 2004 Eni sold the following assetswhich have been classified as discontinued operations: (i)Eni’s interests in Blocks T (Eni operator with an 88.74%interest) and B (Eni operator with an average 70.2% interest)located in the British section of the North Sea off the Scottishcoast; (ii) its interest in the Markham and JC3 natural gasfields in the Southern section of the North Sea; (iii) proved andunproved property in Gabon: an 80% interest in the offshoreproducing Limande field and three offshore exploration permits;(iv) other minor assets.

Within its strategy of concentrating indownstream oil in Europe, in August 2004 Eni sold to theBrazilian company, Petrobras, its 100% interest in Agip do BrasilSA, engaged in the distribution of refined products.

Within its strategy of reducing capitalemployed in Petrochemicals, Eni concluded in January 2004 thesale of its plant for the production of elastomers in Baytown(Texas).

In October 2004, Eni sold a waste disposal unitin Ravenna.

Earnings or losses of these businesses, as wellas any impairment determined as a result of the expected salesproceeds, are reported as discontinued operations for all yearspresented in Eni’s reconciliation of net income determinedunder Italian GAAP to U.S. GAAP.

**Reconciliationof shareholders’ equity**

 

| (million        euro) |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|--------|-------------------|--------|-------------------|
|                  |   |                   |   |                   |

| **Shareholders’ equity according to the        financial statements prepared under Italian GAAP**                                          |   | **26,696** |   |   | **30,338** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Items        increasing (decreasing) reported shareholders’        equity: (a)                                                             |   |       |   |   |       |   |
| A. effect of the differences between Italian        GAAP and U.S. GAAP related to companies carried at equity        method under U.S. GAAP (b) |   | 52         |   |   | 85         |   |
| A. effect        of the differences related to companies carried at equity        method                                                        |   | 213        |   |   | 347        |   |
| B. successful-efforts accounting                                                                                                                |   | 2,253      |   |   | 2,072      |   |
| C. asset        impairments and revaluations                                                                                                    |   | 35         |   |   | 33         |   |
| D. elimination of monetary revaluations                                                                                                         |   | (80        | )      |   | (75        | )      |
| E.        deferred income taxes                                                                                                                 |   | (3,207     | )      |   | (4,212     | )      |
| F. use of different depreciation rates                                                                                                          |   | 2,551      |   |   | 2,435      |   |
| G.        goodwill                                                                                                                              |   | 121        |   |   | 296        |   |
| G. assets associated with the acquisition of a        company (portfolio of clients)                                                            |   | (6         | )      |   | (11        | )      |
| H.        capitalized interest expense                                                                                                          |   | 667        |   |   | 671        |   |
| I. derivative contracts                                                                                                                         |   | 61         |   |   | (42        | )      |
| K. stock        issuance costs                                                                                                                  |   | (17        | )      |   | (10        | )      |
| L. fair value of marketable securities                                                                                                          |   | 17         |   |   | 22         |   |
| M. site        restoration and abandonment liabilities (SFAS 143)                                                                               |   | 441        |   |   | 533        |   |
| U. reserves for contingencies                                                                                                                   |   | 116        |   |   | 128        |   |
| Other        adjustments                                                                                                                        |   |       |   |   | 57         |   |
| Effect of U.S. GAAP adjustments on minority        interest (c)                                                                                 |   | (965       | )      |   | (1,018     | )      |
| **Net        adjustment**                                                                                                                       |   | **2,252**  |   |   | **1,311**  |   |
| **Shareholders’ equity in accordance with        U.S. GAAP**                                                                               |   | **28,948** |   |   | **31,649** |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

___________________

| (a) |   | Items        increasing (decreasing) reported shareholders’        equity of foreign companies are translated into euro at        exchange rate prevailing at the end of each period.                                                                                                                           |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Adjustment        includes the aggregate effect of all differences between        Italian GAAP and U.S. GAAP related to companies fully        consolidated under Italian GAAP but accounted for under        the equity method under U.S. GAAP; specifically this        refers to Saipem SpA and its subsidiaries. |
| (c) |   | Adjustment to        account for minority interest portion of differences B        through U, which include 100% of the differences between        Italian GAAP and U.S. GAAP on less than wholly-owned        subsidiaries.                                                                                         |

Shareholders’equity under U.S. GAAP includes other comprehensive income, witha negative balance of euro 2,748 million and euro 3,531 millionas of December 31, 2003 and 2004, respectively. Such othercomprehensive income primarily relates to exchange ratedifferences resulting from the translation of financialstatements of foreign companies; amounts described are gross ofdeferred income taxes. The decrease in the other comprehensiveincome of euro 783 million regards essentially exchange ratedifferences due to the translation of financial statementsprepared in currencies other than the euro (euro 783 million; ofwhich euro 550 million related to companies whose functionalcurrency is the US dollar).

The consolidated balance sheets, if determinedunder U.S. GAAP would have been as follows:

 

| (million        euro) |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|-----------------------|--------|-------------------|--------|-------------------|
|                  |   |                   |   |                   |

| **ASSETS**                                                                                                                                   |   |       |   |   |       |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| **Current        assets**                                                                                                                    |   |       |   |   |       |   |
| Cash                                                                                                                                         |   | 1,224      |   |   | 988        |   |
| Marketable        securities                                                                                                                 |   | 1,462      |   |   | 1,475      |   |
| Accounts receivable trade, financing and other                                                                                               |   | 14,193     |   |   | 13,904     |   |
| Inventories                                                                                                                                  |   | 2,266      |   |   | 2,273      |   |
| Accrued interest and other                                                                                                                   |   | 601        |   |   | 494        |   |
| ***Total        current assets***                                                                                                            |   | **19,746** |   |   | **19,134** |   |
| **Non-current assets**                                                                                                                       |   |       |   |   |       |   |
| Fixed        assets, net                                                                                                                     |   | 38,468     |   |   | 39,652     |   |
| Non-current inventories (compulsory stock)                                                                                                   |   | 721        |   |   | 662        |   |
| Receivables                                                                                                                                  |   | 1,602      |   |   | 2,151      |   |
| Investments                                                                                                                                  |   | 4,010      |   |   | 4,331      |   |
| Intangible        assets                                                                                                                     |   | 5,547      |   |   | 5,125      |   |
| Other                                                                                                                                        |   | 1,901      |   |   | 1,299      |   |
| ***Total        non-current assets***                                                                                                        |   | **52,249** |   |   | **53,220** |   |
| **TOTAL ASSETS**                                                                                                                             |   | **71,995** |   |   | **72,354** |   |
| **LIABILITIES        AND SHAREHOLDERS’ EQUITY**                                                                                         |   |       |   |   |       |   |
| **Current liabilities**                                                                                                                      |   |       |   |   |       |   |
| Short-term        debt                                                                                                                       |   | 7,470      |   |   | 4,474      |   |
| Current portion of long-term debt                                                                                                            |   | 672        |   |   | 935        |   |
| Trade        accounts payable                                                                                                                |   | 5,146      |   |   | 5,385      |   |
| Advances                                                                                                                                     |   | 798        |   |   | 726        |   |
| Taxes        payable                                                                                                                         |   | 2,661      |   |   | 2,423      |   |
| Accrued expenses and other                                                                                                                   |   | 3,971      |   |   | 3,875      |   |
| ***Total        current liabilities***                                                                                                       |   | **20,718** |   |   | **17,818** |   |
| **Non-current liabilities**                                                                                                                  |   |       |   |   |       |   |
| Long-term        debt                                                                                                                        |   | 8,002      |   |   | 7,288      |   |
| Reserve for employee termination indemnities                                                                                                 |   | 524        |   |   | 556        |   |
| Reserves        for contingencies                                                                                                            |   | 5,444      |   |   | 5,698      |   |
| Deferred and other non-current income tax        liabilities                                                                                 |   | 5,943      |   |   | 6,579      |   |
| Accrued        expenses and other                                                                                                            |   | 594        |   |   | 461        |   |
| ***Total non-current liabilities***                                                                                                          |   | **20,507** |   |   | **20,582** |   |
| **TOTAL        LIABILITIES**                                                                                                                 |   | **41,225** |   |   | **38,400** |   |
| **Minority interests**                                                                                                                       |   | **1,822**  |   |   | **2,305**  |   |
| **Shareholders’        equity**                                                                                                         |   |       |   |   |       |   |
| Capital stock 4,004,424,476 fully paid shares        nominal value 1 euro each (4,002,922,176 fully paid        shares at December 31, 2003) |   | 4,003      |   |   | 4,004      |   |
| Reserves                                                                                                                                     |   | 21,813     |   |   | 24,473     |   |
| Treasury shares                                                                                                                              |   | (3,164     | )      |   | (3,229     | )      |
| Net income        for the year                                                                                                               |   | 6,296      |   |   | 6,401      |   |
| ***Total shareholders’ equity***                                                                                                        |   | **28,948** |   |   | **31,649** |   |
| **TOTAL        LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                   |   | **71,995** |   |   | **72,354** |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

 

The fixedassets, if determined under U.S. GAAP would have been as follows:

| (million        euro)                                              |   | **Dec. 31, 2003** |   | **Dec. 31, 2004** |
|--------------------------------------------------------------------|--------|-------------------|--------|-------------------|
|                                                               |   |                   |   |                   |
| Fixed asset, gross:                                                |   |              |   |              |
| -        Exploration & Production                              |   | 38,851            |   | 39,584            |
| - Gas & Power                                                  |   | 18,974            |   | 20,106            |
| - Refining        & Marketing                                  |   | 8,479             |   | 8,568             |
| - Petrochemicals                                                   |   | 3,780             |   | 3,793             |
| - Oilfield        Services Construction and Engineering            |   | 108               |   | 110               |
| - Other activities                                                 |   | 1,567             |   | 1,511             |
| -        Corporate and financial companies                         |   | 146               |   | 191               |
|                                                               |   | **71,905**        |   | **73,863**        |
| Less        accumulated depreciation, amortization and writedowns: |   |              |   |              |
| - Exploration & Production                                     |   | 17,678            |   | 18,155            |
| - Gas        & Power                                           |   | 6,605             |   | 6,896             |
| - Refining & Marketing                                         |   | 5,270             |   | 5,214             |
| -        Petrochemicals                                            |   | 2,522             |   | 2,564             |
| - Oilfield Services Construction and Engineering                   |   | 64                |   | 69                |
| - Other        activities                                          |   | 1,242             |   | 1,229             |
| - Corporate and financial companies                                |   | 56                |   | 84                |
|                                                               |   | **33,437**        |   | **34,211**        |
| Fixed assets, net:                                                 |   |              |   |              |
| -        Exploration & Production                              |   | 21,173            |   | 21,429            |
| - Gas & Power                                                  |   | 12,369            |   | 13,210            |
| - Refining        & Marketing                                  |   | 3,209             |   | 3,354             |
| - Petrochemicals                                                   |   | 1,258             |   | 1,229             |
| - Oilfield        Services Construction and Engineering            |   | 44                |   | 41                |
| - Other activities                                                 |   | 325               |   | 282               |
| -        Corporate and financial companies                         |   | 90                |   | 107               |
|                                                               |   | **38,468**        |   | **39,652**        |
|                                                               |   |                   |   |                   |

With regard to the statements of income,operating income (loss) by industry segment and income beforeincome taxes, as determined under U.S. GAAP, would have been asfollows:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Operating income (loss) by industry segment**                                      |   |      |   |   |      |   |   |       |   |
|--------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Exploration        & Production                                                  |   | 5,494     |   |   | 5,661     |   |   | 7,946      |   |
| Gas & Power                                                                      |   | 2,666     |   |   | 3,537     |   |   | 3,371      |   |
| Refining        & Marketing                                                      |   | 303       |   |   | 617       |   |   | 811        |   |
| Petrochemicals                                                                       |   | (141      | )      |   | (97       | )      |   | 281        |   |
| Oilfield        Services Construction and Engineering                                |   | (14       | )      |   | 2         |   |   | (52        | )      |
| Other activities                                                                     |   | (237      | )      |   | (204      | )      |   | (364       | )      |
| Corporate        and financial companies                                             |   | (210      | )      |   | (301      | )      |   | (254       | )      |
|                                                                                 |   | **7,861** |   |   | **9,215** |   |   | **11,739** |   |
| **Income        before income taxes and the initial application of SFAS        143** |   | **8,350** |   |   | **9,274** |   |   | **12,324** |   |
| Effect of the initial application of SFAS 143                                        |   |      |   |   | 405       |   |   |       |   |
| **Net        income before income taxes**                                            |   | **8,350** |   |   | **9,679** |   |   | **12,324** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

Operating income (loss) by segment relating to2002 was reclassified on the basis of the new subdivision ofactivities. In particular, "Other activities" includeddata of Syndial SpA and its subsidiaries, previously included inthe "Petrochemicals" segment. The information relatingto the new segment "Corporate and financial companies"was moved from "Other activities". In addition,following the merger of EniData SpA into Eni SpA, operatingincome related this company for 2002 and 2003 was moved from"Other activities" to "Corporate and financialcompanies".

 

**29 Additional financialstatement disclosures required by U.S. GAAP and the SEC**

**Charges related to asset retirementobligations**

Changes in asset retirement obligations duringthe year were:

| (million        euro) |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|
|                  |   |          |   |          |

| **Asset retirement obligations as of January 1**          |   | **1,923** |   |   | **1,950** |   |
|-----------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| New        obligations incurred during the year           |   | 52        |   |   | 193       |   |
| Accretion of discount                                     |   | 102       |   |   | 80        |   |
| Revisions        of previous estimates                    |   | 32        |   |   | 40        |   |
| Spending on existing obligations                          |   | (21       | )      |   | (32       | )      |
| Property        dispositions                              |   | (20       | )      |   | (234      | )      |
| Foreign currency translation                              |   | (155      | )      |   | (36       | )      |
| Other        adjustments                                  |   | 37        |   |   | (2        | )      |
| **Asset retirement obligations as of December        31** |   | **1,950** |   |   | **1,959** |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

 

**Stock compensation**

With the aim of improving motivation andloyalty of its managers, Eni approved plans for the granting ofEni shares and stock options to Eni managers. Until December 31,2002, Eni adopted APB 25 and related interpretations inaccounting for shares and options issued to employees in itsreconciliation to U.S. GAAP. The disclosure requirements of SFASNo. 123, "Accounting for Stock-Based Compensation"("SFAS 123") and a description of Eni’s stockgrant and stock option plans are included below. The relevantcosts are recorded in income for U.S. GAAP purposes (Note No.27). Costs of plans for 2003 have been determined according toItalian GAAP with criteria similar to those of SFAS 123.

**Stock grants**

With the aim of improving motivation andloyalty of Eni managers through the linking of compensation tothe attainment of preset individual and corporate objectives,making management participate in corporate risk and motivatingthem towards the creation of shareholder value and increasing atthe same time their contribution to the management of theCompany, starting in 2000 Eni created stock grant plans offeringshares for no consideration to those managers of Eni SpA and itssubsidiaries as defined in Article 2359 of the Civil Code2who have achieved corporate and individual objectives. Sharesvest within 45 days after the end of the third year from the dateof the offer or, if earlier, within 45 days after: (i) the agreedtermination of employment; (ii) loss of control by Eni of thecompany of which the assignee is employee; (iii) sale to acompany not controlled by Eni of the company of which theassignee is employee; (iv) death of the assignee. Stock rightsmay not be transferred by the assignee to other persons orentities, and their assignment is firm and irrevocable while theyautomatically expire in case the assignee decides to terminateemployment at Eni within three years from the date the sharerights were granted. 

In application of the 2000-2001 Incentive Plan,Eni’s Shareholders’ Meeting of June 6, 2000 delegatedto the Board of Directors, in accordance with Article 2443 of theCivil Code, the power to increase capital stock up to a maximumof euro 3.5 million (or about 0.0875% of current capital stock)by issuing 3.5 million shares, nominal value euro 1 per share forno consideration before July 31, 2001 by withdrawing from the"Reserve for the issue of shares in accordance with Article2349 of the Civil Code". On June 21, 2000 and June 7, 2001the Board of Directors resolved to increase Eni’s sharecapital by issuing up to a maximum of 2 and 1.5 million ordinaryshares, respectively, to be offered for no consideration to thosemanagers that achieved preset individual and corporate targets in1999 and 2000.

In application of the 2002 Incentive Plan,Eni’s Shareholders’ Meeting of May 30, 2002 delegatedto the Board of Directors, in accordance with Article 2443 of theCivil Code, the power to increase the capital stock up to amaximum of euro 1.5 million for no consideration (or about 0.037%of current capital stock) before December 31, 2002 by issuing upto 1.5 million ordinary shares nominal value euro 1 per share, bywithdrawing from the "Reserve for the issue of shares inaccordance with Article 2349 of the Civil Code". On July 2,2002 the Board of Directors resolved to increase Eni’s sharecapital by issuing up to a maximum of 1.5 million ordinary sharesto be offered for no consideration to those managers thatachieved preset individual and corporate targets in 2001.

Eni’s Shareholders’ Meeting of May30, 2003 authorized the Board of Directors to make available amaximum of 6.5 million treasury shares (corresponding to about0.162% of Eni’s share capital) to assign for noconsideration in the 2003-2005 three year period to managers ofthe Group who have achieved preset corporate targets andconferred to the Board of Directors the power to prepare theannual assignment plans. On June 19, 2003 the Board of Directorsapproved the Stock Grant Plan for 2003 that entails theassignment for no consideration of up to 1.5 million treasuryshares (corresponding to about 0.037% of Eni’s sharecapital) to those managers of the Group who have achieved in 2002the individual preset targets.

On July 6, 2004 the Board of Directors approvedthe Stock Grant Plan for 2004 that entails the assignment for noconsideration of up to 1.4 million treasury shares (correspondingto about 0.035% of Eni’s share capital) to those managers ofthe Group who have achieved in 2003 the individual presettargets.

Eni granted 5,353,100 shares of stock (equal to0.108% of current capital stock) subdivided as follows: (i) in2000 a total of 1,428,550 shares (fair value of euro 10.38); (ii)in 2001 a total of 1,851,750 shares (fair value of euro 13.71);(iii) in 2002 a total of 1,037,200 shares (fair value of euro15.96); (iv) in 2003 a total of 1,206,000 shares (fair value11.20); (v) in 2004 a total of 1,035,600 (fair value 14.57).

----

| (2) |   | Does not        include listed subsidiaries, which have their own stock        grant plans. |
|-----|--------|---------------------------------------------------------------------------------------------|

 

**Stock Option Plans**

*2000-2001*

The 2000-2001 Stock Option Plan provided forthe exercise of options for the underwriting of Eni shares to beissued by means of the capital stock increase approved byEni’s Shareholders’ Meeting of August 2, 2000, providedthat the arithmetic average of Eni share price recorded in July2002 is equal to or higher than euro 16.8. In light of Eni’sshare price trend in July 2002, options offered for thesubscription of 14,369,500 Eni shares to 180 Eni Group managersat the price of euro 12.992 (the arithmetic average of officialprices recorded on the Mercato Telematico Azionario in the monthpreceding the date of the Board’s resolution to increasecapital of September 26, 2000) are no longer exercisable andconsequently were cancelled.

*2002*

Eni’s Shareholders’ Meeting of May30, 2002 delegated to the Board of Directors the power toincrease the capital stock up to a maximum of 15 million shares(or about 0.375% of current capital stock) for Eni’s2002-2004 Stock Option Plan to be sold at an exercise pricecorresponding to the arithmetic average of official pricesrecorded on the Mercato Telematico Azionario in the monthpreceding the date of their granting to those managers of Eni SpAand its subsidiaries, as defined in Article 2359 of the CivilCode, who are in the positions that most contribute to theGroup’s performance and are of strategic interest to theGroup (314 persons).

On July 2, 2002 the Board of Directors approvedthe Stock Option Plan for 2002 which provides for the granting ofoptions for the purchase of a maximum of 5 million of Eni shares.Grantees are provided the option to purchase Eni shares at theabove mentioned exercise price after three years from the date ofthe option grant. In case of agreed termination of employment orretirement or death, the grantee maintains the right to exercisevested options within six months from termination of employment,whereas residual unvested options expire. The sole exception isEni SpA’s Managing Director who maintains the right toexercise options assigned to him until July 31, 2010. In case oftermination decided by the assignee or by the company withinthree years from grant, all options expire. Option rights notexercised before July 31, 2010 expire.

At December 31, 2002, a total of 3,518,500options were granted for the purchase of 3,518,500 shares at theprice of euro 15.216 per share.

*2003*

On June 19, 2003, exercising the powerconferred upon it by the Shareholders’ Meeting of May 30,2002, the Board of Directors approved: (i) the Stock Option Planfor 2003 which provides for the granting of a maximum of 6million options for the purchase of treasury share (correspondingto 0.1499% of Eni’s share capital) in a 1 to 1 ratio; (ii)the criteria for the selection of managers that are toparticipate in the Plan; (iii) regulations for the Plan, anddelegated to the Managing Director the selection of the granteeson the basis of such criteria, before December 31, 2003. Optionsprovide to grantees the right to purchase Eni shares after threeyears from the date of grant at a price corresponding to thehigher of the arithmetic average of official prices recorded onthe Mercato Telematico Azionario in the month preceding theoption grant and the average prices of treasury share inportfolio the day before the option grant. In the case of: (i)the agreed termination of employment; (ii) the loss of control onthe part of Eni of the company where the grantee is employed;(iii) the sale of the company or business unit where the granteeis employed to a company not controlled by Eni; (iv) the death ofgrantee, the grantee, or his successors, maintain the right toexercise vested options within six months from the event.

*2004*

On July 6, 2004 exercising the power conferredupon it by the Shareholders’ Meeting of May 30, 2002, theBoard of Directors approved: (i) the Stock Option Plan for 2004which provides for the granting of a maximum of 5 million optionsfor the purchase of treasury shares (corresponding to 0.125% ofEni’s share capital) in a 1 to 1 ratio at a pricecorresponding to the higher of the arithmetic average of officialprices recorded on the Mercato Telematico Azionario in the monthpreceding the date of the option grant and the average cost ofthe treasury shares held by Eni as of the day prior to theassignment; (ii) the criteria for the selection of managers thatare to participate in the Plan; (iii) regulations for the Plan,and delegated to the Managing Director the selection of thegrantees on the basis of such criteria, before December 31, 2004.Grantees are provided the option to purchase Eni shares at theabove mentioned exercise price after three years from the date ofgrant until July 29, 2012 (for the Managing Director optionsexpire on July 31, 2004).

The weighted-average remaining contractual lifeof options outstanding at December 31, 2002 and 2003 is 5.6 and6.6 years, respectively. All stock options granted are consideredfixed.

The following is a summary of stock optionactivity for the years 2002, 2003 and 2004:

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| (euro) |   | **Number of shares** |   | **Weighted average        exercise price**(a) |   | **Number of shares** |   | **Weighted average        exercise price**(a) |   | **Number of shares** |   | **Weighted average        exercise price**(a) |
|--------|--------|----------------------|--------|-----------------------------------------------|--------|----------------------|--------|-----------------------------------------------|--------|----------------------|--------|-----------------------------------------------|
|   |   |                      |   |                                               |   |                      |   |                                               |   |                      |   |                                               |

| **Options as of January 1**                    |   | **12,032,000** |   |   | **12.992** |   |   | **3,518,500** |   |   | **15.216** |   |   | **8,162,000**  |   |   | **14.367** |   |
|------------------------------------------------|--------|----------------|--------|--------|------------|--------|--------|---------------|--------|--------|------------|--------|--------|----------------|--------|--------|------------|--------|
| New        options granted                     |   | 3,518,500      |   |   | 15.216     |   |   | 4,703,000     |   |   | 13.743     |   |   | 3,993,500      |   |   | 16.576     |   |
| Options exercised in the period                |   |           |   |   |       |   |   |          |   |   |       |   |   | (354,000       | )      |   | 14.511     |   |
| Options        cancelled in the period         |   | (12,032,000    | )      |   | 12.992     |   |   | (59,500       | )      |   | 15.216     |   |   | (12,500        | )      |   | 14.450     |   |
| **Options outstanding as of December 31**      |   | **3,518,500**  |   |   | **15.216** |   |   | **8,162,000** |   |   | **14.367** |   |   | **11,789,000** |   |   | **15.111** |   |
| **of        which exercisable at December 31** |   | **42,000**     |   |   | **15.216** |   |   | **73,000**    |   |   | **14.802** |   |   | **-**          |   |   | **-**      |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

___________________

(a) Below quoted market price.

The fair valueof stock options granted during the years ended December 31,2002, 2003 and 2004 of euro 5.39, 1.50 and 2.01 respectively,were calculated applying the Black-Scholes method and using thefollowing assumptions:

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| Risk-free interest rate   | (%)    |   | 3.5 |   | 3.16 |   | 3.21 |
|---------------------------|--------|--------|-----|--------|------|--------|------|
| Expected        life      | (year) |   | 8   |   | 8    |   | 8    |
| Expected volatility       | (%)    |   | 43  |   | 22   |   | 19   |
| Expected        dividends | (%)    |   | 4.5 |   | 5.35 |   | 4.5  |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

The following is a summary of the effect ofstock compensation, as required under SFAS 123:

| (million        euro except per share data) |   | **Dec 31, 2002** |   | **Dec 31, 2003** |   | **Dec 31, 2004** |
|---------------------------------------------|--------|------------------|--------|------------------|--------|------------------|
|                                        |   |                  |   |                  |   |                  |

| **Net income as reported**                                                                                                          |   | **5,292** |   |   | **6,296** |   |   | **6,401** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Pro-forma        fair value expense, net of APB 25 expense of euro 0, 0        and (9) million in 2002, 2003 and 2004, respectively |   | (3        | )      |   | (6        | )      |   | 3         |   |
| **Pro-forma net income**                                                                                                            |   | **5,289** |   |   | **6,290** |   |   | **6,404** |   |
| **Pro-forma        earnings per share**                                                                                             |   | **1.38**  |   |   | **1.66**  |   |   | **1.70**  |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**Comprehensive income**

U.S. GAAP requires the reporting and display ofcomprehensive income and its components in accordance withStatement of Financial Accounting Standards No. 130,"Reporting Comprehensive Income" ("SFAS130"). Components of other comprehensive income includevariations in equity accounts not attributable to transactionsalready recorded in income or transactions with shareholders.Deferred tax effects of exchange differences from the translationof functional currency financial statements have not beenrecorded as provided for by SFAS 109, which permits the exclusionof the calculation of taxes on equity reserves of foreignsubsidiaries when the reserves are not expected to be released.

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Net income in accordance with U.S. GAAP**                                                                         |   | **5,292**  |   |   | **6,296**  |   |   | **6,401** |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|
| **Other        comprehensive income (loss) for the period gross of        income taxes**                            |   |       |   |   |       |   |   |      |   |
| Fair value of marketable securities                                                                                 |   | 19         |   |   | (2         | )      |   | 5         |   |
| Exchange        differences from translation of financial statements        denominated in currency other than euro |   | (2,001     | )      |   | (2,136     | )      |   | (846      | )      |
| Exchange differences from translation in the        period and other changes                                        |   | (124       | )      |   | 213        |   |   | 13        |   |
|                                                                                                                |   | **(2,106** | **)**  |   | **(1,925** | **)**  |   | **(828**  | **)**  |
| **Net comprehensive income for the period        according to U.S. GAAP**                                           |   | **3,186**  |   |   | **4,371**  |   |   | **5,573** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

**Income taxes**

The following information is presentedaccording to Statement of Financial Accounting Standards No. 109"Accounting for Income Taxes".

Domestic and foreign components of pre-taxincome are as follows:

| (million        euro) |   | **2002**  |   | **2003**  |   | **2004**   |
|-----------------------|--------|-----------|--------|-----------|--------|------------|
|                  |   |           |   |           |   |            |
| Domestic              |   | 4,592     |   | 5,307     |   | 5,468      |
| Foreign               |   | 3,758     |   | 4,372     |   | 6,856      |
|                  |   | **8,350** |   | **9,679** |   | **12,324** |
|                  |   |           |   |           |   |            |

The provisions for income taxes are as follows:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| Current  |   | 3,461     |   |   | 4,009     |   |   | 4,470     |   |
|----------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Deferred |   | (602      | )      |   | (914      | )      |   | 1,112     |   |
|     |   | **2,859** |   |   | **3,095** |   |   | **5,582** |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

The reconciliation of the income tax provisioncalculated under Italian tax regulation by applying a 33% rate(Ires - national corporate income tax) to pre-tax income and4.25% (Irap - regional income tax) to net value of production, tothe provision for income taxes recorded on a U.S. GAAP basis inthe consolidated statements of income is as follows:

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Income before income tax in accordance with        U.S. GAAP**                                    |   |   | **8,350** |   |   | **9,679** |   |   | **12,324** |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Italian        statutory tax rate (state and local)                                                 | (%)    |   | 41.4      |   |   | 39.5      |   |   | 38.3       |   |
| **Expected income tax provision in accordance        with U.S. GAAP at Italian statutory tax rate** |   |   | **3,453** |   |   | **3,820** |   |   | **4,714**  |   |
| Effect of        items increasing (decreasing) the Italian statutory tax        rate:               |   |   |      |   |   |      |   |   |       |   |
| - taxation of foreign operations at rates        different from Italian statutory tax rate          |   |   | 194       |   |   | 318       |   |   | 835        |   |
| - taxes on        distributable reserves                                                            |   |   | (75       | )      |   | 121       |   |   | 446        |   |
| - effects of tax credits                                                                            |   |   | (420      | )      |   | (128      | )      |   | (8         | )      |
| -        permanent differences                                                                      |   |   | 64        |   |   | (75       | )      |   | (143       | )      |
| - devaluation/revaluation of deferred tax assets                                                    |   |   | (1        | )      |   | (13       | )      |   | (218       | )      |
| - net tax        effects due to the revaluation of assets (Financial Law        2004)               |   |   |      |   |   | (417      | )      |   |       |   |
| - net tax effects due to the applications of Law        448/2001                                    |   |   |      |   |   | (497      | )      |   |       |   |
| - other                                                                                             |   |   | (356      | )      |   | (34       | )      |   | (44        | )      |
|                                                                                                |   |   | **(594**  | **)**  |   | **(725**  | **)**  |   | **868**    |   |
| **Income        taxes in accordance with U.S. GAAP**                                                |   |   | **2,859** |   |   | **3,095** |   |   | **5,582**  |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

 

*Net deferred tax liabilities*

Net deferred tax liabilities under U.S. GAAP,represented by net deferred taxes recorded under "Reservefor taxes" (euro 6,367 million), less deferred tax assetsrecorded under "Other assets" (euro 1,159 million)amounted to euro 5,208 million at December 31, 2004 (euro 3,997million as of December 31, 2003).

The tax effects of significant temporarydifferences causing the tax liabilities are as follows:

| (million        euro) |   | **Dec 31, 2003** |   | **Dec 31, 2004** |
|-----------------------|--------|------------------|--------|------------------|
|                  |   |                  |   |                  |

| Deferred tax liabilities:                                                                                                                                                               |   |       |   |   |       |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| -        accelerated depreciation                                                                                                                                                       |   | 4,021      |   |   | 4,672      |   |
| - distributable reserves subject to taxes in        case of distribution                                                                                                                |   | 2,437      |   |   | 2,970      |   |
| - excess        cost paid for the acquisition of consolidated investments                                                                                                               |   | 1,245      |   |   | 1,033      |   |
| - successful-efforts accounting                                                                                                                                                         |   | 451        |   |   | 467        |   |
| -        capitalization of interest expense                                                                                                                                             |   | 250        |   |   | 246        |   |
| - reserves for uncollectible receivables                                                                                                                                                |   | 150        |   |   | 137        |   |
| - release        of excess contingency reserves                                                                                                                                         |   | 89         |   |   | 83         |   |
| - gains taxable in the future                                                                                                                                                           |   | 62         |   |   | 46         |   |
| - other                                                                                                                                                                                 |   | 292        |   |   | 378        |   |
|                                                                                                                                                                                    |   | **8,997**  |   |   | **10,032** |   |
| Deferred        tax assets:                                                                                                                                                             |   |       |   |   |       |   |
| - accruals for doubtful accounts and        contingencies                                                                                                                               |   | (1,858     | )      |   | (2,045     | )      |
| -        revaluation of assets in accordance with Law 342/2000                                                                                                                          |   | (1,474     | )      |   | (1,361     | )      |
| - tax loss carryforwards                                                                                                                                                                |   | (1,350     | )      |   | (1,072     | )      |
| -        investment revaluation in accordance with Law 292/1993        and the allocation of the merger difference arising           from the merger of Agip SpA into Eni SpA |   | (818       | )      |   | (818       | )      |
| - revaluation of fixed assets under Law 448/2001                                                                                                                                        |   | (628       | )      |   | (639       | )      |
| - losses        on investments and subsidiaries in excess of currently        allowable tax deductions                                                                                  |   | (644       | )      |   | (472       | )      |
| - future deductible amortization                                                                                                                                                        |   | (272       | )      |   | (432       | )      |
| -        writeoffs of assets deductible in the future                                                                                                                                   |   | (326       | )      |   | (225       | )      |
| - other                                                                                                                                                                                 |   | (773       | )      |   | (599       | )      |
|                                                                                                                                                                                    |   | **(8,143** | **)**  |   | **(7,663** | **)**  |
| Less:                                                                                                                                                                                   |   |       |   |   |       |   |
| -        valuation allowance                                                                                                                                                            |   | 3,143      |   |   | 2,839      |   |
|                                                                                                                                                                                    |   | **(5,000** | **)**  |   | **(4,824** | **)**  |
| **Net        deferred tax liabilities**                                                                                                                                                 |   | **3,997**  |   |   | **5,208**  |   |

|   |   |  |   |  |
|--------|--------|--|--------|--|

The valuation allowance of euro 2,839 million(euro 3,143 million at December 31, 2003) against net deferredtax assets is required because certain consolidatedcompanies’ expected future fiscal profits are not consideredsufficient to utilize respective net deferred tax assets.

*Tax loss carryforwards*

The difference in gross tax loss carryforwardsbetween Italian GAAP and U.S. GAAP relates to the companies whichare consolidated under Italian GAAP, but excluded fromconsolidation according to U.S. GAAP.

 

**Acquisition of Italgas SpA**

Eni’s acquisition of an additionalinterest in Italgas during 2003 was a significant element inEni’s strategy of expanding in the gas segment. Suchstrategy is based on management’s expectation for thenatural gas segment in Italy and Europe. In addition, iscorrelated with the Italian regulation following LegislativeDecree No. 164/2000 (see "Concentrations and certainsignificant estimates - Gas & Power"). Eni’sstrategy in the natural gas segment expects: (i) an increasingfocalization on production, supply and commercialisationactivities with a progressive reduction in the regulatedactivities; (ii) the valorization of Italian sales by theoptimization of the portfolio of clients relating to the maximumdimensional level allowed by Legislative Decree No. 164/2000;(iii) development in the European markets with an interestingprospective for the possibility of increase and profit (IberianPeninsula, Turkey and Germany) by taking advantage of theintegrated knowledge owned by Eni in the natural gas activities.

In January 2003, Eni completed the acquisitionof an additional 56.04% of Italgas SpA (Italgas) for cashconsideration of euro 2,569 million. At December 31, 2002, Eniowned 43.96% of Italgas, which was consolidated on a line-by-linebasis under Italian GAAP, while it was accounted for under theequity method under U.S. GAAP. Italgas was fully consolidated forU.S. GAAP purposes in 2003 as a result of Eni’s acquisitionof the additional interest.

Under U.S. GAAP the acquisition of Italgas hasbeen accounted for in accordance with SFAS 141. The cost of theacquisition was allocated to the assets acquired and liabilitiesassumed based on estimates of their respective fair values at thedate of acquisition. Fair values were determined based on thirdparty appraisals and management’s estimates.

U.S. GAAP goodwill in the amount of euro 941million resulted from the purchase price allocation. Thefollowing table summarizes the estimated fair values of theassets acquired and the liabilities assumed at the date of theItalgas SpA acquisition:

| (million        euro)                                       |   |      |   |
|-------------------------------------------------------------|--------|-----------|--------|
| **Cash paid for shares purchased**                          |   | **2,569** |   |
| **Allocation        of purchase price for assets acquired** |   |      |   |
| Fixed assets                                                |   | 2,163     |   |
| Goodwill                                                    |   | 941       |   |
| Investments                                                 |   | 293       |   |
| Portfolio        of clients                                 |   | 112       |   |
| Deferred tax                                                |   | (562      | )      |
| Other        assets and liabilities                         |   | (378      | )      |
| **Total allocation of purchase price**                      |   | **2,569** |   |

**Investments**

At December 31, 2003 and 2004, investments ofeuro 4,010 million and euro 4,331 million, respectively, includeshares of Saipem SpA, which is publicly listed on the ItalianStock Exchange.

The following information includes its fairvalue:

|                  |   | **Eni’s number** |   | **Equity ratio** |   | **Share price** |   | **Market value** |
|-----------------------|--------|-----------------------|--------|------------------|--------|-----------------|--------|------------------|
|                  |   | **of shares**         |   | (%)              |   | (euro)          |   | (million euro)   |
|                  |   |                       |   |                  |   |                 |   |                  |
| **December 31, 2003** |   |                  |   |             |   |            |   |             |
| Saipem SpA            |   | 189,423,307           |   | 43.00            |   | 6.459           |   | 1,223            |
| **December 31, 2004** |   |                  |   |             |   |            |   |             |
| Saipem SpA            |   | 189,423,307           |   | 42.95            |   | 8.864           |   | 1,679            |
|                  |   |                       |   |                  |   |                 |   |                  |

In 2003, and 2004, Saipem SpA is included inthe consolidation under Italian GAAP, while, under U.S. GAAP, itis valued under the equity method.

Information about Saipem SpA and itssubsidiaries, representing a 100% share of the companies, is asfollows:

| (million        euro)    |   | **Dec 31, 2003** |   | **Dec 31, 2004** |
|--------------------------|--------|------------------|--------|------------------|
|                     |   |                  |   |                  |
| Total assets             |   | 5,098            |   | 5,266            |
| Total        liabilities |   | 3,584            |   | 3,572            |
|                     |   |                  |   |                  |

 

| (million        euro)     |   | **2002** |   | **2003** |   | **2004** |
|---------------------------|--------|----------|--------|----------|--------|----------|
|                      |   |          |   |          |   |          |
| Net sales from operations |   | 6,385    |   | 4,217    |   | 4,306    |
| Operating        income   |   | 835      |   | 358      |   | 368      |
| Net income                |   | 587      |   | 254      |   | 271      |
|                      |   |          |   |          |   |          |

**Concentrations and certain significantestimates**

The following information is presentedaccording to Statement of Position 94-6 "Disclosures ofCertain Significant Risks and Uncertainties".

*Nature ofoperations*

Eni is an integrated energy company operatingin the oil and gas, electricity generation, petrochemicals andoilfield services and engineering industries.

**Exploration & Production:**throughits Exploration & Production Division and subsidiaries, Eniengages in hydrocarbon exploration and production in Italy, NorthAfrica (Algeria, Egypt, Libya and Tunisia), West Africa (Angola,Congo and Nigeria), the North Sea (Norway and the UnitedKingdom), Latin America (Venezuela and Ecuador), the formerSoviet Union countries (mainly Kazakhstan), the United States(mainly in the Gulf of Mexico) and Far East (Iran, Indonesia,Pakistan, China and Australia). In 2004, approximately 70% of oilproduction sold was supplied to Eni’s Refining &Marketing segment and approximately 40% of natural gas productionsold was supplied to Eni’s Gas & Power segment.

Eni owns a storage system made up by a numberof depleted fields used for the modulation of supply inaccordance with seasonal swings in demand (natural gas is storedin the summer and used in the winter), as strategic reserve toensure supply and to support domestic production through mineralstorage. Storage assets are owned by Stoccaggi Gas Italia (Eni100%), a company constituted in accordance with Law Decree No.164 of May 23, 2000 that introduced laws for the liberalizationof the Italian natural gas market.

**Gas & Power:** Eni is engaged in thesupply, transmission and sale of natural gas in Italy and outsideItaly through its Gas & Power Division, which was constitutedby the incorporation of Snam SpA into Eni SpA in 2002, andthrough certain subsidiaries. Approximately 85% of totalpurchases are purchased from foreign sources (primarily Algeria,Russia, the Netherlands and Norway) under long-term contracts,which contain take-or-pay provisions, and transported to Italythrough a network of over 3,700 kilometers internationalpipelines of which Eni owns the transmission rights. Theremaining purchases in Italy are obtained principally fromdomestic gas produced by Eni’s Exploration & Productionsegment. Through an approximately 30,000-kilometer long network(corresponding to 96% of the Italian domestic natural gasnetwork), Eni supplies natural gas to residential and commercialusers (civil market), industrial users and the thermoelectricsegment. Snam Rete Gas (Eni 50.06%), that was constituted inaccordance with Law Decree No. 164/2000, owns the pipelinenetwork used by Eni. Snam Rete Gas, a company listed on theItalian stock exchange, engages in natural gas transportationactivities also for other operators of the segment. Following thedemerger of Italgas, which attributed to Eni the interests ownedby Italgas in Italian companies selling natural gas (among whicha 100% interest in Italgas Più, merged into Eni) and in foreigncompanies selling natural gas (among which a 40% interest inTigaz), Eni now manages directly about 5 million customers of theresidential and commercial segment, optimizing its commercialstructure. Eni is engaged in local distribution outside Italy, inArgentina through Distribuidora de Gas Guyana, in Hungary throughTigaz and Tigaz 2 and in Slovenia through Adriaplin Doo.

Legislative Decree No. 164 of May 23, 2000introduced laws for the liberalization of the Italian natural gasmarket with great impact on Eni’s activities, as the companyis present in all the phases of the natural gas chain. The mostimportant aspects of the decree are the following:

| - |   | total free        market after 2003;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|---|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | until        December 31, 2010 the imposition of thresholds to        operators in relation to a percentage share of domestic        consumption set as follows: (i) 75%, by 2002, for        imported or domestically produced natural gas volumes        introduced in the domestic transmission network in order        to sell it. This percentage decreases by 2 percentage        points per year until it reaches 61% in 2009; (ii) 50%        from January 1, 2003 for sales to final customers. These        ceilings are calculated net of own consumption and, in        case of sales, also net of losses; |
| - |   | tariffs for        transport, dispatching, storage, use of LNG terminals and        local network distribution are set by Authority for        Electricity and Gas;                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| - |   | third parties        are to access the transmission system on a regulated        basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

Eni through EniPower SpA (Eni 100%) andsubsidiaries is engaged in the electricity business at the powerplants located in the Ferrera Erbognone, Ravenna, Livorno,Taranto, Mantova and Brindisi industrial sites with installedcapacity of 3.3 gigawatts and a production sold of 13.85terawatthours. The demand for gas and fuel oils ofEniPower’s stations is met by Eni supplies.

**Refining & Marketing:**Eni, throughits Refining & Marketing Division, which was constituted bythe incorporation of AgipPetroli SpA in Eni SpA in 2002 andcertain subsidiaries, engages in petroleum refining and marketingactivities primarily in Italy and Europe. Eni is the largestrefiner of petroleum products in Italy in terms of overallrefining capacity. Approximately 50% of crude oil supplies ispurchased from Eni’s Exploration & Production segment,the rest is purchased from producing countries pursuant topurchase contracts (28%) and in international spot markets (20%).Over 50% of the purchased crude oil is processed. Over 30% of oilprocessed derives from the production of Eni’s Exploration& Production segment.

**Petrochemicals:** through Polimeri EuropaSpA and its subsidiaries (Eni 100%), Eni engages in manufacturingof olefins, aromatics, intermediate products, styrene andelastomers. Eni’s petrochemicals production is concentratedin Italy, the other operations being primarily in Western Europe.Approximately 22% of the oil-based feedstock requirements used bypetrochemical plants are supplied by Eni’s Refining &Marketing segment.

**Oilfield Services construction andEngineering:** through Saipem SpA (Eni 43%), a company listedon the Italian stock exchange, and its subsidiaries, Eni isengaged in construction and drilling services to customers in theoil and gas industries. Through Snamprogetti SpA (Eni 100%) andits subsidiaries, Eni is a leading provider of engineering andproject management services to customers in the oil and gas andpetrochemical industries. At December 31, 2004 approximately 8%of the order backlog of Eni’s Oilfield Services,Construction and Engineering segment related to orders from EniGroup companies.

*Certain significant estimates*

The preparation of the financial statements inconformity with Italian GAAP, along with the reconciliation toU.S. GAAP, requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities anddisclosures of contingent liabilities at the date of thefinancial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differfrom those estimates.

 

**Accounting for Suspended Well Costs**

Refer to Note 27 "Summary of significantdifferences between Italian accounting principles and U.S. GAAPon page F-64 under the caption "B) Exploration &Production activities" for a discussion of thecompany’s accounting policy for the cost of exploratorywells.

In April 2005, the FASB issued FSP FAS19-1 to amend FAS 19, "Financial Accounting and Reporting byOil and Gas Producing Companies." Under the provisions ofFSP FAS 19-1, companies in the oil and gas industry are allowedto continue capitalization of an exploratory well after thecompletion of drilling when: (a) the well has found asufficient quantity of reserves to justify completion as aproducing well and (b) the enterprise is making sufficientprogress assessing the reserves and the economic and operatingviability of the project. If either condition is not met or if anenterprise obtains information that raises substantial doubtabout the economic or operational viability of the project, theexploratory well would be assumed to be impaired, and its costs,net of any salvage value, would be charged to expense. FSP FAS19-1 provided a number of indicators needing to be present todemonstrate sufficient progress was being made in assessing thereserves and economic viability of the project. Among theseindicators are: (i) costs are being incurred to assess thereserves and their potential development; (ii) existence (oractive negotiations) of sales contracts with customers for oiland natural gas; and (iii) existence of firm plans, establishedtimetables or contractual commitments, which may include seismictesting and drilling of additional exploratory wells.

The disclosures and discussion below addressthose suggested in FSP FAS 19-1.

The following table reflects the net changes incapitalized exploratory well costs during 2004, 2003 and 2002,and does not include amounts that were capitalized andsubsequently expensed in the same period. Capitalized exploratorywell costs for fiscal years ending December 31, 2004, 2003 and2002, are presented based on the Company’s previousaccounting policy.

The adoption of this FSP does not result in thewrite-off of any capitalized exploration drilling costs for theperiod 2002-2004.

 

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| Beginning balance at January 1                                                                                  |   | 613 |   |   | 591  |   |   | 570 |   |
|-----------------------------------------------------------------------------------------------------------------|--------|-----|--------|--------|------|--------|--------|-----|--------|
| Additions        pending the determination of proved reserves                                                   |   | 235 |   |   | 284  |   |   | 185 |   |
| Amount previously capitalized charged to expense        during the year                                         |   | (63 | )      |   | (107 | )      |   | (54 | )      |
| Reclassification        to wells, facilities and equipment based on the        determination of proved reserves |   | (97 | )      |   | (96  | )      |   | (72 | )      |
| Other reductions (*)                                                                                            |   | (4  | )      |   | 0    |   |   | (79 | )      |
| Foreign        exchange effects                                                                                 |   | (94 | )      |   | (100 | )      |   | (37 | )      |
| **Ending Balance at December 31**                                                                               |   | 591 |   |   | 570  |   |   | 513 |   |

|   |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|

___________________

(*) Represents sales of properties.

 

The following table provides an aging ofcapitalized exploratory well costs, based on the date thedrilling was completed, and the number of net wells for whichexploratory costs have been capitalized for the period:

 

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

|   |   | million euro |   | Net wells (*) |   | million euro |   | Net wells (*) |   | million euro |   | Net wells (*) |
|--------|--------|--------------|--------|---------------|--------|--------------|--------|---------------|--------|--------------|--------|---------------|
|   |   |              |   |               |   |              |   |               |   |              |   |               |

| < 1 year                  |   | 200 |   | 17.76 |   | 264 |   | 16.8  |   | 156 |   | 11.14 |
|------------------------------|--------|-----|--------|-------|--------|-----|--------|-------|--------|-----|--------|-------|
| 1 to 3        years          |   | 299 |   | 20.4  |   | 241 |   | 22.38 |   | 319 |   | 27.55 |
| 3 to 8 years                 |   | 91  |   | 13.96 |   | 65  |   | 8.36  |   | 39  |   | 3.8   |
| **Total        at year end** |   | 591 |   | 52.12 |   | 570 |   | 47.54 |   | 513 |   | 42.49 |
|                         |   |     |   |       |   |     |   |       |   |     |   |       |

___________________

(*) A net well is the sum of the fractionalworking interest owned in gross wells.

> 
 

The followingtable provides, based on the date the drilling was completed, thecapitalized costs and the related net well number at year end2004, 2003 and 2002 divided by category of projects ofexploratory activity.

|   |   | **2002** |   | **2003** |   | **2004** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

|   |   | mm euro |   | Net wells (*) |   | mm euro |   | Net wells (*) |   | mm euro |   | Net wells (*) |
|--------|--------|---------|--------|---------------|--------|---------|--------|---------------|--------|---------|--------|---------------|
|   |   |         |   |               |   |         |   |               |   |         |   |               |

| **Project with wells drilled in the past 12        months**                    |   | **200** |   | **17.76** |   | **264** |   | **16.8**  |   | **156** |   | **11.14** |
|--------------------------------------------------------------------------------|--------|---------|--------|-----------|--------|---------|--------|-----------|--------|---------|--------|-----------|
| **Project        with recent or planned exploratory activitiy**                |   | **163** |   | **11.61** |   | **163** |   | **13.39** |   | **283** |   | **21.94** |
| Project with exploration activities already        underway or firmly planned: |   |    |   |      |   |    |   |      |   |    |   |      |
|      *future        exploration drilling*             |   | 87      |   | 5.05      |   | 101     |   | 6.83      |   | 148     |   | 10.29     |
|      *other        exploratory activities*            |   | 76      |   | 6.56      |   | 62      |   | 6.56      |   | 135     |   | 11.65     |
| **Project        with completed exploratory activity**                         |   | **227** |   | **22.75** |   | **143** |   | **17.35** |   | **75**  |   | **9.41**  |
| Project progressing towards        commercialization/sanction                  |   | 221     |   | 22.52     |   | 131     |   | 16.46     |   | 61      |   | 8.32      |
| Projects        awaiting finalization of development facilities                |   | 7       |   | 0.23      |   | 12      |   | 0.89      |   | 14      |   | 1.09      |
| **Total at the year end**                                                      |   | **591** |   | **52.12** |   | **570** |   | **47.54** |   | **513** |   | **42.49** |
|                                                                           |   |         |   |           |   |         |   |           |   |         |   |           |

___________________

(*) A net well is the sum of the fractionalworking interest owned in gross wells.

> 
 

At the end of 2004 of the euro 513 million ofexploratory suspended costs, approximately euro 156 millionrelated to the 11 net wells for which the drilling was completedin one year or less. Of the remaining euro 357 million, relatedto the 31.35 net wells suspended for more than one year since thecompletion of drilling, 79% is associated with projects for whichexploration activity is still ongoing.

 

**Recent accounting pronouncements**

In November 2004, the Financial AccountingStandards Board issued the statement No. 151, "InventoryCosts - An Amendment of ARB No. 43, Chapter 4" (SFAS 151),and in December 2004 the statement No. 153, "Exchanges ofNonmonetary Assets - An Amendment of APB Opinion No. 29"(SFAS 153).

SFAS 151 amends the guidance in ARB No. 43 andclarifies that items such as idle facility expense, excessivespoilage, double freight, handling costs and other similar costsmust be recognized as current period charges regardless ofwhether they meet the criterion of "so abnormal". Inaddition, with the effort of the FASB to improve thecomparability with the international accounting standards (IFRS),SFAS 151 provides that allocation of fixed production overheadsto the costs of conversion be based on the normal capacity of theproduction facilities, also considering the losses of productioncapacity following the closure of plants for plannedmaintenances. The application of SFAS 151 is provided beginningfrom 2006.

Eni presently is analyzing the statement and,at the moment, believes that the application will not have asignificant effect on Eni’s consolidated financial positionor operating results.

SFAS 153 amends APB Opinion 29, that providesthat exchanges of nonmonetary assets should be measured based onthe fair value of the assets exchanged, with the exception thatnonmonetary exchanges of similar productive assets should bemeasured on a carryover basis. With the effort of the FASB toimprove the comparability with the international accountingstandards (IFRS), SFAS 153 eliminates the exception for exchangesof nonmonetary exchanges of similar productive assets andreplaces it with a general exception for exchanges of nonmonetaryassets that do not have commercial substance. A nonmonetaryexchange has a commercial substance if the future cash flows ofthe entity are expected to change significantly as a result ofthe exchange. The first application of SFAS 153 is providedbeginning from July 1, 2005. Eni presently is analyzing thestatement and, at the moment cannot predict whether or not theapplication will have a material impact on Eni’s financialposition or operating results.**Subsequent events**

The main subsequent events occurred are asfollows:

| - |   | on February 18, 2005, the        Council of Ministers, on proposal of the Ministry of        Economy and Finance, presented a Draft Decree of the        President of the Council of Ministers which defined        criteria and modes for the divestment of the interest        held by Eni in Snam Rete Gas SpA (50.06%). The special        powers of the Ministry of Economy and Finance provided        for by the regulations on the divestment of interests        held by the Italian Government will be included in the        by-laws of this company. After the publication of the        relevant Decree, Eni will continue the procedure for the        sale of Snam Rete Gas SpA shares until Eni’s        interest reaches 20% before July 1, 2007; |
|---|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - |   | within the        North Caspian Sea PSA for the development of the Kashagan        field, on March 31, 2005 Eni and the other partners in        the consortium, except for one, purchased proportionally        to their respective working interest the 16.67% share of        British Gas that left the project, following the exercise        of the pre-emptive right in May 2003. All partners then        sold 50% of this interest to the Kazakh national company        Kazmunaygaz, new partner in the PSA with an 8.335%        interest. Eni’s interest in the operated project        increased from 16.67% to 18.52% after the purchase that        entailed an expenditure of US dollar 200 million;                                                |
| - |   | in April 2005        Eni concluded the sale procedure of a 90% interest in        Italiana Petroli (IP) with a call-and-put option for the        remaining 10% to be exercised in the second half of 2010.        The transaction that has been submitted for approval to        the Italian Antitrust Authority will entail cash proceeds        of euro 186 million for 100% of the shares when        finalized. In 2004, IP sold 2.6 billion liters of fuels        with an average throughput of 896,000 liters; at year end        IP’s network included 2,915 service stations, of        these approximately 2,700 were leased;                                                                                                                           |
| - |   | Eni        Shareholders’ Meeting of May 27, 2005 resolved to        extend Eni’s share buy-back program for an 18-month        period starting on May 27, 2005. Eni share buy-back        program started in 2000 and provides for the purchase of        a maximum of 400 million Eni shares for an amount not        higher than euro 5.4 billion. Both limits include        treasury shares held by Eni as of May 26, 2005 (245.16        million shares for a total purchase cost of euro 3,440        million).                                                                                                                                                                                                                                         |

 

**Supplementaloil and gas information (unaudited)**

The following information is presented inaccordance with Statement of Financial Accounting Standards No.69, "Disclosures about Oil & Gas ProducingActivities". Amounts related to minority interests are notsignificant.

*Capitalized costs*

Capitalized costs represent the totalexpenditures for proved and unproved mineral interests andrelated support equipment and facilities utilized in oil and gasexploration and production activities, together with relatedaccumulated depreciation, depletion and amortization.

| (million        euro) |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-----------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                  |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **At December 31, 2003**                                    |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
|-------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Proved        mineral interests (a)                         |   | 8,766     |   |   | 6,103     |   |   | 6,141     |   |   | 8,291     |   |   | 6,389     |   |   | 35,690     |   |
| Unproved mineral interests                                  |   |      |   |   | 329       |   |   | 83        |   |   | 696       |   |   | 1,272     |   |   | 2,380      |   |
| Support        equipment and facilities                     |   | 262       |   |   | 594       |   |   | 208       |   |   | 32        |   |   | 51        |   |   | 1,147      |   |
| Incomplete wells and other                                  |   | 826       |   |   | 1,254     |   |   | 1,098     |   |   | 223       |   |   | 1,413     |   |   | 4,814      |   |
| **Gross        capitalized costs**                          |   | **9,854** |   |   | **8,280** |   |   | **7,530** |   |   | **9,242** |   |   | **9,125** |   |   | **44,031** |   |
| Accumulated depreciation, depletion and        amortization |   | (6,186    | )      |   | (3,799    | )      |   | (3,785    | )      |   | (4,252    | )      |   | (2,657    | )      |   | (20,679    | )      |
| **Net        capitalized costs**                            |   | **3,668** |   |   | **4,481** |   |   | **3,745** |   |   | **4,990** |   |   | **6,468** |   |   | **23,352** |   |
| **At December 31, 2004**                                    |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Proved        mineral interests (a)                         |   | 9,056     |   |   | 7,192     |   |   | 6,288     |   |   | 7,198     |   |   | 7,698     |   |   | 37,432     |   |
| Unproved mineral interests                                  |   |      |   |   | 272       |   |   | 70        |   |   | 561       |   |   | 1,103     |   |   | 2,006      |   |
| Support        equipment and facilities                     |   | 252       |   |   | 1,056     |   |   | 209       |   |   | 33        |   |   | 75        |   |   | 1,625      |   |
| Incomplete wells and other                                  |   | 662       |   |   | 468       |   |   | 1,038     |   |   | 397       |   |   | 882       |   |   | 3,447      |   |
| **Gross        capitalized costs**                          |   | **9,970** |   |   | **8,988** |   |   | **7,605** |   |   | **8,189** |   |   | **9,758** |   |   | **44,510** |   |
| Accumulated depreciation, depletion and        amortization |   | (6,416    | )      |   | (3,887    | )      |   | (3,907    | )      |   | (3,733    | )      |   | (3,252    | )      |   | (21,195    | )      |
| **Net        capitalized costs**                            |   | **3,554** |   |   | **5,101** |   |   | **3,698** |   |   | **4,456** |   |   | **6,506** |   |   | **23,315** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

___________________

(a) Includes capitalized costs for wells andfacilities related to proved reserves.

 

*Costincurred*

Costs incurred represent amounts bothcapitalized and expensed in connection with oil and gas producingactivities.

 

| (million        euro) |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-----------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                  |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **Year ended December 31, 2002**    |   |    |   |      |   |      |   |    |   |      |   |      |
|-------------------------------------|--------|---------|--------|-----------|--------|-----------|--------|---------|--------|-----------|--------|-----------|
| Proved        property acquisitions |   |    |   |      |   |      |   | 104     |   | 24        |   | 128       |
| Unproved property acquisitions      |   |    |   |      |   |      |   | 22      |   | 167       |   | 189       |
| Exploration                         |   | 69      |   | 116       |   | 203       |   | 84      |   | 430       |   | 902       |
| Development                         |   | 440     |   | 724       |   | 986       |   | 316     |   | 1,622     |   | 4,088     |
| **Total        costs incurred**     |   | **509** |   | **840**   |   | **1,189** |   | **526** |   | **2,243** |   | **5,307** |
| **Year ended December 31, 2003**    |   |    |   |      |   |      |   |    |   |      |   |      |
| Proved        property acquisitions |   |    |   |      |   |      |   | 308     |   | 8         |   | 316       |
| Unproved property acquisitions      |   |    |   |      |   |      |   | 125     |   | 6         |   | 131       |
| Exploration                         |   | 67      |   | 80        |   | 138       |   | 125     |   | 243       |   | 653       |
| Development (a)                     |   | 449     |   | 1,106     |   | 1,268     |   | 286     |   | 1,454     |   | 4,563     |
| **Total        costs incurred**(b)  |   | **516** |   | **1,186** |   | **1,406** |   | **844** |   | **1,711** |   | **5,663** |
| **Year ended December 31, 2004**    |   |    |   |      |   |      |   |    |   |      |   |      |
| Proved        property acquisitions |   |    |   |      |   |      |   |    |   |      |   |      |
| Unproved property acquisitions      |   |    |   |      |   |      |   |    |   |      |   |      |
| Exploration                         |   | 64      |   | 104       |   | 71        |   | 66      |   | 194       |   | 499       |
| Development (a)                     |   | 431     |   | 965       |   | 881       |   | 391     |   | 1,407     |   | 4,075     |
| **Total        costs incurred**     |   | **495** |   | **1,069** |   | **952**   |   | **457** |   | **1,601** |   | **4,574** |
|                                |   |         |   |           |   |           |   |         |   |           |   |           |

___________________

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Includes for assets        retirement obligations pursuant to SFAS 143        "Accounting for asset retirement obligations"        euro 84 million of costs capitalized during 2003 and 233        euro million for 2004.                                                                                                                                                                                            |
| (b)    |   | Includes costs for        acquisition of Fortum Petroleum AS (now Eni Norge AS) of        euro 434 million, net of the related gross-up for        deferred taxes of euro 514 million. The amount has been        allocated to the North Sea area as follows: (i) Proved        property acquisitions euro 308 million, (ii) Unproved        property acquisitions euro 109 million, (iii) Exploration        euro 17 million. |

 

*Results ofoperations from oil and gas producing activities*

Results of operations from oil and gasproducing activities, including gas storage services used tomodulate the seasonal variation of demand, represent only thoserevenues and expenses directly associated to such activitiesincluding operating overheads. These amounts do not include anyallocation of interest expense or general corporate overhead and,therefore, are not necessarily indicative of the contributions toconsolidated net earnings of Eni. Related income taxes arecomputed by applying the local income tax rates to the pre-taxincome from producing activities. Eni is a party to certainProduction Sharing Agreements (PSAs) whereby a portion ofEni’s share of oil and gas production is withheld and soldby its joint venture partners which are state-owned entities,with proceeds being remitted to the state in satisfaction ofEni’s PSA-related tax liabilities. Revenue and income taxesinclude such taxes owed by Eni but paid by state-owned entitiesout of Eni’s share of oil and gas production.

| (million        euro) |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-----------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                  |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **Year ended December 31, 2002**                       |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
|--------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Revenues:                                              |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| - sales to affiliates                                  |   | 2,871     |   |   | 1,673     |   |   | 1,856     |   |   | 1,748     |   |   | 281       |   |   | 8,429      |   |
| - sales to        unaffiliated entities                |   | 253       |   |   | 1,226     |   |   | 186       |   |   | 695       |   |   | 1,414     |   |   | 3,774      |   |
| **Total revenues**                                     |   | **3,124** |   |   | **2,899** |   |   | **2,042** |   |   | **2,443** |   |   | **1,695** |   |   | **12,203** |   |
| Operations        costs                                |   | (218      | )      |   | (352      | )      |   | (317      | )      |   | (490      | )      |   | (237      | )      |   | (1,614     | )      |
| Production taxes                                       |   | (138      | )      |   | (110      | )      |   | (210      | )      |   | (20       | )      |   | (47       | )      |   | (525       | )      |
| Exploration        expenses                            |   | (80       | )      |   | (71       | )      |   | (116      | )      |   | (117      | )      |   | (294      | )      |   | (678       | )      |
| D.D. & A. and Provision for abandonment (a)        |   | (528      | )      |   | (532      | )      |   | (390      | )      |   | (863      | )      |   | (758      | )      |   | (3,071     | )      |
| Other        income and (expenses)                     |   | (258      | )      |   | (186      | )      |   | (122      | )      |   | (47       | )      |   | (183      | )      |   | (796       | )      |
| **Pretax income from producing activities**            |   | **1,902** |   |   | **1,648** |   |   | **887**   |   |   | **906**   |   |   | **176**   |   |   | **5,519**  |   |
| Estimated        income taxes                          |   | (751      | )      |   | (852      | )      |   | (578      | )      |   | (445      | )      |   | (83       | )      |   | (2,709     | )      |
| **Results of operations from E&P activities**      |   | **1,151** |   |   | **796**   |   |   | **309**   |   |   | **461**   |   |   | **93**    |   |   | **2,810**  |   |
| **Year        ended December 31, 2003**                |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Revenues:                                              |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| - sales to        affiliates                           |   | 2,609     |   |   | 1,469     |   |   | 1,946     |   |   | 1,913     |   |   | 345       |   |   | 8,282      |   |
| - sales to unaffiliated entities                       |   | 153       |   |   | 1,188     |   |   | 164       |   |   | 822       |   |   | 1,595     |   |   | 3,922      |   |
| **Total        revenues**                              |   | **2,762** |   |   | **2,657** |   |   | **2,110** |   |   | **2,735** |   |   | **1,940** |   |   | **12,204** |   |
| Operations costs                                       |   | (222      | )      |   | (316      | )      |   | (283      | )      |   | (446      | )      |   | (235      | )      |   | (1,502     | )      |
| Production        taxes                                |   | (136      | )      |   | (97       | )      |   | (235      | )      |   | (11       | )      |   | (79       | )      |   | (558       | )      |
| Exploration expenses                                   |   | (89       | )      |   | (70       | )      |   | (113      | )      |   | (96       | )      |   | (276      | )      |   | (644       | )      |
| D.D. &        A. and Provision for abandonment (a) |   | (458      | )      |   | (420      | )      |   | (377      | )      |   | (759      | )      |   | (734      | )      |   | (2,748     | )      |
| Other income and (expenses)                            |   | (170      | )      |   | (264      | )      |   | (121      | )      |   | 14        |   |   | (289      | )      |   | (830       | )      |
| Accretion        discount (SFAS 143) (b)               |   | (37       | )      |   | (5        | )      |   | (14       | )      |   | (42       | )      |   | (4        | )      |   | (102       | )      |
| **Pretax income from producing activities**            |   | **1,650** |   |   | **1,485** |   |   | **967**   |   |   | **1,395** |   |   | **323**   |   |   | **5,820**  |   |
| Estimated        income taxes                          |   | (629      | )      |   | (788      | )      |   | (617      | )      |   | (750      | )      |   | (111      | )      |   | (2,895     | )      |
| **Results of operations from E&P activities**      |   | **1,021** |   |   | **697**   |   |   | **350**   |   |   | **645**   |   |   | **212**   |   |   | **2,925**  |   |
| **Year        ended December 31, 2004**                |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Revenues:                                              |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| - sales to        affiliates                           |   | 2,633     |   |   | 1,868     |   |   | 2,762     |   |   | 2,083     |   |   | 508       |   |   | 9,854      |   |
| - sales to unaffiliated entities                       |   | 148       |   |   | 1,364     |   |   | 306       |   |   | 709       |   |   | 2,086     |   |   | 4,613      |   |
| **Total        revenues**                              |   | **2,781** |   |   | **3,232** |   |   | **3,068** |   |   | **2,792** |   |   | **2,594** |   |   | **14,467** |   |
| Operations costs                                       |   | (223      | )      |   | (292      | )      |   | (322      | )      |   | (405      | )      |   | (289      | )      |   | (1,531     | )      |
| Production        taxes                                |   | (118      | )      |   | (91       | )      |   | (379      | )      |   | (13       | )      |   | (163      | )      |   | (764       | )      |
| Exploration expenses                                   |   | (57       | )      |   | (47       | )      |   | (71       | )      |   | (93       | )      |   | (155      | )      |   | (423       | )      |
| D.D. &        A. and provision for abandonment (a) |   | (489      | )      |   | (437      | )      |   | (482      | )      |   | (687      | )      |   | (849      | )      |   | (2,944     | )      |
| Other income and (expenses)                            |   | (98       | )      |   | (368      | )      |   | (216      | )      |   | 97        |   |   | (208      | )      |   | (793       | )      |
| Accretion        discount (SFAS 143) (b)               |   | (37       | )      |   | (5        | )      |   | (17       | )      |   | (15       | )      |   | (6        | )      |   | (80        | )      |
| **Pretax income from producing activities**            |   | **1,759** |   |   | **1,992** |   |   | **1,581** |   |   | **1,676** |   |   | **924**   |   |   | **7,932**  |   |
| Estimated        income taxes                          |   | (632      | )      |   | (994      | )      |   | (945      | )      |   | (948      | )      |   | (305      | )      |   | (3,824     | )      |
| **Results of operations from E&P activities**      |   | **1,127** |   |   | **998**   |   |   | **636**   |   |   | **728**   |   |   | **619**   |   |   | **4,108**  |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

___________________

(a) Includes assets impairments amounting foreuro 227 million for 2002, 210 million for 2003 and 300 millionfor 2004.(b) Represents the financial effect of the passage of timerelating to Eni’s future asset retirement obligationspursuant to SFAS 143 "Accounting for asset retirementobligations".

 

 

*Averagesales prices and production costs per unit of production*

|   |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|--------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|   |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **2002**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Average        sales prices:                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and condensates, per BBL                 | ($)    |   | 22.39  |   | 23.49  |   | 23.62  |   | 23.97  |   | 18.90  |   | 22.81  |
| Natural        gas, per kCF                  |   |   | 3.73   |   | 2.83   |   | 0.42   |   | 2.46   |   | 2.90   |   | 3.08   |
| Average production costs, per BOE (1)        |   |   | 2.97   |   | 3.44   |   | 5.75   |   | 4.37   |   | 2.94   |   | 3.83   |
| **2003**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average sales prices:                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and        condensates, per BBL          | ($)    |   | 24.24  |   | 27.14  |   | 27.60  |   | 28.37  |   | 21.53  |   | 26.29  |
| Natural gas, per kCF                         |   |   | 4.65   |   | 2.86   |   | 0.53   |   | 3.11   |   | 3.18   |   | 3.56   |
| Average        production costs, per BOE (1) |   |   | 3.77   |   | 3.70   |   | 6.21   |   | 4.19   |   | 3.26   |   | 4.16   |
| **2004**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average        sales prices:                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and condensates, per BBL                 | ($)    |   | 30.98  |   | 35.66  |   | 36.32  |   | 36.92  |   | 30.79  |   | 34.76  |
| Natural        gas, per kCF                  |   |   | 5.33   |   | 2.92   |   | 0.60   |   | 3.87   |   | 3.29   |   | 3.89   |
| Average production costs, per BOE (1)        |   |   | 4.35   |   | 3.53   |   | 7.70   |   | 4.73   |   | 4.50   |   | 4.92   |
|                                         |   |   |        |   |        |   |        |   |        |   |        |   |        |

___________________

| (1) |   | Calculated net of volumes        of natural gas consumed in operations. Starting in 2004,        natural gas was converted to oil-equivalent at 5,742 CF =        1 BBL. Previously, natural gas was converted to        oil-equivalent at 5,800 CF = 1 BBL for natural gas        produced outside Italy and at 5,600 CF = 1 BBL for        natural gas produced in Italy. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

*Oil and natural gas reserves*

Proved oil and gas reserves are the estimatedquantities of crude oil, natural gas and natural gas liquidswhich geological and engineering data demonstrate with reasonablecertainty to be recoverable in future years from known reservoirsunder technical, contractual, economic and operating conditionsexisting at the time. Prices include consideration of changes inexisting prices provided only by contractual arrangements, butnot on escalations based upon future conditions. Proved crude oiland natural gas reserves have been calculated on the basis of thespot price of Brent crude oil as of December 31, of each of thethree years presented (40.47, 30.10 and 25.66 US dollar perbarrel for 2004, 2003 and 2002, respectively) as provided for inRule 4-10 of Regulation S-X. Proved reserves exclude royaltiesand interests owned by others.

Proved developed reserves are proved reservesthat can be estimated to be recovered through existing wells withexisting equipment and operating methods.

Proved undeveloped oil and gas reserves arereserves that are expected to be recovered from new wells onundrilled acreage, or from existing wells where a relativelymajor expenditure is required for completion.

Additional oil and gas reserves expected to beobtained through the application of fluid injection or otherimproved recovery techniques for supplementing natural forces andmechanisms of primary recovery are included as proved developedreserves only after testing by a pilot project or after theoperation of an installed program has confirmed throughproduction response that increased recovery will be achieved.

The estimates of Eni’s reserve quantitieshave been prepared in accordance with Statement of FinancialAccounting Standard No. 69. The estimates of proved reserves,developed and undeveloped, at December 31, 2001, 2002, 2003 and2004 are based on data prepared by Eni.

Eni operates under Production SharingAgreements (PSAs) in several of the foreign jurisdictions whereit has oil and gas exploration and production activities. Incountries where Eni operates under PSAs, proved reserves areshown in accordance with Eni’s economic interest (pursuantto PSA contract terms) in the oil and gas reserve quantitiesestimated to be recoverable in future years. Such reservesinclude estimated quantities allocated to Eni for recovery ofcosts, income taxes owed by Eni but settled by its joint venturepartners (which are state-owned entities) out of Eni’s shareof production, and Eni’s net equity share after costrecovery. Proved oil and gas reserves associated with PSAsrepresent 43%, 46% and 51% of total proved reserves as ofyear-end 2002, 2003 and 2004, respectively, on an oil-equivalentbasis.

Proved reserves include the volume of naturalgas used for own consumption and volumes of natural gas held incertain Eni storage fields in Italy. Proved reserves attributableto these fields include: (i) the residual natural gas volumes ofthe reservoirs; (ii) natural gas volumes from other Eni fieldsinput into these reservoirs in subsequent periods. Provedreserves do not include volumes owned by or acquired from thirdparties. Gas withdrawn from storage is produced and therebydetracted from proved reserves when it is sold to third parties.

Numerous uncertainties are inherent inestimating quantities of proved reserves and in projecting futurerates of production and timing of development expenditures. Theaccuracy of any reserve estimate is a function of the quality ofavailable data and engineering and geological interpretation andjudgement. Results of drilling, testing and production after thedate of the estimate may require substantial upward and downwardrevision. In addition, changes in oil and natural gas pricescould have an effect on the quantities of Eni’s provedreserves because the estimates of reserves are based on pricesand costs at the date when such estimates are made. Reserveestimates are also subject to revision as prices fluctuate due tothe cost recovery feature under certain PSAs.

The following table presents yearly changes inestimated proved reserves, developed and undeveloped, of crudeoil (including condensate and natural gas liquids) and naturalgas for the years 2002, 2003 and 2004.

*Crude oil(Including Condensates and Natural Gas Liquids)*

| (million        barrels)
**Proved Oil Reserves** |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|--------------------------------------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                                             |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **Reserves at December 31, 2001**        |   | **309** |   |   | **1,171** |   |   | **976**   |   |   | **552** |   |   | **940**   |   |   | **3,948** |   |
|------------------------------------------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|
| Purchase        of Minerals in Place     |   |    |   |   |      |   |   |      |   |   | 13      |   |   | 12        |   |   | 25        |   |
| Revisions of Previous Estimates          |   | 2       |   |   | (31       | )      |   | 112       |   |   | 4       |   |   | (33       | )      |   | 54        |   |
| Improved        Recovery                 |   |    |   |   | 14        |   |   | 1         |   |   |    |   |   |      |   |   | 15        |   |
| Extensions and Discoveries               |   | 11      |   |   | 10        |   |   | 14        |   |   | 18      |   |   | 104       |   |   | 157       |   |
| Production                               |   | (30     | )      |   | (92       | )      |   | (81       | )      |   | (77     | )      |   | (54       | )      |   | (334      | )      |
| Sales of Minerals in Place               |   | (37     | )      |   |      |   |   |      |   |   | (12     | )      |   | (33       | )      |   | (82       | )      |
| **Reserves        at December 31, 2002** |   | **255** |   |   | **1,072** |   |   | **1,022** |   |   | **498** |   |   | **936**   |   |   | **3,783** |   |
| Purchase of Minerals in Place            |   |    |   |   |      |   |   |      |   |   | 86      |   |   |      |   |   | 86        |   |
| Revisions        of Previous Estimates   |   | 21      |   |   | 51        |   |   | 59        |   |   | 52      |   |   | 153       |   |   | 336       |   |
| Improved Recovery                        |   |    |   |   | 15        |   |   | 16        |   |   |    |   |   |      |   |   | 31        |   |
| Extensions        and Discoveries        |   | 6       |   |   | 32        |   |   | 28        |   |   |    |   |   | 214       |   |   | 280       |   |
| Production                               |   | (30     | )      |   | (90       | )      |   | (87       | )      |   | (86     | )      |   | (64       | )      |   | (357      | )      |
| Sales of        Minerals in Place        |   |    |   |   |      |   |   |      |   |   | (21     | )      |   |      |   |   | (21       | )      |
| **Reserves at December 31, 2003**        |   | **252** |   |   | **1,080** |   |   | **1,038** |   |   | **529** |   |   | **1,239** |   |   | **4,138** |   |
| Purchase        of Minerals in Place     |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |
| Revisions of Previous Estimates          |   | (1      | )      |   | (22       | )      |   | 44        |   |   | 12      |   |   | (18       | )      |   | 15        |   |
| Improved        Recovery                 |   |    |   |   | 11        |   |   | 48        |   |   | 4       |   |   |      |   |   | 63        |   |
| Extensions and Discoveries               |   | 4       |   |   | 20        |   |   | 34        |   |   | 4       |   |   | 144       |   |   | 206       |   |
| Production                               |   | (30     | )      |   | (94       | )      |   | (104      | )      |   | (74     | )      |   | (75       | )      |   | (377      | )      |
| Sales of Minerals in Place               |   |    |   |   | (2        | )      |   | (4        | )      |   | (25     | )      |   | (6        | )      |   | (37       | )      |
| **Reserves        at December 31, 2004** |   | **225** |   |   | **993**   |   |   | **1,056** |   |   | **450** |   |   | **1,284** |   |   | **4,008** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

| (million        barrels)
**Proved Developed Oil        Reserves** |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-------------------------------------------------------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                                                              |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| Reserves at December 31, 2001        |   | 171 |   |   | 685 |   |   | 539 |   |   | 476 |   |   | 443 |   |   | 2,314 |   |
|--------------------------------------|--------|-----|--------|--------|-----|--------|--------|-----|--------|--------|-----|--------|--------|-----|--------|--------|-------|--------|
| Reserves        at December 31, 2002 |   | 168 |   |   | 610 |   |   | 554 |   |   | 426 |   |   | 483 |   |   | 2,241 |   |
| Reserves at December 31, 2003        |   | 173 |   |   | 640 |   |   | 560 |   |   | 464 |   |   | 610 |   |   | 2,447 |   |
| Reserves        at December 31, 2004 |   | 174 |   |   | 655 |   |   | 588 |   |   | 386 |   |   | 668 |   |   | 2,471 |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

 

*Natural gas*

| (billion        cubic feet)
**Proved Natural Gas        Reserves** |   | **Italy**(a) |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|--------------------------------------------------------------------|--------|--------------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                                                               |   |              |   |                  |   |                 |   |               |   |                   |   |           |

| **Reserves at December 31, 2001**        |   | **5,640** |   |   | **5,509** |   |   | **925**   |   |   | **1,892** |   |   | **3,106** |   |   | **17,072** |   |
|------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Purchase        of Minerals in Place     |   |      |   |   |      |   |   |      |   |   | 87        |   |   |      |   |   | 87         |   |
| Revisions of Previous Estimates          |   | 21        |   |   | 257       |   |   | 8         |   |   | 115       |   |   | 1,238     |   |   | 1,639      |   |
| Improved        recovery                 |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Extensions and Discoveries               |   | 105       |   |   | 9         |   |   | 636       |   |   | 74        |   |   | 223       |   |   | 1,047      |   |
| Production                               |   | (456      | )      |   | (212      | )      |   | (36       | )      |   | (201      | )      |   | (228      | )      |   | (1,133     | )      |
| Sales                                    |   | (15       | )      |   |      |   |   |      |   |   | (68       | )      |   |      |   |   | (83        | )      |
| **Reserves        at December 31, 2002** |   | **5,295** |   |   | **5,563** |   |   | **1,533** |   |   | **1,899** |   |   | **4,339** |   |   | **18,629** |   |
| Purchase of Minerals in Place            |   | 10        |   |   |      |   |   |      |   |   | 425       |   |   | 8         |   |   | 443        |   |
| Revisions        of Previous Estimates   |   | (768      | )      |   | (123      | )      |   | 172       |   |   | 139       |   |   | 325       |   |   | (255       | )      |
| Improved recovery                        |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Extensions        and Discoveries        |   | 84        |   |   | 242       |   |   |      |   |   |      |   |   | 100       |   |   | 426        |   |
| Production                               |   | (455      | )      |   | (215      | )      |   | (49       | )      |   | (229      | )      |   | (276      | )      |   | (1,224     | )      |
| Sales                                    |   |      |   |   |      |   |   |      |   |   | (11       | )      |   |      |   |   | (11        | )      |
| **Reserves at December 31, 2003**        |   | **4,166** |   |   | **5,467** |   |   | **1,656** |   |   | **2,223** |   |   | **4,496** |   |   | **18,008** |   |
| Revisions        of Previous Estimates   |   | 105       |   |   | 814       |   |   | 129       |   |   | 75        |   |   | 84        |   |   | 1,207      |   |
| Improved Recovery                        |   |      |   |   |      |   |   | 10        |   |   |      |   |   |      |   |   | 10         |   |
| Extensions        and Discoveries        |   | 29        |   |   | 420       |   |   |      |   |   | 38        |   |   | 222       |   |   | 709        |   |
| Production                               |   | (409      | )      |   | (247      | )      |   | (66       | )      |   | (220      | )      |   | (303      | )      |   | (1,245     | )      |
| Sales                                    |   | (73       | )      |   | (1        | )      |   |      |   |   | (65       | )      |   | (115      | )      |   | (254       | )      |
| **Reserves at December 31, 2004**        |   | **3,818** |   |   | **6,453** |   |   | **1,729** |   |   | **2,051** |   |   | **4,384** |   |   | **18,435** |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

| (billion        cubic feet)
**Proved Developed        Natural Gas Reserves** |   | **Italy**(a) |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|------------------------------------------------------------------------------|--------|--------------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                                                                         |   |              |   |                  |   |                 |   |               |   |                   |   |           |

| Reserves at December 31, 2001        |   | 3,665 |   |   | 1,103 |   |   | 584 |   |   | 1,721 |   |   | 1,221 |   |   | 8,294  |   |
|--------------------------------------|--------|-------|--------|--------|-------|--------|--------|-----|--------|--------|-------|--------|--------|-------|--------|--------|--------|--------|
| Reserves        at December 31, 2002 |   | 3,397 |   |   | 1,084 |   |   | 863 |   |   | 1,727 |   |   | 1,283 |   |   | 8,354  |   |
| Reserves at December 31, 2003        |   | 2,966 |   |   | 962   |   |   | 866 |   |   | 2,075 |   |   | 3,355 |   |   | 10,224 |   |
| Reserves        at December 31, 2004 |   | 2,850 |   |   | 1,760 |   |   | 924 |   |   | 1,845 |   |   | 3,122 |   |   | 10,501 |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

___________________

(a) Including approximately 728, 779, 747 and737 billions of cubic feet of natural gas held in storage atDecember 31, 2001, 2002, 2003 and 2004 respectively.

 

*Standardizedmeasure of discounted future net cash flows*

Estimated future cash inflows represent therevenues that would be received from production and aredetermined by applying year-end prices of oil and gas to theestimated future production of proved reserves. Future pricechanges are considered only to extent provided by contractualarrangements. Estimated future development and production costsare determined by estimating the expenditures to be incurred indeveloping and producing the proved reserves at the end of theyear. Neither the effects of price and cost escalations norexpected future changes in technology and operating practiceshave been considered.

The standardized measure is calculated as theexcess of future cash inflows from proved reserves less futurecosts of producing and developing the reserves, future incometaxes and a yearly 10% discount factor.

Future cash flows as of December 31, 2002, 2003and 2004 include annual revenue payments from Eni’s Gas& Power segment and other transport and distribution gascompanies which represent payments for modulation services tosupport demand delivery capability. Such capability is providedthrough utilization of gas withdrawn from producing fields andinjected into depleted gas fields as storage.

Future production costs include the estimatedexpenditures related to the production of proved reserves plusany production taxes without consideration of future inflation.Future development costs include the estimated costs of drillingdevelopment wells and installation of production facilities, plusthe net costs associated with dismantlement and abandonment ofwells and facilities, under the assumption that year-end costscontinue without considering future inflation. Future incometaxes were calculated in accordance with the tax laws of thecountries in which Eni operates.

The standardized measure of discounted futurenet cash flows, related to the preceding proved oil and gasreserves, is calculated in accordance with the requirements ofStatement of Financial Accounting Standard No. 69. Thestandardized measure does not purport to reflect realizablevalues or fair market value of Eni’s proved reserves. Anestimate of fair value would also take into account, among otherthings, the expected recovery of reserves in excess of provedreserves, anticipated changes in future prices and costs and adiscount factor representative of the risks inherent in producingoil and gas.

 

| (million        euro) |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-----------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                  |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **At December 31, 2002**                                            |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |        |   |
|---------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|
| Future        cash inflows                                          |   | 32,809     |   |   | 41,797     |   |   | 29,242     |   |   | 19,645     |   |   | 26,500     |   |   | 149,993     |   |
| Future production costs                                             |   | (4,367     | )      |   | (10,354    | )      |   | (6,795     | )      |   | (4,748     | )      |   | (4,310     | )      |   | (30,574     | )      |
| Future        development and abandonment costs                     |   | (2,755     | )      |   | (3,880     | )      |   | (2,706     | )      |   | (1,523     | )      |   | (2,459     | )      |   | (13,323     | )      |
| **Future net inflow before income tax**                             |   | **25,687** |   |   | **27,563** |   |   | **19,741** |   |   | **13,374** |   |   | **19,731** |   |   | **106,096** |   |
| Future        income tax                                            |   | (8,885     | )      |   | (12,164    | )      |   | (11,320    | )      |   | (7,598     | )      |   | (5,593     | )      |   | (45,560     | )      |
| **Future net cash flows**                                           |   | **16,802** |   |   | **15,399** |   |   | **8,421**  |   |   | **5,776**  |   |   | **14,138** |   |   | **60,536**  |   |
| 10%        discount factor                                          |   | (7,471     | )      |   | (7,411     | )      |   | (3,534     | )      |   | (1,577     | )      |   | (6,063     | )      |   | (26,056     | )      |
| **Standardized measure of discounted future net        cash flows** |   | **9,331**  |   |   | **7,988**  |   |   | **4,887**  |   |   | **4,199**  |   |   | **8,075**  |   |   | **34,480**  |   |
| **At        December 31, 2003**                                     |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |        |   |
| Future cash inflows                                                 |   | 24,641     |   |   | 36,484     |   |   | 25,074     |   |   | 19,590     |   |   | 28,505     |   |   | 134,294     |   |
| Future        production costs                                      |   | (3,879     | )      |   | (7,868     | )      |   | (5,847     | )      |   | (5,458     | )      |   | (4,763     | )      |   | (27,815     | )      |
| Future development and abandonment costs                            |   | (2,080     | )      |   | (3,762     | )      |   | (2,005     | )      |   | (1,084     | )      |   | (2,575     | )      |   | (11,506     | )      |
| **Future        net inflow before income tax**                      |   | **18,682** |   |   | **24,854** |   |   | **17,222** |   |   | **13,048** |   |   | **21,167** |   |   | **94,973**  |   |
| Future income tax                                                   |   | (6,113     | )      |   | (10,296    | )      |   | (8,979     | )      |   | (7,614     | )      |   | (6,073     | )      |   | (39,075     | )      |
| **Future        net cash flows**                                    |   | **12,569** |   |   | **14,558** |   |   | **8,243**  |   |   | **5,434**  |   |   | **15,094** |   |   | **55,898**  |   |
| 10% discount factor                                                 |   | (5,056     | )      |   | (6,646     | )      |   | (3,130     | )      |   | (1,872     | )      |   | (7,930     | )      |   | (24,634     | )      |
| **Standardized        measure of discounted future net cash flows** |   | **7,513**  |   |   | **7,912**  |   |   | **5,113**  |   |   | **3,562**  |   |   | **7,164**  |   |   | **31,264**  |   |
| **At December 31, 2004**                                            |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |        |   |
| Future        cash inflows                                          |   | 28,582     |   |   | 40,373     |   |   | 28,395     |   |   | 20,435     |   |   | 32,619     |   |   | 150,404     |   |
| Future production costs                                             |   | (3,635     | )      |   | (7,237     | )      |   | (6,664     | )      |   | (5,082     | )      |   | (4,858     | )      |   | (27,476     | )      |
| Future        development and abandonment costs                     |   | (2,210     | )      |   | (4,073     | )      |   | (1,873     | )      |   | (1,419     | )      |   | (2,873     | )      |   | (12,448     | )      |
| **Future net inflow before income tax**                             |   | **22,737** |   |   | **29,063** |   |   | **19,858** |   |   | **13,934** |   |   | **24,888** |   |   | **110,480** |   |
| Future        income tax                                            |   | (7,599     | )      |   | (11,487    | )      |   | (10,949    | )      |   | (8,824     | )      |   | (6,736     | )      |   | (45,595     | )      |
| **Future net cash flows**                                           |   | **15,138** |   |   | **17,576** |   |   | **8,909**  |   |   | **5,110**  |   |   | **18,152** |   |   | **64,885**  |   |
| 10%        discount factor                                          |   | (6,006     | )      |   | (7,592     | )      |   | (3,267     | )      |   | (1,350     | )      |   | (9,412     | )      |   | (27,627     | )      |
| **Standardized measure of discounted future net        cash flows** |   | **9,132**  |   |   | **9,984**  |   |   | **5,642**  |   |   | **3,760**  |   |   | **8,740**  |   |   | **37,258**  |   |

|   |   |  |   |  |   |  |   |  |   |  |   |  |
|--------|--------|--|--------|--|--------|--|--------|--|--------|--|--------|--|

 

*Changes instandardized measure of discounted future net cash flows*

The following table reflects the changes instandardized measure of discounted future net cash flows for theyears 2002, 2003 and 2004.

| (million        euro) |   | **2002** |   | **2003** |   | **2004** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Beginning of year**                                                                                  |   | **26,771** |   |   | **34,480** |   |   | **31,264** |   |
|--------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Increase        (Decrease):                                                                            |   |       |   |   |       |   |   |       |   |
| - sales, net of production costs                                                                       |   | (10,064    | )      |   | (10,144    | )      |   | (12,172    | )      |
| - net        changes in sales and transfer prices, net of production        costs                      |   | 18,936     |   |   | (1,050     | )      |   | 13,031     |   |
| - extensions, discoveries and improved recovery,        net of future production and development costs |   | 1,810      |   |   | 1,855      |   |   | 2,806      |   |
| - changes        in estimated future development and abandonment costs                                 |   | (2,697     | )      |   | (3,576     | )      |   | (3,437     | )      |
| - development costs incurred during the period        that reduced future development costs            |   | 4,287      |   |   | 4,864      |   |   | 4,229      |   |
| -        revisions of quantity estimates                                                               |   | 1,715      |   |   | 2,348      |   |   | 1,658      |   |
| - accretion of discount                                                                                |   | 4,279      |   |   | 5,585      |   |   | 5,328      |   |
| - net        change in income taxes                                                                    |   | (9,318     | )      |   | 105        |   |   | (4,805     | )      |
| - purchase of reserves in-place                                                                        |   | 387        |   |   | 1,488      |   |   |       |   |
| - sale of        reserves in-place                                                                     |   | (646       | )      |   | (222       | )      |   | (727       | )      |
| - changes in production rates (timing) and other                                                       |   | (980       | )      |   | (4,469     | )      |   | 83         |   |
| **Net        increase (decrease)**                                                                     |   | **7,709**  |   |   | **(3,216** |   |   | **5,994**  |   |
| **End of year**                                                                                        |   | **34,480** |   |   | **31,264** |   |   | **37,258** |   |

|   |   |  |   |  |   |  |
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##### Tableof Contents

**Footnotes Item 1-15**

| (1)  |   | For a        definition of margin see "Glossary".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | From 1991 to        2002 to DeGolyer and MacNaughton, from 2003 also to Ryder        Scott.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (3)  |   | In PSAs the        national oil company awards the execution of exploration        and production activities to the international oil        company (contractor). The contractor bears the mineral        and financial risk of the initiative and, when        successful, recovers capital expenditure and costs        incurred in the year (cost oil) by means of a share of        production. This production share varies along with        international oil prices. In certain PSAs changes in        international oil prices affect also the share of        production to which the contractor is entitled in order        to remunerate its expenditure (profit oil).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (4)  |   | Of these, 5        are owned through affiliates for initiatives in Saudi        Arabia, Russia and Spain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (5)  |   | Of these        27,421 square kilometers are owned through affiliates for        initiatives in Saudi Arabia, Russia and Spain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (6)  |   | Two of these        are not yet operational.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (7)  |   | Eni agreed        with the Antitrust Authority to sell a total volume of        9.2 billion cubic meters of natural gas (2.3 billion        cubic meters/year) in the four thermal years from October        1, 2004 to September 30, 2008 at the Tarvisio entry point        into the Italian network.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (8)  |   | In accordance        with Article 19, paragraph 4 of Legislative Decree No.        164/2000, the volumes of natural gas consumed in        operations by a company or its subsidiaries are excluded        from the calculation of ceilings for sales to end        customers and from volumes input into the Italian network        to be sold in Italy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (9)  |   | Article 11 of        Legislative Decree No. 79/1999 concerning the opening up        of the Italian electricity market obliges importers and        producers of electricity from non renewable sources to        input into the national electricity system a share of        electricity produced from renewable sources set at 2% of        electricity imported or produced from non renewable        sources exceeding 100 gigawatts. Calculations are made on        total amounts net of co-generation and own consumption.        This obligation can be met also by purchasing volumes or        rights from other producers employing renewable sources        (the so called "green certificates") to cover        all or part of such 2% share. Legislative Decree No.        387/2003 established that from 2004 to 2006 the minimum        amount of electricity from renewable sources to be input        in the grid in the following year be increased by 0.35%        per year. The Minister of Productive Activities, with        decrees issued in consent with the Minister of the        Environment, will define further increases for the        2007-2009 and 2010-2012 periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (10) |   | The Refining        & Marketing segment purchased approximately 70% of        the Exploration & Production segment’s oil and        condensate production and resold on the market those        crudes and condensates that are not suited to processing        in its own refineries due to their characteristics or        geographic area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (11) |   | Other        floating production units are semi-submersible platforms,        tension leg platforms and submersible pipe alignment        rigs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (12) |   | For a        discussion of leverage and a reconciliation with the most        directly comparable GAAP financial measure, see        "Liquidity and capital resources – Financial        conditions" below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (13) |   | This        definition applies to the term margin whenever used in        this section.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (14) |   | The ceiling        on sales to end customers is 50%; the ceiling on volumes        input into the Italian network to be sold in Italy is        73%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (15) |   | Difference        between the current period cost of products sold and the        cost deriving from the application of the weighted        average cost method in the evaluation of inventories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (16) |   | Excluding        loans directed to specific capital expenditure projects        in the Exploration & Production and Gas & Power        segments, whose financial charges are recognized as an        increase of the relevant capital goods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (17) |   | In fiscal        year 2003, Stoccaggi Gas Italia, which in 2001 received a        contribution-in-kind of natural gas storage assets from        Eni SpA and Snam SpA, applied Law No. 448 of December 28,        2001, that allows companies receiving        contributions-in-kind of assets to align the taxable        value of these assets to the higher book value by paying        a 9% special rate tax instead of the 34% statutory tax        rate. Therefore in Eni’s 2003 consolidated financial        statements a deferred tax asset of euro 287 million (net        of the special rate tax of euro 154 million) was        recognized on the temporary difference between the        taxable value and the book value of these assets. See        "2003 Annual Report on Form 20-F - Item 5 Operating        and financial review and prospects - Results of        operations, under the caption Income Taxes". On that        occasion, the deferred tax asset arising from the        temporary difference between the taxable value and the        book value of natural gas volumes held in storage (euro        696 million) was not recognized because its        recoverability was not considered reasonably certain,        given the fact that Law No. 170 of 1974 did not establish        limitations to the renewal of natural gas storage        concessions. As a matter of fact Italian GAAP state that        no deferred tax asset can be recognized unless there        exists a reasonable degree of certainty about its future        recoverability. On the contrary the newly enacted Law No.        239 of August 23, 2004 establishes a limit to the renewal        of natural gas storage concessions; in particular Article        1 paragraph 61 states: "holders of natural gas        underground storage concessions are entitled to no more        than two renewals, each lasting ten years, on condition        that such persons carry out storage programs and all        other obligations arising from the concession". On        this basis in 2004 accounts a deferred tax asset was        recognized of euro 259 million. |
| (18) |   | According to        Law No. 448 of December 28, 2001, companies receiving        contributions-in-kind of assets are allowed to align the        taxable value of these assets to the higher book value by        paying a tax calculated at the 9% special rate provided        for by the law instead of the 34% statutory tax rate        applied to the difference between the two values.        Stoccaggi Gas Italia SpA, which in 2001 received a        contribution-in-kind of natural gas storage assets from        Eni SpA and Snam SpA, applied this law. Therefore in        Eni’s consolidated financial statements a temporary        difference between taxable values and book values of        these assets was recognized, which led to the recognition        of the euro 287 million deferred tax asset (net of the        special rate tax of euro 154 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (19) |   | Include own        consumption and Eni’s share of sales of affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (20) |   | Taking into        account the later conferral of assets to Eni’s        subsidiary Snam Rete Gas SpA, the timing difference was        considered analogous to that deriving from the        cancellation of intra-group profits; under Italian GAAP        the adopted 19% rate is equal to taxes paid by the        conferring entity, not to the taxes recoverable by the        receiving entity, Snam Rete Gas SpA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (21) |   | The term        "reversal" means the charging to income        statement of the provisions for deferred tax assets made        in previous periods, due to the cancellation of the        timing difference that determined them due, e.g., to the        charging to income statement of technical-economic        amortization after the completion of the depreciation        allowed by fiscal laws or the fiscal recognition of        expense previously recorded under the undeductible        reserve for contingent liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (22) |   | Article 1,        paragraph 61 states: "Holders of natural gas        underground storage concessions cannot benefit of more        than 2 renewals lasting 10 years if they complied with        their storage plans and all the duties included in the        said concessions". Formerly Law 170/1970 stated:        "concessions can be renewed for 10 year        periods".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (23) |   | Given the        uncertainties related to their payment date, employee        termination indemnities are considered as a defined        benefit plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (24) |   | Actuarial        assumptions concern, among other things, the following        variables: (i) level of future salaries; (ii) death rates        of employees; (iii) turn-over rate of employees; (iv)        share of participants with successors entitled to        benefits (e.g. spouses and children); (v) for medical        assistance plans, frequency of requests for reimbursement        and future changes in medical costs; and (vi) interest        rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (25) |   | For a        discussion of the usefulness of leverage and its        reconciliation with the most directly comparable GAAP        measure, see "Item 5 – Financial        Condition".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

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##### Table of Contents

**Exhibit 1**

**Eni S.p.A. By-laws**

> 
***Part I - Establishment - Name - Registered Office    and Duration of the Company***

**ARTICLE 1**

| 1.1 |   | "Eni S.p.A."        resulting from the transformation of Ente Nazionale        Idrocarburi, a public law agency, established by Law 136        of February 10, 1953, is regulated by these by-laws. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 2**

| 2.1 |   | The registered head office        of the company is located in Rome, Italy and the        company's two branches in San Donato Milanese (MI).        |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.2 |   | Main representative offices,        affiliates and branches may be established and/or wound        up in Italy or abroad in compliance with the law. |

**ARTICLE 3**

| 3.1 |   | The company is expected to        exist until December 31, 2100. Its duration may be        extended one or more times by resolution of the        shareholders' meeting. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 4**

| 4.1    |   | The company objects are the        direct and/or indirect management, by way of        shareholdings in companies, agencies or businesses, of        activities in the field of hydrocarbons and natural        vapours, such as exploration and development of        hydrocarbon fields, construction and operation of        pipelines for transporting the same, processing,        transformation, storage, utilisation and trade of        hydrocarbons and natural vapours, all in respect of        concessions provided by law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | The company also has the        object of direct and/or indirect management, by way of        shareholdings in companies, agencies or businesses, of        activities in the fields of chemicals, nuclear fuels,        geothermy and renewable energy sources, in the sector of        engineering and construction of industrial plants, in the        mining sector, in the metallurgy sector, in the textile        machinery sector, in the water sector, including        derivation, drinking water, purification, distribution        and reuse of waters; in the sector of environmental        protection and treatment and disposal of waste, as well        as in every other business activity that is instrumental,        supplemental or complementary with the aforementioned        activities. The company also has the object of managing        the technical and financial co-ordination of subsidiaries        and affiliated companies as well as providing financial        assistance on their behalf. The company may perform any        operations necessary or useful for the achievement of the        company objects; by way of example, it may initiate        operations involving real estate, moveable goods, trade        and commerce, industry, finance and banking asset and        liability operations, as well as any action that is in        any way connected with the company objects with the        exception of public fund raising and the performance of        investment services as regulated by Legislative Decree        No. 58 of February 24, 1998. |
|   |   | The company may take        shareholdings and interests in other companies or        businesses with objects similar, comparable or        complementary to its own or those of companies in which        it has holdings, either in Italy or abroad, and it may        provide real and or personal bonds for its own and        others' obligations, especially guarantees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

**ARTICLE 5**

| 5.1    |   | The company capital is euro        4,004,425,176.00 (four billion four million four hundred        and twenty-five thousand one hundred and seventy-six)        represented by 4,004,425,176 (four billion four million        four hundred and twenty-five thousand one hundred and        seventy-six) shares of ordinary stock with a nominal        value of euro 1 (one) each.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5.2    |   | Shares may not be split up        and each share is entitled to one vote.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 5.3    |   | The fact of being a        Shareholder in itself constitutes approval of these        by-laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 5.4    |   | The Board of Directors in        execution of the delegation of authority resolved        pursuant to Article 2443 of the Civil Code by the        Shareholders' Meeting held on June 6, 2000 approved in        the Meetings held on June 21, 2000 and June 7, 2001 to        increase the company capital up to euro 3,500,000 (three        million five hundred thousand). Therefore the Board        resolved to issue up to 3,500,000 (three million five        hundred thousand) ordinary shares nominal value euro 1        (one) each, bearing regular coupon, by using the Reserve        for the issue of shares pursuant to Article 2349 of the        Civil Code for a corresponding amount. The shares have        been assigned pursuant to Article 2349 of the Civil Code        to managers employed by the company and its subsidiaries        controlled directly or indirectly by Eni S.p.A. pursuant        to Article 2359 of the Civil Code who have achieved the        pre-set annual corporate and individual targets. In the        two-year period concerned by the Plan the total figure of        the commitments of share offerings was 1,428,550 in the        year 2000 and 1,851,750 in the year 2001 for a total        amount of 3,280,300 shares. Eni share capital will be        increased up to the amount corresponding to the shares        subscribed until the term of December 31, 2004. |
| 5.5    |   | Pursuant to Article 2443 of        the Civil Code, the Board of Directors is delegated to        increase the company share capital, for no consideration        and within December 31, 2002, in one or more times,        pursuant to Article 2349 of the Civil Code, up to euro        1,500,000 (one million five hundred thousand). The Board        may therefore issue up to 1,500,000 (one million five        hundred thousand) ordinary shares nominal value 1 (one)        euro each, bearing regular coupon, by using the Reserve        for the issue of shares pursuant to Article 2349 of the        Civil Code for a corresponding amount. The shares to be        issued will be assigned pursuant to Article 2349 of the        Civil Code to managers employed by the company and its        subsidiaries controlled directly or indirectly by Eni        S.p.A. pursuant to Article 2359 of the Civil Code, listed        subsidiaries excepted, who have achieved the pre-set 2001        individual targets. The shares will be offered for        subscription for no consideration within a month from the        expiration of a three-year term commencing as of the date        of the communication of the commitment of the offer to        the assignee. The company capital will be increased up to        the amount corresponding to the shares subscribed until        the term of June 30, 2006.    |
|   |   | The Board of Directors is        empowered to adopt any act to define terms and conditions        for the execution of the share capital increase,        including but not limited to the approval of the        "Regulations of the 2002 Plan of Assignation of Eni        S.p.A. shares to be issued pursuant to Article 2349 of        the Civil Code".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

**ARTICLE 6**

| 6.1    |   | Pursuant to Article 3 of Law        Decree 332 of May 31, 1994, converted with amendments        into Law 474 of July 30, 1994, no one, in any capacity,        may own company shares that entail a holding of more than        3 per cent of voting share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Such maximum shareholding        limit is calculated by taking into account the aggregate        shareholding held by the controlling entity, either a        physical or legal person or company; its directly or        indirectly controlled entities, as well as entities        controlled by the same controlling entity; affiliated        entities as well as people related to the second degree        by blood or marriage, also in the case of a legally        separated spouse. Control exists, with reference also to        entities other than companies, in the cases envisaged by        Article 2359, paragraphs 1 and 2 of the Civil Code.        Affiliation exists in the case set forth in Article 2359,        paragraph 3 of the Civil Code as well as between entities        that directly or indirectly, by way of subsidiaries,        other than those managing investment funds, are bound,        even with third parties, in agreements regarding the        exercise of voting rights or the transfer of shares or        portions of third companies or, in any event, in        agreements or pacts as per Article 122 of Legislative        Decree No. 58 of February 24, 1998 regarding third party        companies if said agreements or pacts concern at least 10        per cent of the voting capital, if they are listed        companies, or 20 per cent if they are unlisted companies. |
|   |   | The aforementioned        shareholding limit (3 per cent) is calculated by taking        into account shares held by any fiduciary nominee or        intermediary. Any voting rights attributable to voting        capital held or controlled in excess of the maximum limit        indicated in the foregoing cannot be exercised and the        voting rights of each entity to whom such limit on        shareholding applies are reduced in proportion, unless        otherwise jointly provided in advance by the parties        involved. In the event that shares exceeding this limit        are voted, any Shareholders' resolution adopted pursuant        to such a vote may be challenged pursuant to Article 2377        of the Civil Code, if the required majority had not been        reached without the votes exceeding the aforementioned        maximum limit. Shares not entitled to vote are included        in the determination of the quorum at shareholders'        meetings.                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 6.2    |   | Pursuant to Article 2,        paragraph 1 of Law Decree 332 of May 31, 1994, converted        with amendments into Law 474 of July 30, 1994, as        modified by Article 4, Paragraph 227, of Law December 24,        2003 No. 350, the Minister of Economy and Finance retains        the following special powers to be exercised in agreement        with the Minister of Productive Activities and according        to the criteria contained in the Decree issued by the        President of the Council of Ministers on June 10, 2004:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|   |   | a) |   | opposition with respect to        the acquisition of material shareholdings by entities        affected by the shareholding limit as set forth in        Article 3 of Law Decree 332 of May 31, 1994, converted        with amendments into Law 474 of July 30, 1994, by which        – as per Decree issued by the Minister of Treasury        on October 16, 1995 – are meant those representing        at least 3% of share capital with the right to vote at        the ordinary shareholders' meeting. The opposition is        expressed within ten days of the date of the notice to be        filed by the Board of Directors at the time request is        made for registration in the Shareholders' Register if        the Minister considers that such an acquisition may        prejudice the vital interests of the Italian State. Until        the ten-day term is not lapsed, the voting rights and the        non-asset linked rights connected with the shares        representing a material shareholding may not be        exercised. If the opposition power is exercised, through        a duly motivated act in connection with the prejudice        that may be caused by the operation to the vital        interests of the Italian State, the transferee may not        exercise the voting rights and the other non-asset linked        rights connected with the shares representing a material        shareholding and must sell said shares within one year.        Failing to comply, the law court, upon request of the        Minister of Economy and Finance, will order the sale of        the shares representing a material shareholding according        to the procedures set forth in Article 2359-ter of the        Civil Code. The act through which the opposition power is        exercised may be sued by the transferee before the        Regional Administrative Court of Latium within sixty days        as of its issue;                                                                                        |
|--------|--------|----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | b) |   | opposition with respect to        the subscription of Shareholders' pacts or agreements as        per Article 122 of Legislative Decree No. 58 of February        24, 1998, involving – as per Decree issued by the        Minister of Treasury on October 16, 1995 – at least        3% of the share capital with the right to vote at        ordinary shareholders' meetings. In order to allow the        exercise of the above mentioned opposition power, Consob        notifies the Minister of Economy and Finance of the        relevant pacts or agreements communicated to it pursuant        to the aforementioned Article 122 of Legislative Decree        No. 58 of February 24, 1998. The opposition power may be        exercised within ten days as of the date of the notice by        Consob. Until the ten-day term is not lapsed, the voting        right and the other non-asset linked rights connected        with the shares held by the shareholders who have        subscribed the above mentioned pacts or agreements may        not be exercised. If the opposition power is exercised        through the issue of an act that shall be duly motivated        in consideration of the prejudice that may be caused by        said pacts or agreements to the vital interests of the        Italian State, the shareholders pacts or agreements shall        be null and void. If in the shareholders’ meetings        the shareholders who have signed shareholders’ pacts        or agreements behave as if those pacts or agreements        disciplined by Article 122 of Legislative Decree No. 58        of February 24, 1998 were still in effect, the        resolutions approved with their vote, if determining for        the approval, may be sued. The act through which the        opposition power is exercised may be sued by the        shareholders who joined the above mentioned pacts or        agreements before the Regional Administrative Court of        Latium within sixty days as of its issue; |
|   |   | c) |   | veto power with respect to        resolutions to dissolve the company, to transfer the        business, to merge, to demerge, to transfer the company's        registered office abroad, to change the company objects        and to amend the by-laws cancelling or modifying the        powers indicated in this Article. The act through which        the veto power is exercised shall be duly motivated in        consideration of the prejudice the related resolution may        cause to the vital interests of the Italian State and may        be sued by the dissenting Shareholders before the        Regional Administrative Court of Latium within sixty days        as of its issue;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | d) |   | appointment of one Board        member with no voting rights. Should such appointed        Director lapse, the Minister of Economy and Finance in        agreement with the Minister of Productive Activities will        appoint his substitute.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

**ARTICLE 7**

| 7.1 |   | When shares are fully paid,        and if the law so allows, they may be issued to the        bearer. Bearer shares may be converted into registered        shares and vice-versa. Conversion operations are        performed at the Shareholder's expense. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 8**

| 8.1 |   | In the event, and for        whatever reason, a share belongs to more than one person,        the rights relating to said share may not be exercised by        other than one person or by a proxy for all co-owners. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 9**

| 9.1 |   | The shareholders' meeting        may resolve to increase the company capital and establish        terms, conditions and means thereof.                                                                                                      |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 9.2 |   | The shareholders' meeting        may resolve to increase the company capital by issuing        shares, including shares of different classes, to be        assigned for no consideration pursuant to Article 2349 of        the Civil Code. |

**ARTICLE 10**

| 10.1 |   | Payments on shares are        requested by the Board of Directors in one or more times.                                                                                                                                                |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2 |   | Shareholders who are late in        payment are charged an interest calculated at the        official discount rate established by the Bank of Italy        besides the provisions envisaged in Article 2344 of the        Civil Code. |

**ARTICLE 11**

| 11.1 |   | The company may issue bonds,        including convertibles and warrant bonds in compliance        with the law. |
|------|--------|-----------------------------------------------------------------------------------------------------------------|

**ARTICLE 12**

| 12.1 |   | Ordinary and extraordinary        shareholders' meetings are usually held at the company        registered office unless otherwise resolved by the Board        of Directors, provided however they are held in Italy.                              |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 12.2 |   | Ordinary shareholders’        meetings must be called at least once a year to approve        the financial statements, within 180 days of the end of        the business year, as the Company approves the Group        tFinancial Statements. |

**ARTICLE 13**

| 13.1 |   | Shareholders’ meetings        are convened through a notice to be published on the        Italian Official Gazette, according to the current        legislation and in compliance with the rules in force        regulating the exercise of the vote by mail.         |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 13.2 |   | Admission to the        shareholders’ meeting is subject to the delivery,        also for registered shares, of the certification issued        by financial intermediaries at least two days before the        date of the shareholders’ meeting on first call. |

**ARTICLE 14**

| 14.1 |   | Each Shareholder entitled to        attend the Meeting may also be represented in compliance        with the law by a person appointed by written proxy.        Incorporated entities and companies may attend the        Meeting by way of a person appointed by written proxy. In        order to simplify collection of proxies issued by        Shareholders who are employees of the company or its        subsidiaries and members of Shareholders associations        incorporated under and managed pursuant to current        legislation regulating proxies collection, notice boards        for communications and rooms to allow proxies collection        are made available to said associations according to        terms and conditions agreed from time to time by the        company with the associations representatives. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 14.2 |   | The Chairman of the Meeting        has to assure the regularity of written proxies and, in        general, the right to attend the Meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 14.3 |   | The right to vote may also        be exercised by mail according to the laws and        regulations in force concerning this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 14.4 |   | Eni S.p.A. shareholders'        meetings are disciplined by Eni S.p.A.'s shareholders'        meeting Regulation approved by the ordinary shareholders'        meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**ARTICLE 15**

| 15.1 |   | The Meeting is chaired by        the Chairman of the Board of Directors, or in the event        of absence or impediment, by the Managing Director; in        absence of both, by another person, duly delegated by the        Board of Directors, failing which the Meeting may elect        its own Chairman. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 15.2 |   | The Chairman of the Meeting        is assisted by a Secretary, who need not be a        Shareholder, to be designated by the Shareholders        present, and may appoint one or more scrutineers.                                                                                                              |

**ARTICLE 16**

| 16.1 |   | The ordinary shareholders'        meeting decides on all the matters for which it is        legally entitled and authorises the transfer of the        business.                        |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 16.2 |   | Resolutions either at        ordinary or extraordinary meetings, either on first,        second or third call, must be taken with the majority        required by the law in each case. |
| 16.3 |   | Resolutions of the Meeting        taken in compliance with the law and these by-laws are        binding for all Shareholders even if absent or        dissenting.                       |
| 16.4 |   | The minutes of ordinary        meetings must be signed by the Chairman and the        Secretary.                                                                                        |
| 16.5 |   | The minutes of extraordinary        meetings must be drawn up by a notary public.                                                                                                       |

**ARTICLE 17**

| 17.1   |   | The company is managed by a        Board of Directors consisting of no fewer than three and        no more than nine members. The shareholders' meeting        determines the number within these limits. The Minister        of Economy and Finance in agreement with the Minister of        Productive Activities may appoint another member, with no        voting rights, pursuant to Article 6, second Paragraph,        letter d), of the by-laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 17.2   |   | The Board of Directors is        appointed for a period of up to three financial years;        this term lapses on the date of the shareholders’        meeting convened to approve the financial statements of        the last year of their office. They may be reappointed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 17.3   |   | The Board members, except        for the one appointed pursuant to Article 6.2, letter d)        of these by-laws, are appointed by the shareholders'        meeting on the basis of lists presented by Shareholders        and by the Board of Directors, in such lists the        candidates must be listed in numerical order. Should the        retiring Board of Directors present its own candidate        list, it must be deposited at the company's registered        office and published in at least three Italian newspapers        of general circulation, two of them business dailies, at        least twenty days before the date set for the first call        of the shareholders' meeting. Candidate lists presented        by Shareholders must be deposited at the company        registered office and published as indicated in the        foregoing at least ten days before the date set for the        first call of the shareholders' meeting. |
|   |   | Each Shareholder may present        or take part in the presenting of only one candidate list        and each candidate may appear in one list only or he will        be ineligible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | Companies that are        controlling entities or are under common control, as        defined by Article 2359, first Paragraph, of the Civil        Code, by the same entity of the company presenting a list        shall not present nor take part in the presentation of        another candidate list. Each candidate may appear in one        list only or he will be ineligible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | Only those Shareholders who,        alone or together with other Shareholders, represent at        least 1 per cent of voting share capital at the ordinary        shareholders' meeting may present candidate lists. In        order to demonstrate the title on the number of shares        necessary to present candidate lists, the Shareholders        must present and/or deliver to the company registered        office a copy of the certification issued by the        authorised financial intermediaries that are depositaries        of their shares at least five days prior to the date set        for the first call of the shareholders' meeting.                                                                                                                                                                                                                                                                                                        |
|   |   | Together with each list,        within the aforementioned time limits, statements must be        presented in which each candidate accepts his nomination        and attests, in his own responsibility, that he possesses        the requisites required by the norms in force for the        corresponding appointments and that causes for his        ineligibility and incompatibility are non existing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | Each person entitled to vote        may vote for a candidate list only.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | Board members will be        elected in the following manner:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|   |   | a)     |   | seven tenths of the members        to be elected will be drawn out from the candidate list        that receives the majority of votes expressed by the        Shareholders in the numerical order in which they appear        on the list, rounded off in the event of a fractional        number to the next lower number;                                                                                                                                                                                                                                                                  |
|--------|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | b)     |   | the remaining Board members        will be drawn out from the other candidate lists; to this        purpose the votes obtained by each candidate list will be        divided by one or two depending on the number of the        members to be elected. The quotients thus obtained will        be assigned progressively to candidates of each said list        in the order given in the lists themselves. Quotients        thus assigned to candidates of said lists will be set in        one decreasing numerical order. Those who obtain the        highest quotients will be elected. |
|   |   |   |   | In the event that more than        one candidate obtains the same quotient, the candidate        elected will be the one of the list that has not hitherto        had a Board member elected or that has elected the least        number of Board members.                                                                                                                                                                                                                                                                                                                                   |
|   |   |   |   | In the event that none of        the lists has yet elected a Board member or that all of        them have elected the same number of Board members, the        candidate from all such lists who has obtained the        largest number of votes will be elected. In the event of        equal list votes and equal quotient, a new vote will be        taken by the entire shareholders' meeting and the        candidate elected will be the one who obtains a simple        majority of the votes;                                                                                        |
|   |   | c)     |   | to appoint Board members for        any reason not covered by the terms of the aforementioned        procedure, the shareholders' meeting will make a        resolution with the majorities prescribed by the law.                                                                                                                                                                                                                                                                                                                                                                           |

| 17.4   |   | The shareholders' meeting        may, even during the Board's term of office, change the        number of members of the Board of Directors, always        within the limits set forth in paragraph 17.1 above, and        make the relating appointments. Board members so elected        will expire at the same time as the rest of the Board.                                                                                                                |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 17.5   |   | If during the term of office        one or more members leave the Board, action will be taken        in compliance with Article 2386 of the Civil Code with        exception of the Board member appointed pursuant to        Article 6.2 letter d) of these by-laws. If a majority of        members leaves the Board, the whole Board will be        considered lapsed and the Board must promptly call a        shareholders' meeting to appoint a new Board. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

**ARTICLE 18**

| 18.1   |   | If the shareholders' meeting        has not appointed a Chairman, the Board will elect one of        its members. The Director appointed pursuant to Article        6, second Paragraph, letter d) of the by-laws cannot be        appointed as Chairman. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 18.2   |   | The Board, at the Chairman's        proposal, appoints a Secretary, who need not belong to        the company.                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                      |

**ARTICLE 19**

| 19.1   |   | The Board meets in the place        indicated in the notice whenever the Chairman or, in case        of absence or impediment, the Managing Director deems        necessary, or when written application has been made by        the majority of the members. The Board of Directors may        be convened also pursuant to Article 28.4 of the by-laws.                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | The Board of Directors'        meetings may be held by video or teleconference if each        of the participants to the meetings may be identified and        if each is allowed to follow the discussion and take part        to it in real time. If said conditions are met, the        Meeting is considered duly held in the place where the        Chairman and the Secretary are present. |
| 19.2   |   | Usually notice is given at        least five days in advance. In cases of urgency notice        may be sent earlier. The Board of Directors decides on        how to convene its meetings.                                                                                                                                                                                                       |
| 19.3   |   | The Board of Directors must        likewise be convened when so requested by at least two        Board members or by one member if the Board consists of        three members to decide on a specific matter considered        of particular importance, pertaining to management,        matter to be indicated in the request.                                                                 |

**ARTICLE 20**

| 20.1 |   | The Chairman of the Board        or, in his absence, the oldest Board member in attendance        chairs the Meeting. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------|

**ARTICLE 21**

| 21.1 |   | A majority of members of the        Board having a voting right must be present for a Board        meeting to be valid.                                                                                |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 21.2 |   | Resolutions are taken with        the majority of votes of the Board members having a        voting right present; should votes be equal, the person        who chairs the Meeting has a casting vote. |

**ARTICLE 22**

| 22.1 |   | Resolutions of the Board are        entered in the minutes, which are recorded in a book kept        for that purpose pursuant to the law, and said minutes        are signed by the Chairman of the Meeting and by the        Secretary. |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 22.2 |   | Copies of the minutes are        bona fide if they are signed by the Chairman or the        person acting for him and countersigned by the Secretary.                                                                                     |

**ARTICLE 23**

| 23.1 |   | The Board of Directors is        invested with the fullest powers for ordinary and        extraordinary management of the company and, in        particular, the Board has the power to perform all acts        it deems advisable for the implementation and achievement        of the company objects, except for the acts that the law        or these by-laws reserve for the shareholders' meeting. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 23.2 |   | The Board of Directors is        allowed to resolve on the following matters:                                                                                                                                                                                                                                                                                                                            |

|   |   | -      |   | the merger and the demerger        of at least 90% directly owned subsidiaries;      |
|--------|--------|--------|--------|--------------------------------------------------------------------------------------|
|   |   | -      |   | the establishment and        winding up of branches;                                 |
|   |   | -      |   | the amendment to the by-laws        in order to comply with the current legislation. |
|   |   |   |   |                                                                                 |

| 23.3 |   | The Board of Directors and        the Managing Director report timely, at least every three        months and however in the Board of Directors meetings, to        the Board of Statutory Auditors on the activities and on        the most relevant operations regarding the operational,        economic and financial management of the company and its        subsidiaries; in particular the Board of Directors and        the Managing Director report to the Board of Statutory        Auditors on operations entailing an interest on their        behalf or on behalf of third parties. |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 24**

| 24.1   |   | The Board of Directors        delegates its powers to one of its members with the        exception of the Director appointed pursuant Article 6,        second Paragraph, letter d) of the by-laws, in compliance        with the limits set forth in Article 2381 of the Civil        Code. In addition the Board of Directors may delegate        powers to the Chairman for researching and promoting        integrated projects and strategic international        agreements. The Board of Directors may at any time        withdraw the delegations of powers hereon; if the Board        of Directors withdraws powers delegated to the Managing        Director, a new Managing Director is simultaneously        appointed. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | The Board of Directors, upon        proposal of the Chairman and in agreement with the        Managing Director, may confer powers for single acts or        categories of acts to other members of the Board of        Directors with the exception of the Director appointed        pursuant Article 6, second Paragraph, letter d) of the        by-laws. The Chairman and the Managing Director, in        compliance with the limits of their delegations, may        delegate and empower company employees or persons not        belonging to the company to represent the company for        single acts or specific categories of acts.                                                                                     |
|   |   | Further, on proposal of the        Managing Director and in agreement with the Chairman, the        Board of Directors may also appoint one or more General        Managers and determines the powers to be conferred to        them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

**ARTICLE 25**

| 25.1 |   | Legal representation towards        any judicial or administrative authority and towards        third parties, together with the company signature, are        vested either onto the Chairman or the Managing Director. |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 26**

| 26.1 |   | The Chairman and the members        of the Board are remunerated in an amount established by        the ordinary shareholders' meeting. Said resolution, once        taken, will remain valid for subsequent business years        until the shareholders' meeting decides otherwise. |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ARTICLE 27**

| 27.1 |   | The Chairman: |
|------|--------|---------------|

|   |   | a) |   | represents the company        according to the provisions of Article 25.1;                                               |
|--------|--------|----|--------|--------------------------------------------------------------------------------------------------------------------------|
|   |   | b) |   | chairs the shareholders'        meeting pursuant to Article 15.1;                                                        |
|   |   | c) |   | convenes and chairs meetings        of the Board of Directors pursuant to Articles 19.1 and        20.1;                 |
|   |   | d) |   | ascertains whether Board        resolutions have been implemented;                                                       |
|   |   | e) |   | exercises the powers        delegated to him by the Board of Directors pursuant to        Article 24.1 of these by-laws. |

**ARTICLE 28**

| 28.1   |   | The Board of Statutory        Auditors consists of five effective members and two        alternate members. The Auditors shall have the        professional and honour requirements set forth by the        Ministerial Decree No. 162, dated March 30, 2000 issued        by the Ministry of Justice.                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Pursuant to the        aforementioned Ministerial Decree, the matters strictly        connected to those of interest of the Company are:        companies law, business economics and corporate finance.                                                                                                                                                                                                                                        |
|   |   | Pursuant to said Ministerial        Decree, the sectors strictly connected with those of        interest of the Company are the engineering and        geological sectors.                                                                                                                                                                                                                                                                      |
|   |   | Those who are already        appointed effective auditor or supervisory board member        or audit committee member in at least five companies with        securities listed on regulated securities markets other        than Eni S.p.A. subsidiaries may not be appointed        Statutory Auditor; if elected, they will lapse.                                                                                                            |
| 28.2   |   | The effective Auditors and        the alternate Auditors are appointed by the shareholders'        meeting on the basis of lists presented by the        Shareholders; in such lists candidates are listed in        numerical order. For the presentation, deposit and        publication of candidate lists the procedures set forth        in Article 17.3 shall apply.                                                                      |
|   |   | Lists shall be divided into        two sections: the first one for the candidates to be        appointed effective Auditors and the second one for the        candidates to be appointed alternate Auditors. At least        the first candidate of each section shall be chartered        accountant and have exercised audit activities for not        less than three years.                                                                 |
|   |   | Three effective Auditors and        one alternate Auditor will be drawn from the list that        obtains the majority of votes. The other two effective        Auditors and the other alternate Auditor will be        appointed pursuant to Article 17.3, letter b) of the        by-laws. The procedure described in this last Article        shall be applied to each section of the lists involved        separately.                      |
|   |   | The shareholders’        meeting appoints the Chairman of the Board of Statutory        Auditors among the effective Auditors appointed.                                                                                                                                                                                                                                                                                                   |
|   |   | To appoint effective or        alternate Auditors for any reason not elected according        to the terms of the aforementioned procedure, the        shareholders' meeting will resolve with the majorities        prescribed by the law.                                                                                                                                                                                                     |
|   |   | Should an effective Auditor        drawn out from the candidate list that receives the        majority of votes expressed by the Shareholders be        replaced, he will be succeeded by the alternate Auditor        drawn out from the same candidate list; should an        effective Auditor drawn out from the other candidate list        be replaced, he will be substituted pursuant to Article        17.3, letter b) of the by-laws. |
| 28.3   |   | Retiring Auditors may be        reelected.                                                                                                                                                                                                                                                                                                                                                                                                      |
| 28.4   |   | Subject to a previous        communication to the Chairman of the Board of Directors,        the Board of Statutory Auditors is empowered to convene        the shareholders' meeting and the Board of Directors. At        least two effective Auditors are empowered to convene the        shareholders' meeting and the Board of Directors, too.                                                                                             |

**ARTICLE 29**

| 29.1 |   | The business year ends on        December 31 every year.                                                                                                              |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 29.2 |   | At the end of each business        year, the Board of Directors sees to the preparation of        the company financial statements in conformity with the        law. |
| 29.3 |   | The Board of Directors may,        during the course of the business year, pay interim        dividends to the Shareholders.                                          |

**ARTICLE 30**

| 30.1   |   | Dividends not collected        within five years of the day on which they are payable        will be prescribed in favour of the company and allocated        to reserves. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                       |

**ARTICLE 31**

| 31.1   |   | In the event the company is        wound up, the shareholders' meeting will decide the        manner of liquidation, appoint one or more liquidators        and determine their powers and remuneration. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                     |

**ARTICLE 32**

| 32.1 |   | For matters not expressly        regulated by these by-laws, the norms of the Civil Code        and specific laws concerning these matters will apply.                                                                                                                                        |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2 |   | The Ministry of Economy and        Finance may retain his shareholding in the company share        capital in excess of the limit set forth in Article 6.1        of these by-laws and will not be subject to the        provisions of said Article 6.1 for the period set by the        law. |

**ARTICLE 33**

| 33.1 |   | The company retains all        assets and liabilities held before its transformation by        the public law agency Ente Nazionale Idrocarburi. |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

##### .Table of Contents

**Exibit 8**

**List of Eni's subsidiary for year 2004**

| **Subsidiary**                                                                                                     |   | **Country of        Incorporation** | **Eni's        interest (%)** |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-------------------------------|
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Exploration & Production                                                                                       |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Agip Caspian Sea BV                                                                                                |   | (the Netherlands)                   | 100                           |
| Agip Energy and Natural        Resources (Nigeria) Ltd                                                             |   | (Nigeria)                           | 100                           |
| Agip Karachaganak BV                                                                                               |   | (the Netherlands)                   | 100                           |
| Agip Oil Ecuador BV                                                                                                |   | (the Netherlands)                   | 100                           |
| Eni A E P Ltd                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni Algeria Exploration BV                                                                                         |   | (the Netherlands)                   | 100                           |
| Eni Algeria Ltd Sàrl                                                                                          |   | (Luxembourg)                        | 100                           |
| Eni Algeria Production BV                                                                                          |   | (the Netherlands)                   | 100                           |
| Eni Ambalat Ltd                                                                                                    |   | (the United Kingdom)                | 100                           |
| Eni America Ltd                                                                                                    |   | (USA)                               | 100                           |
| Eni Angola Exploration BV                                                                                          |   | (the Netherlands)                   | 100                           |
| Eni Angola Production BV                                                                                           |   | (the Netherlands)                   | 100                           |
| Eni AOG Ltd (in liquidation)                                                                                       |   | (the United Kingdom)                | 100                           |
| Eni AUL Ltd                                                                                                        |   | (USA)                               | 100                           |
| Eni Australia BV                                                                                                   |   | (the Netherlands)                   | 100                           |
| Eni Australia Ltd                                                                                                  |   | (the United Kingdom)                | 100                           |
| Eni BBI Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni BB Ltd                                                                                                         |   | (the United Kingdom)                | 100                           |
| Eni BB Petroleum Inc                                                                                               |   | (USA)                               | 100                           |
| Eni BB Pipeline Llc                                                                                                |   | (USA)                               | 100                           |
| Eni Birch Ltd                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni Bukat Ltd                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni China BV                                                                                                       |   | (the Netherlands)                   | 100                           |
| Eni Congo SA                                                                                                       |   | (Congo)                             | 100                           |
| Eni Croatia BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni Dación BV                                                                                                 |   | (the Netherlands)                   | 100                           |
| Eni Deepwater Llc                                                                                                  |   | (USA)                               | 100                           |
| Eni Denmark BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni Elgin/Franklin Ltd                                                                                             |   | (the United Kingdom)                | 100                           |
| Eni Energy BV                                                                                                      |   | (the Netherlands)                   | 100                           |
| Eni Exploration BV                                                                                                 |   | (the Netherlands)                   | 100                           |
| Eni Finance Inc                                                                                                    |   | (USA)                               | 100                           |
| Eni Forties Ltd                                                                                                    |   | (the United Kingdom)                | 100                           |
| Eni Ganal Ltd                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni Grand Maghreb BV                                                                                               |   | (the Netherlands)                   | 100                           |
| Eni Guibsen Exploration BV                                                                                         |   | (the Netherlands)                   | 100                           |
| Eni Indonesia Ltd                                                                                                  |   | (the United Kingdom)                | 100                           |
| Eni International NA NV        Sàrl                                                                           |   | (Luxembourg)                        | 100                           |
| Eni Investments Plc                                                                                                |   | (the United Kingdom)                | 100                           |
| Eni Iran BV                                                                                                        |   | (the Netherlands)                   | 100                           |
| Eni Ireland BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni Jpda 03-13 Ltd                                                                                                 |   | (the United Kingdom)                | 100                           |
| Eni Krueng Mane Ltd                                                                                                |   | (the United Kingdom)                | 100                           |
| Eni Lasmo Plc                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni Liverpool Bay Ltd                                                                                              |   | (the United Kingdom)                | 100                           |
| Eni LNS Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni Malagot Ltd                                                                                                    |   | (the United Kingdom)                | 100                           |
| Eni Marketing Inc                                                                                                  |   | (USA)                               | 100                           |
| Eni Mediterranea Idrocarburi        SpA                                                                            |   | (Italy)                             | 100                           |
| Eni Mep Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni Middle East Ltd                                                                                                |   | (the United Kingdom)                | 100                           |
| Eni Morocco BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni Muara Bakau BV                                                                                                 |   | (the Netherlands)                   | 100                           |
| Eni Norge AS                                                                                                       |   | (Norway)                            | 100                           |
| Eni North Africa BV                                                                                                |   | (the Netherlands)                   | 100                           |
| Eni Oil Algeria Ltd                                                                                                |   | (the United Kingdom)                | 100                           |
| Eni Oil do Brasil SA                                                                                               |   | (Brazil)                            | 100                           |
| Eni Oil & Gas Inc                                                                                              |   | (USA)                               | 100                           |
| Eni Oil Holdings BV                                                                                                |   | (the Netherlands)                   | 100                           |
| Eni Oil US Llc                                                                                                     |   | (USA)                               | 100                           |
| Eni Pakistan Ltd                                                                                                   |   | (the United Kingdom)                | 100                           |
| Eni Pakistan (M) Ltd Sàrl                                                                                     |   | (Luxembourg)                        | 100                           |
| Eni Papalang Ltd                                                                                                   |   | (the United Kingdom)                | 100                           |
| Eni Petroleum BV                                                                                                   |   | (the Netherlands)                   | 100                           |
| Eni Petroleum Co Inc                                                                                               |   | (USA)                               | 100                           |
| Eni Petroleum Exploration Co        Inc                                                                            |   | (USA)                               | 100                           |
| Eni Popodi Ltd                                                                                                     |   | (the United Kingdom)                | 100                           |
| Eni Rapak Ltd                                                                                                      |   | (the United Kingdom)                | 100                           |
| Eni Securities Ltd                                                                                                 |   | (the United Kingdom)                | 100                           |
| Eni Sesulu Ltd                                                                                                     |   | (the United Kingdom)                | 100                           |
| Eni TNS Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni Trading BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni Trinidad and Tobago        Exploration BV                                                                      |   | (the Netherlands)                   | 100                           |
| Eni Trinidad and Tobago Ltd                                                                                        |   | (Trinidad & Tobago)             | 100                           |
| Eni TTO Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni Tunisia Bek BV                                                                                                 |   | (the Netherlands)                   | 100                           |
| Eni Tunisia BV                                                                                                     |   | (the Netherlands)                   | 100                           |
| Eni UHL Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni UKCS Ltd                                                                                                       |   | (the United Kingdom)                | 100                           |
| Eni UK Ltd                                                                                                         |   | (the United Kingdom)                | 100                           |
| Eni ULT Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni ULX Ltd                                                                                                        |   | (the United Kingdom)                | 100                           |
| Eni USA Inc                                                                                                        |   | (USA)                               | 100                           |
| Eni US Operating Co Inc                                                                                            |   | (USA)                               | 100                           |
| Eni Venezuela BV                                                                                                   |   | (the Netherlands)                   | 100                           |
| Eni Ventures Plc                                                                                                   |   | (the United Kingdom)                | 100                           |
| Enstar Petroleum Ltd                                                                                               |   | (Canada)                            | 50                            |
| Ieoc Exploration BV                                                                                                |   | (the Netherlands)                   | 100                           |
| Ieoc Production BV                                                                                                 |   | (the Netherlands)                   | 100                           |
| Lasmo Oil Development        (Canada) Ltd                                                                          |   | (Canada)                            | 100                           |
| Lasmo Sanga Sanga Ltd                                                                                              |   | (Bermuda)                           | 100                           |
| Lasmo (UPET) Inc                                                                                                   |   | (Canada)                            | 100                           |
| Nigerian Agip Exploration        Ltd                                                                               |   | (Nigeria)                           | 100                           |
| Nigerian Agip Oil Co Ltd                                                                                           |   | (Nigeria)                           | 100                           |
| Pennant Insurance Co Ltd                                                                                           |   | (Bermuda)                           | 100                           |
| Secab Niugini Ltd                                                                                                  |   | (Papua New Guinea)                  | 100                           |
| Società Petrolifera        Italiana SpA                                                                       |   | (Italy)                             | 99.96                         |
| Société Italo Tunisienne        d’Exploitation Pétrolière SA                              |   | (Tunisia)                           | 50                            |
| Stoccaggi Gas Italia SpA -        Stogit SpA                                                                       |   | (Italy)                             | 100                           |
| Unimar Llc                                                                                                         |   | (USA)                               | 50                            |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Gas & Power                                                                                                    |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Acquedotto di Savona SpA                                                                                           |   | (Italy)                             | 67.05                         |
| Acquedotto Vesuviano SpA                                                                                           |   | (Italy)                             | 100                           |
| Adriaplin Podjetje za        distribucijo zemeljskega plina d.o.o. Ljubljana                                       |   | (Slovenia)                          | 51                            |
| Compagnia Napoletana di        Illuminazione e Scaldamento col Gas SpA                                             |   | (Italy)                             | 99.69                         |
| Distribuidora de Gas Cuyana        SA                                                                              |   | (Argentina)                         | 45.6                          |
| Eni Acqua Campania SpA                                                                                             |   | (Italy)                             | 49.05                         |
| Eni Gas & Power CH SA                                                                                          |   | (Switzerland)                       | 100                           |
| Eni Gas & Power LNG        Australia BV                                                                        |   | (the Netherlands)                   | 100                           |
| Eni G & P Trading BV                                                                                           |   | (the Netherlands)                   | 100                           |
| Eni Gas Trading Europe BV                                                                                          |   | (the Netherlands)                   | 100                           |
| EniPower SpA                                                                                                       |   | (Italy)                             | 100                           |
| EniPower Trading SpA                                                                                               |   | (Italy)                             | 100                           |
| EniPower Trasmissione SpA                                                                                          |   | (Italy)                             | 100                           |
| Fiorentina Gas Clienti SpA                                                                                         |   | (Italy)                             | 100                           |
| Fiorentina Gas SpA                                                                                                 |   | (Italy)                             | 51.03                         |
| Gas Brasiliano Distribuidora        SA                                                                             |   | (Brazil)                            | 100                           |
| GNL Italia SpA                                                                                                     |   | (Italy)                             | 50.06                         |
| Greenstream BV                                                                                                     |   | (the Netherlands)                   | 75                            |
| Inversora de Gas Cuyana SA                                                                                         |   | (Argentina)                         | 76                            |
| Italgas Hellas SpA                                                                                                 |   | (Italy)                             | 100                           |
| LNG Shipping SpA                                                                                                   |   | (Italy)                             | 100                           |
| Napoletana Gas Clienti SpA                                                                                         |   | (Italy)                             | 99.69                         |
| Partecipazioni Industriali        SpA                                                                              |   | (Italy)                             | 100                           |
| Slim Sicilia - Società        Lavori Impianti Metano Sicilia SpA                                              |   | (Italy)                             | 100                           |
| Snam Rete Gas SpA                                                                                                  |   | (Italy)                             | 50.06                         |
| Società Azionaria per la        Condotta di Acque Potabili                                                    |   | (Italy)                             | 67.05                         |
| Società EniPower Ferrara        Srl                                                                           |   | (Italy)                             | 51                            |
| Società Italiana per il Gas        pA                                                                         |   | (Italy)                             | 100                           |
| Société de Service du        Gazoduc Transtunisien SA - Sergaz SA                                        |   | (Tunisia)                           | 66.67                         |
| Société pour la        Construction du Gazoduc Transtunisien SA - Scogat SA                              |   | (Tunisia)                           | 100                           |
| Tigáz Tiszántúli        Gázszolgáltató Részvénytársaság          |   | (Hungary)                           | 50                            |
| Tigáz 2 Földgáz Elosztó        és Közüzemi Szolgáltató Kft            |   | (Hungary)                           | 44.65                         |
| Trans Tunisian Pipeline Co        Ltd                                                                              |   | (Jersey)                            | 100                           |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Refining & Marketing                                                                                           |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Agip Austria GmbH                                                                                                  |   | (Austria)                           | 100                           |
| Agip Benelux BV                                                                                                    |   | (the Netherlands)                   | 100                           |
| Agip Bratislava Sro                                                                                                |   | (Slovakia)                          | 100                           |
| Agip Ceská Republika Sro                                                                                      |   | (Czech Republic)                    | 100                           |
| Agip Deutschland GmbH                                                                                              |   | (Germany)                           | 100                           |
| Agip Ecuador SA                                                                                                    |   | (Ecuador)                           | 100                           |
| Agip España SA                                                                                                |   | (Spain)                             | 100                           |
| Agip Française SA                                                                                             |   | (France)                            | 100                           |
| AgipFuel SpA                                                                                                       |   | (Italy)                             | 100                           |
| Agip Hungaria        Részvénytársaság                                                          |   | (Hungary)                           | 99.41                         |
| Agip Lubricantes SA                                                                                                |   | (Argentina)                         | 100                           |
| Agip Lubricants (Pty) Ltd                                                                                          |   | (South Africa)                      | 100                           |
| Agip Pannónia Kereskedelmi        Korlátolt Felelõsségû Társaság                |   | (Hungary)                           | 99.41                         |
| Agip Portugal - Combustiveis        SA                                                                             |   | (Portugal)                          | 100                           |
| AgipRete SpA                                                                                                       |   | (Italy)                             | 100                           |
| Agip Romania SA                                                                                                    |   | (Romania)                           | 100                           |
| Agip Schmiertechnik GmbH                                                                                           |   | (Germany)                           | 100                           |
| Agip Slovenija Doo                                                                                                 |   | (Slovenia)                          | 100                           |
| Agip Slovensko Spol. Sro (ex        Agip Slovensko Sro)                                                            |   | (Slovakia)                          | 100                           |
| Agip Suisse SA                                                                                                     |   | (Switzerland)                       | 100                           |
| American Agip Co Inc                                                                                               |   | (USA)                               | 100                           |
| Big Bon Distribuzione SpA                                                                                          |   | (Italy)                             | 100                           |
| Costiero Gas Livorno SpA                                                                                           |   | (Italy)                             | 65                            |
| Ecofuel SpA                                                                                                        |   | (Italy)                             | 100                           |
| Eni Portugal Investment SpA                                                                                        |   | (Italy)                             | 100                           |
| Esain SA                                                                                                           |   | (Ecuador)                           | 100                           |
| Intermode Trasporti        Logistica Integrata SpA                                                                 |   | (Italy)                             | 100                           |
| Italiana Petroli SpA                                                                                               |   | (Italy)                             | 100                           |
| Petrolig Srl                                                                                                       |   | (Italy)                             | 70                            |
| Petroven Srl                                                                                                       |   | (Italy)                             | 68                            |
| Praoil Oleodotti Italiani        SpA                                                                               |   | (Italy)                             | 100                           |
| Raffineria di Gela SpA                                                                                             |   | (Italy)                             | 100                           |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Petrochemicals                                                                                                     |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Dunastyr Polisztirolgyártó        Részvénytársaság                                   |   | (Hungary)                           | 100                           |
| Polimeri Europa Americas Inc                                                                                       |   | (USA)                               | 100                           |
| Polimeri Europa Benelux SA                                                                                         |   | (Belgium)                           | 100                           |
| Polimeri Europa Distribution        France SAS                                                                     |   | (France)                            | 100                           |
| Polimeri Europa Distribution        SA                                                                             |   | (Switzerland)                       | 100                           |
| Polimeri Europa Elastomères        France SA                                                                  |   | (France)                            | 100                           |
| Polimeri Europa France Snc                                                                                         |   | (France)                            | 100                           |
| Polimeri Europa GmbH                                                                                               |   | (Germany)                           | 100                           |
| Polimeri Europa Ibérica SA                                                                                    |   | (Spain)                             | 100                           |
| Polimeri Europa SpA                                                                                                |   | (Italy)                             | 100                           |
| Polimeri Europa UK Ltd                                                                                             |   | (the United Kingdom)                | 100                           |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Oilfield Services        Construction and Engineering                                                              |   |                                |                          |
| Oilfield Services and        Construction                                                                          |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Boscongo SA                                                                                                        |   | (Congo)                             | 42.95                         |
| Bos Investment Ltd (ex        Bouygues Offshore Ltd)                                                               |   | (the United Kingdom)                | 42.95                         |
| Bos Italia Srl                                                                                                     |   | (Italy)                             | 42.95                         |
| BOS Shelf Ltd Society                                                                                              |   | (Azerbaijan)                        | 21.48                         |
| Bos - UIE Ltd (ex Bouygues        Offshore - UIE Ltd)                                                              |   | (the United Kingdom)                | 42.95                         |
| Camom Gesellschaft fur        Instandhaltung und Montagen GmbH                                                     |   | (Germany)                           | 42.95                         |
| Camom SA                                                                                                           |   | (France)                            | 42.95                         |
| Canalisations, Tuyauteries        Soudées SA                                                                  |   | (France)                            | 42.94                         |
| Consorzio Saipem Energy        International - Tecnomare                                                           |   | (Italy)                             | 50.05                         |
| Dalia Floater Angola Snc                                                                                           |   | (France)                            | 11.81                         |
| Delong Hersent - Estudos,        Construções Maritimas         e Participações, Unipessoal Lda |   | (Portugal)                          | 42.95                         |
| Energy Maintenance Services        SpA                                                                             |   | (Italy)                             | 71.48                         |
| Entreprise Nouvelle        Marcellin SA                                                                            |   | (France)                            | 42.95                         |
| Er Sai Caspian Contractor        Llc                                                                               |   | (Kazakhstan)                        | 21.48                         |
| ERS - Equipment Rental &        Services BV                                                                    |   | (the Netherlands)                   | 42.95                         |
| European Marine Contractors        Ltd                                                                             |   | (the United Kingdom)                | 42.95                         |
| European Marine Investments        Ltd                                                                             |   | (the United Kingdom)                | 42.95                         |
| European Maritime Commerce        BV                                                                               |   | (the Netherlands)                   | 42.95                         |
| FPSO Firenze Produção                                                                                    |   | (Portugal)                          | 21.48                         |
| FPSO Mystras (Nigeria) Ltd                                                                                         |   | (Nigeria)                           | 21.48                         |
| FPSO Mystras - Produção de        Petròleo Lda                                                      |   | (Portugal)                          | 21.48                         |
| Global Petroprojects        Services AG                                                                            |   | (Switzerland)                       | 42.95                         |
| Guangdong Contractor Snc                                                                                           |   | (France)                            | 25.77                         |
| Hazira Cryogenic Engineering        & Construction Management Private Ltd                                      |   | (India)                             | 23.57                         |
| Hazira Marine Engineering        & Construction Management Private Ltd                                         |   | (India)                             | 42.95                         |
| Intermare Sarda SpA                                                                                                |   | (Italy)                             | 42.95                         |
| Katran-K Llc                                                                                                       |   | (Russia)                            | 42.95                         |
| Lipardiz - Construção de        Estruturas Maritimas Lda                                                 |   | (Portugal)                          | 21.48                         |
| Moss Arctic Offshore AS                                                                                            |   | (Norway)                            | 42.95                         |
| Moss Maritime AS                                                                                                   |   | (Norway)                            | 42.95                         |
| Moss Maritime Inc                                                                                                  |   | (USA)                               | 42.95                         |
| Moss Offshore AS                                                                                                   |   | (Norway)                            | 42.95                         |
| Nigerian Services &        Supply Co Ltd                                                                       |   | (Nigeria)                           | 42.95                         |
| Offshore Design Engineering        Ltd                                                                             |   | (the United Kingdom)                | 21.48                         |
| Petrex SA                                                                                                          |   | (Peru)                              | 42.95                         |
| Petromar Lda                                                                                                       |   | (Angola)                            | 30.07                         |
| PT Saipem Indonesia                                                                                                |   | (Indonesia)                         | 42.95                         |
| PT Sofresid Indonesia Ll                                                                                           |   | (Indonesia)                         | 42.95                         |
| Saibos Akogep Snc                                                                                                  |   | (France)                            | 30.07                         |
| Saibos Construções        Maritimas Lda                                                                  |   | (Portugal)                          | 42.95                         |
| Saibos Fze                                                                                                         |   | (United Arab Emirates)              | 42.95                         |
| Saibos SAS                                                                                                         |   | (France)                            | 42.95                         |
| Saipar Drilling Co BV                                                                                              |   | (the Netherlands)                   | 21.48                         |
| Saipem Aban Drilling Co        Private Ltd                                                                         |   | (India)                             | 21.48                         |
| Saipem Asia Sdn Bhd                                                                                                |   | (Malaysia)                          | 42.95                         |
| Saipem Contracting Algerie        SpA (ex Saipem Algerie SpA)                                                      |   | (Algeria)                           | 42.93                         |
| Saipem Contracting (Nigeria)        Ltd                                                                            |   | (Nigeria)                           | 41.67                         |
| Saipem do Brasil Serviçõs        de Petroleo Ltda                                                        |   | (Brazil)                            | 42.95                         |
| Saipem Energy International        SpA                                                                             |   | (Italy)                             | 42.95                         |
| Saipem Holding France SAS                                                                                          |   | (France)                            | 42.95                         |
| Saipem Inc                                                                                                         |   | (USA)                               | 42.95                         |
| Saipem India Project        Services Ltd        (ex International Development Process and Engineering        Ltd)  |   | (India)                             | 42.95                         |
| Saipem International BV                                                                                            |   | (the Netherlands)                   | 42.95                         |
| Saipem Luxembourg SA                                                                                               |   | (Lussemburgo)                       | 42.95                         |
| Saipem (Malaysia) Sdn Bhd                                                                                          |   | (Malaysia)                          | 17.18                         |
| Saipem Mediterranean        Services Llc                                                                           |   | (Croatia)                           | 42.95                         |
| Saipem (Nigeria) Ltd                                                                                               |   | (Nigeria)                           | 38.41                         |
| Saipem - Perfurações e        Construções Petroliferas America do Sul Lda                      |   | (Portugal)                          | 42.95                         |
| Saipem (Portugal) Comércio        Marítimo, Sociedade Unipessoal Lda                                     |   | (Portugal)                          | 42.95                         |
| Saipem (Portugal) - Gestão        de Participações SGPS Sociedade Unipessoal SA                     |   | (Portugal)                          | 42.95                         |
| Saipem SA                                                                                                          |   | (France)                            | 42.95                         |
| Saipem Services SA                                                                                                 |   | (Belgium)                           | 42.95                         |
| Saipem SpA                                                                                                         |   | (Italy)                             | 42.95                         |
| Saipem UK Ltd                                                                                                      |   | (the United Kingdom)                | 42.95                         |
| SAIR Construções Mecanicas        de Estruturas Maritimas Lda                                            |   | (Portugal)                          | 36.94                         |
| Sas Port de Tanger                                                                                                 |   | (France)                            | 42.95                         |
| Saudi Arabian Saipem Ltd                                                                                           |   | (Saudi Arabia)                      | 25.77                         |
| SB Construction and Maritime        Services BV                                                                    |   | (the Netherlands)                   | 42.95                         |
| Services et Equipements        Gaziers et Petroliers SA                                                            |   | (France)                            | 42.85                         |
| Servicios de Construçiones        Caucedo SA                                                                  |   | (Dominical Republic)                | 21.35                         |
| Société de Construction        d’Oleoducs Snc                                                       |   | (France)                            | 42.85                         |
| Société Nouvelle Technigaz        SA                                                                     |   | (France)                            | 42.94                         |
| Société pour la        Realisation du Port de Tanger Mediterranée                                   |   | (Morocco)                           | 14.32                         |
| Sofresid Engineering SA                                                                                            |   | (France)                            | 42.95                         |
| Sofresid SA                                                                                                        |   | (France)                            | 42.95                         |
| Sonsub A/S                                                                                                         |   | (Norway)                            | 42.95                         |
| Sonsub Inc                                                                                                         |   | (USA)                               | 42.95                         |
| Sonsub International Pty Ltd                                                                                       |   | (Australia)                         | 42.95                         |
| Sonsub Ltd                                                                                                         |   | (the United Kingdom)                | 42.95                         |
| Sonsub SpA                                                                                                         |   | (Italy)                             | 42.95                         |
| Star Gulf Free Zone Co                                                                                             |   | (United Arab Emirates)              | 42.95                         |
| Starstroi Llc                                                                                                      |   | (Russia)                            | 21.48                         |
| Stts Snc                                                                                                           |   | (France)                            | 25.77                         |
| Tbe Ltd                                                                                                            |   | (Egypt)                             | 30.06                         |
| Tss Dalia Snc                                                                                                      |   | (Egypt)                             | 11.81                         |
| Upstream Constructors        International Fzco                                                                    |   | (United Arab Emirates)              | 21.48                         |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Engineering                                                                                                        |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Andromeda Consultoria        Tecnica e Representações Ltda                                               |   | (Brazil)                            | 100                           |
| ASG Scarl                                                                                                          |   | (Italy)                             | 55.34                         |
| CEPAV (Consorzio Eni per        l’Alta Velocità) Uno                                                     |   | (Italy)                             | 50.21                         |
| Consorzio Snamprogetti Abb        Lg Chemicals                                                                     |   | (Italy)                             | 50                            |
| CMS&A Wll                                                                                                      |   | (Qatar)                             | 20                            |
| Modena Scarl                                                                                                       |   | (Italy)                             | 59.33                         |
| Rodano Consortile Scarl                                                                                            |   | (Italy)                             | 53.57                         |
| Rpco Enterprises Ltd                                                                                               |   | (Cyprus)                            | 50                            |
| Snamprogetti France Sàrl                                                                                      |   | (France)                            | 100                           |
| Snamprogetti Ltd                                                                                                   |   | (the United Kingdom)                | 99.99                         |
| Snamprogetti Lummus Gas Ltd                                                                                        |   | (Malta)                             | 99                            |
| Snamprogetti Management        Services SA                                                                         |   | (Switzerland)                       | 99.99                         |
| Snamprogetti Netherlands BV                                                                                        |   | (the Netherlands)                   | 100                           |
| Snamprogetti Saudi Arabia        Ltd                                                                               |   | (Saudi Arabia)                      | 74.99                         |
| Snamprogetti Services SpA                                                                                          |   | (Italy)                             | 100                           |
| Snamprogetti SpA                                                                                                   |   | (Italy)                             | 100                           |
| Snamprogetti Sud SpA                                                                                               |   | (Italy)                             | 100                           |
| Snamprogetti USA Inc                                                                                               |   | (USA)                               | 99.99                         |
| Spf - Tkp Omifpro Snc                                                                                              |   | (France)                            | 50                            |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Other Activities                                                                                                   |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Agenzia Giornalistica Italia        SpA                                                                            |   | (Italy)                             | 100                           |
| Ambiente SpA                                                                                                       |   | (Italy)                             | 100                           |
| Eni Corporate University SpA                                                                                       |   | (Italy)                             | 100                           |
| EniTecnologie SpA                                                                                                  |   | (Italy)                             | 100                           |
| Ing. Luigi Conti Vecchi SpA                                                                                        |   | (Italy)                             | 100                           |
| Marghera Servizi Industriali        Srl                                                                            |   | (Italy)                             | 100                           |
| Servizi Aerei SpA                                                                                                  |   | (Italy)                             | 100                           |
| Sieco SpA                                                                                                          |   | (Italy)                             | 100                           |
| Syndial SpA - Attività        Diversificate                                                                   |   | (Italy)                             | 100                           |
| Tecnomare - Società per lo        Sviluppo delle Tecnologie Marine SpA        (ex Tecnomare SpA)              |   | (Italy)                             | 57.15                         |
|                                                                                                               |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Corporate and financial        copanies                                                                            |   |                                |                          |
|                                                                                                               |   |                                |                          |
| Eni Coordination Center SA                                                                                         |   | (Belgium)                           | 100                           |
| Eni International Bank Ltd                                                                                         |   | (Bahamas)                           | 100                           |
| Eni International BV                                                                                               |   | (the Netherlands)                   | 100                           |
| Società Finanziamenti        Idrocarburi - Sofid - SpA                                                        |   | (Italy)                             | 99.61                         |
| Società Finanziaria Eni SpA        - Enifin                                                                   |   | (Italy)                             | 100                           |
| Padana Assicurazioni SpA                                                                                           |   | (Italy)                             | 99.72                         |
| Serfactoring SpA                                                                                                   |   | (Italy)                             | 48.81                         |
| Serleasing SpA                                                                                                     |   | (Italy)                             | 99.61                         |
| Sofidsim - Società di        Intermediazione Mobiliare SpA                                                    |   | (Italy)                             | 99.61                         |

 

----

##### Table of Contents

**Exhibit 11**

**Code of Ethics**

Approved by the Board of Directors of Eni SpAon October 21, 1998 and on July 31, 2003 (Addendum)

 

CONTENTS

Addendum

Foreword 

**1. General Principles**

1.1 To whom the Code applies

1.2 Duties of Eni5

1.3 Duties of Employees

1.4 Additional Duties of Managers

1.5 Applicability of the Code to Third Parties

1.6 Reference, Implementation and Control Functions(Guarantors)

1.7 Contractual Value of the Code

**2. Business Conduct**

2.1 Relations with Customers

2.2 Relations with Suppliers

**3. Transparency of Accounting and Internal Controls**

3.1 Accounting Records

3.2 Internal Controls

**4. Personnel Policies**

4.1 Human Resources

4.2 Harassment in the Workplace

4.3 Abuse of Alcohol or Drugs

4.4 Smoking

**5. Health, Safety and the Environment**

**6. Confidentiality**

**7. External Relations**

7.1 Relations with Public Institutions

7.2 Relations with Political Organizations and Trade Unions

7.3 Relations with the Media

7.4 Presentation of Eni Objectives, Activities, Results andPoints of View

7.5 "Non Profit" Initiatives

**ADDENDUM**

In conducting its activities as an international company, Enirefers to the protection of human and labor rights, of safety andthe environment, as well as to the system of values andprinciples concerning transparency and integrity, energyefficiency and sustainable development, as outlined byinternational institutions and conventions.

In this respect Eni reaffirms its commitment to operate withinthe framework of the United Nations Universal Declaration ofHuman Rights, the Fundamental Conventions of the ILO –International Labour Organization – and the OECD Guidelineson Multinational Enterprises, with particular reference to theareas concerning the protection of labor rights, freedom ofassociation, the rejection of all forms of discrimination, forcedand child labor, corruption, the safeguarding of dignity, healthand safety at the workplace, the respect for naturalbiodiversities and the protection of the environment.

Moreover, Eni is committed to actively contribute to promotingthe quality of life and the socio-economic development of thecommunities where the Group operates and to the development oftheir human resources and capabilities, while conducting itsbusiness activities in internal and external markets according tostandards that are compatible with fair commercial practice.

All of Eni's activities are carried out in the awareness ofthe Social Responsibility that the Group has towards all of itsstakeholders (employees, shareholders, customers, suppliers,communities, commercial and financial partners, institutions,industry associations, trade unions...), in the belief thatthe capacity for dialogue and interaction with civil societyconstitutes an important asset for the company.

Therefore, Eni is committed to spreading an awareness of itsvalues and principles both within and outside the Group and toimplementing adequate control procedures.

**FOREWORD**

Eni1 is an internationally oriented industrialgroup which, because of its size and the importance of itsactivities, plays a significant role in the marketplace and inthe economic development and welfare of the communities where itis present.

Eni operates in many institutional, economic, political,social and cultural environments in constant and rapiddevelopment. Eni’s activities must be performed in fullrespect of the law, in fair competition, with honesty, integrityand good faith, with due respect for the legitimate interests ofits customers, employees, shareholders, commercial and financialpartners and the communities where it is present. All those whowork in Eni are, without any distinction or exception whatsoever,committed to respecting these principles in performing theirroles and responsibilities and to making sure that others respectthem. The conviction that one is acting in favor or to theadvantage of Eni can never, in any way, justify acts or behaviorthat conflict with these principles.

Due to the complexity of the situations in which Eni operates,it is important to define clearly the values that Eni accepts,acknowledges and shares as well as the responsibilities assumedby Eni inside and outside Eni itself. For this reason the presentCode of Practice (hereinafter called the "Code") hasbeen produced. Respect of the Code by every Eni employee is ofparamount importance for the good functioning, reliability andreputation of Eni; all of which are crucial factors for itssuccess.

Apart from fulfilling their general duties of loyalty,fairness and the performance of their labor contract in goodfaith, all Eni employees must refrain from acts that compete withEni and they must respect company rules and comply with the Code;which compliance is also required under existing laws.2

Each employee is expected to have full knowledge of the Codeand to contribute actively to its implementation and to reportany shortcomings. Eni undertakes to facilitate and promoteknowledge of the Code among its employees and to accept theirconstructive contribution to the Code’s contents. Anybehavior violating the letter and the spirit of the Code will bepunished according to the rules herein defined.

Eni will check compliance with the Code by providing suitableinformation, prevention and control instruments and it shallensure transparency in all operations and conduct by takingcorrective measures if and as required.

The Code shall be brought to the attention of every person orbody having business relations with Eni.

 

----

| (1) |   | In the        present Code "Eni" or "Group" mean        Eni SpA and its subsidiaries as defined in Article 2359        of the Italian Civil Code as well as other subsidiaries        as defined in Article 26 of Legislative Decree n. 127 of        April, 9, 1991.                                                                                                                                                       |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | "Article 2104.        Diligence of workers. Workers are expected to render        diligently the services expected from them according to        the nature of such services, the interests of the company        and the higher interests of national production. They        must also comply with the rules for work execution and        discipline as set down by their employers and the        superiors to whom they report." |

 

 

**1. GENERAL PRINCIPLES**

**1.1 To whom the code applies**

Moral integrity is a constant duty for any person working forEni and characterizes the conduct of its entire organization.

The rules of the Code are applicable to each and every Eniemployee without exception and to all those who work for theachievement of Eni’s objectives.

Eni’s management has to comply with the rules of the Codein the presentation of projects, and in actions and investmentsaimed at increasing in the long-term the value of Eni assets,managerial capability, technology, the return on investment forshareholders, and the welfare of employees and the community atlarge.

Members of the Board of Directors must bear in mind theprinciples contained in the Code when determining corporateobjectives.

Company managers must be the first to give concrete form tothe values and principles contained in the Code, by assumingresponsibility for them both inside and outside the Group, and byinstilling trust, cohesion and a sense of team-work.

Eni employees shall not only respect existing applicable lawsbut they are also expected to adjust their actions and conduct soas to conform to the principles, objectives and commitmentscontemplated in the Code.

The general conduct and any action, operation and negotiationperformed by Eni employees in the performance of their dutiesshall be inspired by the highest principles of fairness,completeness and transparency of information and legitimacy, bothin form and substance, as well as in clarity and truthfulness inall accounting matters, as per existing and applicable laws andinternal regulations.

Eni shall actively and fully cooperate with publicAuthorities, through its employees. 

All in-house work shall be performed with the utmost care andprofessional skill. Each employee must bring adequate skills andexpertise to the task assigned and always act in a way that shallprotect Eni’s reputation.

Relationships between employees, at all levels, must becharacterized by fairness, cooperation, loyalty and mutualrespect.

In order to fully comply with the Code, each employee mayrefer not only to his or her superior but may also contactdirectly any internal body or office specifically designated forthe purpose.

 

**1.2 Duties of Eni**

Through the establishment of specific internal bodies("Guarantor" and "Committee for the Code ofPractice"), Eni will:

| • |   | ensure the widest        dissemination of the Code among its employees and        partners;                                                                                           |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | provide for further analyses        and updating of the Code as required to meet evolving        circumstances and laws;                                                              |
| • |   | make available all the tools        for understanding and clarifying the interpretation and        the implementation of the Code;                                                    |
| • |   | arrange for a careful        evaluation to be carried out on any instances where the        Code may have been violated;                                                              |
| • |   | in the event of an        acknowledged violation of the Code, it shall provide for        an evaluation of the facts and, if necessary, the        adoption of appropriate sanctions; |
| • |   | ensure that no one may        suffer any retaliation whatsoever for having provided        information regarding possible violations of the Code or        related laws.              |

 

**1.3 Duties of employees**

All employees are expected to know the regulations containedin the Code and the relevant rules governing activities performedin their respective functions.

Eni employees shall: 

| • |   | refrain from all conduct        contrary to such rules and regulations;                                                                 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| • |   | consult their superior, or        the Guarantor, whenever clarifications concerning the        implementation of said rules are needed; |
| • |   | immediately report to their        superiors or to the Guarantor:                                                                       |
| • |   | any fact that comes to their        direct, or indirect, knowledge concerning a possible        violation of such rules;                |
| • |   | any request they receive to        violate such rules;                                                                                  |
| • |   | cooperate with the relevant        office or department in ascertaining any violations.                                                 |

If, after notifying a supposed violation, an employee shoulddeem that the issue has not been fully investigated or feels thathe or she has been subject to retaliation, then the employeeshall be entitled to make a complaint to the Committee for theCode of Practice.

Employees are not allowed to conduct personal investigations,nor to exchange information, except to their superiors, theGuarantor or the Committee for the Code of Practice.

 

**1.4 Additional duties of managers**

Each manager shall:

| • |   | act in a way that shall        serve as an example of good conduct to his or her        subordinates;                                                                                                                                                                                              |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | encourage employees to        respect the Code and to raise relevant questions and        issues relating to the Code;                                                                                                                                                                             |
| • |   | act in such a way as to        demonstrate to employees that respecting the Code is an        essential aspect of the quality of their work;                                                                                                                                                       |
| • |   | in so far as it is possible,        try to select employees and external collaborators in        such a way that will prevent assignments being given to        persons who cannot be relied upon to implement the Code;                                                                           |
| • |   | immediately report the        discovery of any possible deviations from the Code to a        Senior Manager or to the Guarantor. Likewise, any        information on possible deviations that is received from        subordinates must also be passed on immediately to Senior        Management; |
| • |   | immediately take corrective        measures whenever necessary;                                                                                                                                                                                                                                    |
| • |   | prevent any kind of        retaliation.                                                                                                                                                                                                                                                            |

 

 

**1.5 Applicability of the code to third parties**

In dealing with third parties, Eni employees shall:

| • |   | properly inform all third        parties about the commitments and duties contained in the        Code;                                                                                                                                         |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | require the third parties to        respect the obligations in the Code relevant to their        activities;                                                                                                                                    |
| • |   | adopt proper internal        actions and, if the matter comes within the limits of the        employee’s own responsibilities, also external        actions, in the event that any third party should fail to        comply with the Code. |
|   |   |                                                                                                                                                                                                                                            |

**1.6 Reference, implementation and control functions(guarantors)**

Eni has established the function of "Guarantor of theCode of Practice" with the following proposes and once theoffice of the Guarantor has been established, all employees mustbe made aware of its purpose and of how they themselves cancommunicate directly with it (by telephone, fax, e-mail, etc.):

| • |   | to establish criteria and        procedure aimed at reducing the risk of violations of the        Code;                                                                                                                                                                  |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | to promote the publication        of guidelines and operational procedures in cooperation        with offices and departments responsible for their        preparation;                                                                                                  |
| • |   | to organize information and        training programs for employees aimed at providing a        better knowledge of the Code’s objectives;                                                                                                                           |
| • |   | to promote and monitor        knowledge of the Code inside and outside Eni and its        implementation;                                                                                                                                                                |
| • |   | to investigate reports of        any violation by initiating proper inquiry procedures;                                                                                                                                                                                  |
| • |   | to inform the Personnel        Department about the results of any inquiries for the        adoption of any sanctions;                                                                                                                                                   |
| • |   | to inform the relevant        departments of the results of any inquiries in relation        to the taking any further actions;                                                                                                                                          |
| • |   | to present the Chairman, in        conjunction with the Committee for the Code of Practice,        with proposals for the further dissemination and updating        of the Code (the Chairman then reports these to the Board        of Directors);                      |
| • |   | to initiate and then        maintain a proper reporting and communication flow with        similar departments and bodies in Eni subsidiaries;                                                                                                                           |
| • |   | to present the Chairman, in        conjunction with the Committee for the Code of Practice,        with a yearly report on the implementation of the Code        inside Eni SpA and its subsidiaries (the Chairman then        reports these to the Board of Directors). |

In performing its duties, the Guarantor will be aided by therelevant structures within Eni SpA.

Eni has established the Committee for the Code of Practice tocarry out the following assignments:

| • |   | to express an evaluation on        the Guarantor’s proposals for the dissemination and        updating of the Code;                                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | to analyze the yearly report        on the Code’s implementation and suggest to the        Chairman, (who reports to the Board on such matters),        appropriate actions to prevent any recurrences of        violations;                                             |
| • |   | to take action at the        request of employees in the event of receiving reports        that violations of the Code have not been properly dealt        with or in the event of being informed of any retaliation        against employees for having reported violations. |

Similar structures will be created in all Eni Group companies.

The Eni SpA Guarantor coordinates the activities of theGuarantors in subsidiaries. After review by the Board ofDirectors of the respective sector head companies, a copy of theyearly report concerning each sector shall be presented to theEni SpA Guarantor. The Eni SpA Guarantor shall also receive acopy of the yearly report of directly controlled companies notincluded in any sector.

 

**1.7 Contractual value of the code**

Respect of the Code’s rules is an essential part of thecontractual obligations of Eni employees as per Article 2104 ofthe Italian Civil Code.

Any violation of the Code’s rules may be considered as aviolation of primary obligations under labor relations or of therules of discipline, and can entail the consequences provided forby law, including termination of the work contract andreimbursement of damages arising from any violation therefrom.

 

 

**2. BUSINESS CONDUCT**

In conducting its business Eni is inspired by the principlesof fairness, loyalty, transparency, efficiency and an openmarket.

Eni employees, and external collaborators whose actions maysomehow be referred to Eni, must act correctly when conductingbusiness in Eni’s interest and in their relations with thePublic Administration, irrespective of the market conditions andthe importance of the business under negotiation.

Bribes, illegitimate favors, collusion, pressures, eitherdirect or through third parties, requests of personal benefitsfor oneself or others, are prohibited.

Eni acknowledges and respects the right of employees to takepart in investments, businesses and other kinds of activities,provided that these are not related to the activities that suchemployees perform in the interests of Eni and provided that suchactivities are permitted by law and are compatible with theduties of being employees of Eni.

In any event, Eni employees shall avoid any situation andactivity where a conflict of interest may arise or which caninterfere with their ability to make impartial decisions in thebest interests of Eni and in full accordance with the Code. Anysituation that may constitute or give rise to a conflict ofinterest shall be immediately reported to one’s superiors.In particular, all Eni employees shall avoid conflicts ofinterest between personal and family economic activities andtheir tasks within their company. By way of example, conflicts ofinterest are determined by the following situations:

| • |   | economic and financial        interest of employee and/or his family in activities of        supplier, customer and competitor;                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | use of one’s position        in the company, or of information acquired during        one’s work, in such a way as to create a conflict        between one’s personal interests and the interests        of the company;                                                                                                                                                                                                                                                                                                                                     |
| • |   | performing any type of work        for suppliers, customers and competitors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| • |   | accepting money, favors or        benefits from persons or firms that have, or intend to        have, business relationships with Eni;                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| • |   | buying or selling of shares        in Eni companies or in other corporations on the basis of        important information not in the public domain and        obtained because of one’s position at Eni. In any        case, transactions in securities of Eni companies shall        always be conducted with the utmost transparency and        fairness with respect to the issuing company and its        Group, as well as to investors and shall always be such        as not to generate any expectations, alarm or errors in        judgment in third parties. |

It is prohibited to pay or offer, directly or indirectly,money and material benefits of any kind to third parties, whetherpublic officers or private individuals, in order to influence orremunerate the actions of their office. Courtesy objects, such assmall presents or hospitality gifts, are allowed only when thevalue of such objects is small and does not compromise theintegrity and reputation of the partners and cannot be construedby an impartial observer as aimed at obtaining undue advantages.In any case, these expenses must always be authorized by thedesignated managers as per existing rules and accompanied byappropriate documentation.

Employees receiving presents or special treatment that cannotbe directly related to normal courteous relations must informtheir superior of the facts.

External collaborators (including consultants,representatives, agents, brokers etc.) are required to complywith the Code’s principles. To this purpose, in accordancewith their responsibilities, employees shall make sure that:

| • |   | code principles and        procedures are followed in the selection of external        collaborators and in relationships with them;                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | only qualified and reputable        persons and companies are selected;                                                                                                        |
| • |   | all information relevant to        the selection of particular external collaborators be        taken into proper account regardless of the source of        such information; |
| • |   | doubts on any supposed        violation of the Code by external collaborators are        immediately reported to one’s superior or the        Guarantor;                  |
| • |   | an explicit commitment to        respect the principles of the Code of Practice be        included in contracts with outside collaborators.                                    |

In any case, the remuneration to be paid shall be exclusivelycommensurate with the services to be rendered and described inthe contract and payments shall be made only to the contractpartner and within the country indicated in the contract.

 

**2.1 Relations with customers**

Eni pursues its business success on markets by offeringquality products and services under competitive conditions whilerespecting the rules protecting fair competition.

Eni knows that the esteem of those requesting products orservices is of primary importance for success in business.Therefore, Eni employees shall:

| • |   | follow internal procedures        on relations with customers;                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | provide, with courtesy and        efficiency and within the limits set in the contracts,        high quality products that can meet or exceed the        customers’ reasonable expectations and needs; |
| • |   | provide sufficient and        accurate information about its products and services so        that customers can take reasoned decisions;                                                                    |
| • |   | be truthful in all        advertising and communications.                                                                                                                                                   |

 

**2.2 Relations with suppliers**

In the case of tenders and contracts for the supply of goodsand services, Eni employees shall:

| • |   | follow internal procedures        concerning selection and relations with suppliers;                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | abstain from the exclusion        of suppliers that have the proper requirements to bid for        Eni’s orders, by adopting appropriate and objective        selection methods, based on established, transparent        criteria; |
| • |   | secure the cooperation of        suppliers in guaranteeing the continuous satisfaction of        Eni’s customers in terms of quality, costs and        delivery times, to the extent expected by customers;                         |
| • |   | whenever possible and in        accordance with applicable laws, make use of products and        services supplied by other Eni Group companies at        arm’s length conditions;                                                  |
| • |   | respect all conditions        contained in contracts;                                                                                                                                                                                    |
| • |   | maintain a frank and open        dialogue with suppliers in line with good commercial        practice;                                                                                                                                   |
| • |   | inform Eni SpA’s        Department for Industrial Planning and Development about        any serious problems that may arise with a particular        supplier in order to evaluate the possible consequences        for Eni.        |

 

 

**3. TRANSPARENCY OF ACCOUNTING AND INTERNAL CONTROLS**

**3.1 Accounting records**

Accounting transparency is based on the use of true, accurateand complete information for construing entries in the books ofaccounts. Each employee shall cooperate in order to have eventsproperly and timely registered in the books of accounts.

For each transaction the proper supporting evidence has to bemaintained in order to:

| • |   | facilitate registration of        the accounting;                                                                             |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|
| • |   | identify the different        degrees of responsibilities;                                                                    |
| • |   | provide an accurate        representation of the transaction so as to avoid any        errors in interpretation of the facts. |

Each record shall reflect exactly what is shown by thesupporting evidence. Each employee shall make sure, throughaccurate filing according to logical criteria, that thedocumentation can be easily traced.

Eni employees who become aware of any omissions,misrepresentations, negligence in the accounting or in thedocuments on which accounting is based, shall bring the facts tothe attention of his or her superior or to the Guarantor.

 

**3.2 Internal controls**

It is Eni’s policy to disseminate, at every level of itsorganization, a culture characterized by an awareness of theexistence of controls and a control oriented mentality. Apositive attitude towards control is to be achieved in order toincrease its efficiency.

Internal controls are all those necessary or useful tools foraddressing, managing and checking activities in the company; theyaim at ensuring respect of corporate laws and procedures,protecting corporate assets, efficiently managing operations andproviding precise and complete accounting information.

The responsibility for building an efficient internal controlsystem rests on all levels of the organization; therefore all Eniemployees, in their respective functions, are responsible for thedefinition and proper functioning of internal controls.

Within their areas of responsibility, managers shall berequested to become involved in the company’s system ofinternal controls and inform employees thereon. Each employeeshall be held responsible for the corporate tangible andintangible assets relevant to his job. No employee can make, orlet others make, improper use of assets and equipment belongingto Eni.

Internal Auditors and appointed external auditors shall havefull access to all data, documents and information necessary toperform their audit activities.

 

 

**4. PERSONNEL POLICIES**

**4.1 Human resources**

Human resources are basic components in the company’slife. The dedication and professionalism of employees representfundamental values and conditions for reaching Eni’sobjectives.

Eni is committed to developing the abilities and skills ofeach employee so that his or her energy and creativity can havefull expression for the fulfillment of their potential.

Eni offers equal opportunities to all its employees, makingsure that each of them receives fair treatment based on merit,without discrimination of any kind. All departments thereforeshall:

| • |   | adopt criteria of merit,        ability and professionalism in all decisions concerning        employees;     |
|--------|--------|---------------------------------------------------------------------------------------------------------------|
| • |   | select, hire, train,        compensate and manage employees without discrimination of        any kind;        |
| • |   | create a working environment        where personal characteristics do not give rise to        discrimination. |

Eni considers the protection of working conditions and theprotection of the mental and physical health of workers to bepart of its entrepreneurial activity, while always respectingtheir moral personality and avoiding any undue pressures. To thisend, any personal conduct considered to be offensive and liableto produce difficulties in relationships within the workingenvironment will be given due consideration.

Eni expects all its employees, at every level, to cooperate inmaintaining a climate of reciprocal respect for a person’sdignity, honor and reputation. Eni shall do its best to preventthe emergence of attitudes that can be considered offensive.

 

**4.2 Harassment in the workplace**

Eni demands that there shall be no harassment in personalrelationships either inside or outside the company. Harassmentis:

| • |   | the creation of an        intimidating, hostile or isolating environment or        atmosphere for one or more employee;                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | unjustified interference in        the work performed by others;                                                                                   |
| • |   | the placing of obstacles in        the way of the work prospects and expectations of others        merely for reasons of personal competitiveness. |

Eni does not tolerate sexual harassment, by which it means:

| • |   | the subordinating of        decisions on someone’s working life to the        acceptance of sexual attentions;                                                                                                                                                                                                          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | proposals of private        interpersonal relations which are repeated despite the        recipient’s clear distaste and which, because of the        specific situation, can put the recipient in a difficult        situation because they entail direct consequences on the        recipient’s work and career. |

 

**4.3 Abuse of alcohol or drugs**

Eni demands that each employee contribute to maintaining agood work environment in respect of the feelings of others. Eniwill therefore consider individuals who

| • |   | work under the effect of        alcohol or drug abuse;                          |
|--------|--------|---------------------------------------------------------------------------------|
| • |   | make use of or give to        others any drug or similar substance during work; |

as being aware of the risk they bring to such environmentalconditions, during the performance of their work activities andin the workplace. 

Chronic addiction to such substances, when it affects workperformance, shall be considered similar to the above mentionedevents in terms of the contractual consequences.

Eni is committed to favor the social action in this field asprovided for by collective work contracts.

 

**4.4 Smoking**

Without prejudice to the general prohibition on smoking inworkplaces where this is dangerous and where such prohibition isindicated, Eni, in its normal workplaces, will pay particularattention to the condition of those suffering physical discomfortfrom exposure to smoke and who request to be protected from"passive smoke" in their place of work.

 

 

**5. HEALTH, SAFETY AND THE ENVIRONMENT**

In its activities, Eni is committed to contributing to thedevelopment and welfare of the communities where it operates bypursuing the objective of ensuring the safety and health of itsemployees, external collaborators, customers and localcommunities that may be affected by Eni’s activities and toreducing the environmental impact of such activities.

Eni actively contributes to the promotion of research anddevelopment aimed at protecting the environment and naturalresources.

Eni’s industrial activities shall be performed in fullaccordance with all applicable laws on prevention and protection.

Operations shall be carried out according to advanced criteriafor the protection of the environment and energy efficiency, withthe aim of creating better working conditions and protecting thehealth and safety of employees.

Research and technological development must be aimed inparticular at promoting the use of products and processes thatare as environmental friendly as possible and characterized by anever-greater attention being paid to the safety and health ofemployees.

Eni employees, within their areas of responsibility,participate in the process of risk prevention and environmentaland health protection and safety, that is in their own interestand in the interest also of third parties.

 

 

**6. CONFIDENTIALITY**

Eni’s activities require the constant acquisition,storage, handling, communication and diffusion of news, documentsand other data relevant to negotiations, administrativeprocedures, financial transactions, know-how (contracts, deeds,reports, studies, drawings, photographs, software), etc.

Eni’s data bases may contain, among other things,personal data protected according to privacy laws, some of whichcannot be made known outside Eni under contractual obligationsand some of which cannot be improperly or untimely disclosed onrisk of harmful prejudice to Eni’s interest.

Employees shall guarantee the confidentiality of allinformation acquired in the performance of their work.

Eni is committed to protecting information concerning itsemployees and third parties, whether generated or obtained insideEni or in the conduct of Eni’s business and to avoidingimproper use of any such information.

Information, know-how and data that are acquired and processedby employees during their work at Eni or because of theirresponsibilities, all belong to Eni and cannot be used,communicated to others or disclosed without specificauthorization of one’s superior.

Without prejudice to the prohibition to disclose informationconcerning the organization and methods of production or to usesuch information in a way that could be harmful to Eni, each Eniemployee shall:

| • |   | obtain and handle only data        that are necessary and adequate to the aims of their work        and strictly related to the tasks being performed;                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | obtain and handle such data        only within specified procedures;                                                                                                                                                                                        |
| • |   | store said data in a way        that avoids non-authorized persons having access to it;                                                                                                                                                                     |
| • |   | disclose such data only        pursuant to specific procedures and/or subject to        specific authorization by one’s superior and, in any        case, only after having checked that such data are        available for disclosure;                |
| • |   | make sure that no relative        or absolute constraint exists on the disclosure of        information concerning third parties connected to Eni by        any kind of relationship and, whenever necessary, ensure        that their consent is obtained; |
| • |   | file said data in such a way        that any person authorized to access them may do so with        as much precision, clarity and truthfulness as possible.                                                                                                |

 

 

**7. EXTERNAL RELATIONS**

**7.1 Relations with public institutions**

Relations with Public Institutions that are aimed at theprotection of Eni’s interests and related to theimplementation of Eni’s programs, are to be maintained onlyby departments and persons specifically appointed to do so.

Specific departments in the Eni Group companies shallcoordinate their work with Eni SpA’s Department forRelations with Institutions in Italy, and in the European Union,so as to have a prior evaluation of the quality of the actions tobe taken for sharing, for implementation and for monitoring.

Small presents and courtesy gifts to representatives ofGovernments, public officers and civil servants are allowedprovided that they are limited in value and do not compromise theintegrity or good name of either party nor be construed byimpartial observers as aimed at obtaining undue advantages. Inany case this kind of expense must be authorized by the personindicated in the procedures and must always be duly documented.

 

**7.2 Relations with political organizations and trade unions**

Eni does not give any direct or indirect contributions inwhatever form to political parties, organizations, committees ortrade unions, nor to their representatives and candidates, exceptthose specifically contemplated by applicable laws andregulations.

 

**7.3 Relations with the media**

Information provided to outside parties shall be truthful andtransparent.

In its communications with the media, Eni shall be presentedin an accurate and uniform way. Relations with the media shall bemaintained only by departments and managers specificallyappointed to do so and all communications shall be agreed uponbeforehand with the Eni Unit responsible for Relations with theMedia.

Eni employees may not give information to mediarepresentatives nor engage in providing any such informationunless they are duly authorized by the relevant Eni departments.

Eni employees are never entitled to offer payments, gifts orother benefits aimed at influencing the professional activity ofmedia representatives or that could reasonably be construed as anattempt to do so.

 

**7.4 Presentation of Eni objectives, activities, results andpoints of view**

Eni employees who are required to present information to thepublic concerning the objectives, activities, results andopinions of Eni on such occasions as:

| • |   | congresses, meetings and        seminars;            |
|--------|--------|------------------------------------------------------|
| • |   | essays, articles and        publications in general; |
| • |   | participation to public        events;               |

must be authorized by the highest organizational authoritywithin their own department for all that relates to texts,lectures and the lines of action which they intend to makepublic; and they must also agree beforehand with Eni SpA’sUnit for Relations with the Media on the actual content of theirpresentations.

 

**7.5 "Non profit" initiatives**

Eni supports "non profit" activities as evidence ofits commitment to help meet the needs of those communities whereit operates.

Within the framework their respective responsibilities, Eniemployees shall participate in the definition of such singleinitiatives in full respect of Eni’s policies and programs,and they shall implement them according to criteria of absolutetransparency and shall support them as an integral part ofEni’s objectives.

 

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##### Table of Contents

Certifications as separate documents filedas exhibits

**EXHIBIT 12.1**

**Certification**

 

I, Paolo Scaroni, certify that:

 

|   | 1. |   | I have reviewed this annual        report on Form 20-F of Eni SpA; |
|--------|----|--------|--------------------------------------------------------------------|

|   | 2. |   | Based on my knowledge, this        report does not contain any untrue statement of a        material fact or omit to state a material fact necessary        to make the statements made, in light of the        circumstances under which such statements were made, not        misleading with respect to the period covered by this        report; |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. |   | Based on my knowledge, the        financial statements, and other financial information        included in this report, fairly present in all material        respects the financial condition, results of operations        and cash flows of the company as of, and for, the periods        presented in this report; |
|--------|----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. |   | The company’s other        certifying officers and I are responsible for        establishing and maintaining disclosure controls and        procedures (as defined in Exchange Act Rules 13a-15(e)        and 15d-15(e)) for the company and have: |
|--------|----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) |   | Designed such disclosure        controls and procedures, or caused such disclosure        controls and procedures to be designed under our        supervision, to ensure that material information relating        to the company, including its consolidated subsidiaries,        is made known to us by others within those entities,        particularly during the period in which this report is        being prepared; |
|--------|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) |   | Evaluated the effectiveness        of the company’s disclosure controls and procedures        and presented in this report our conclusions about the        effectiveness of the disclosure controls and procedures,        as of the end of the period covered by this report based        on such evaluation; and |
|--------|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) |   | Disclosed in this report any        change in the company’s internal control over        financial reporting that occurred during the period        covered by the annual report that has materially        affected, or is reasonably likely to materially affect,        the company’s internal control over financial        reporting; and |
|--------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. |   | The company’s other        certifying officer and I have disclosed, based on our        most recent evaluation of internal control over financial        reporting, to the company’s auditors and the audit        committee of the company’s board of directors (or        persons performing the equivalent functions): |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) |   | All significant deficiencies        and material weaknesses in the design or operation of        internal control over financial reporting which are        reasonably likely to adversely affect the company’s        ability to record, process, summarize and report        financial information; and |
|--------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) |   | Any fraud, whether or not        material, that involves management or other employees who        have a significant role in the company’s internal        control over financial reporting. |
|--------|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Date: June 24, 2005

 

| /s/PAOLO SCARONI                                                          |
|---------------------------------------------------------------------------|
|                                                                           |
| Paolo Scaroni        Title: Managing Director and Chief Executive Officer |

 

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##### Table of Contents

**EXHIBIT 12.2**

 

**Certification**

 

I, Roberto Jaquinto, certify that:

 

|   | 1. |   | I have reviewed this annual        report on Form 20-F of Eni SpA; |
|--------|----|--------|--------------------------------------------------------------------|

|   | 2. |   | Based on my knowledge, this        report does not contain any untrue statement of a        material fact or omit to state a material fact necessary        to make the statements made, in light of the        circumstances under which such statements were made, not        misleading with respect to the period covered by this        report; |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. |   | Based on my knowledge, the        financial statements, and other financial information        included in this report, fairly present in all material        respects the financial condition, results of operations        and cash flows of the company as of, and for, the periods        presented in this report; |
|--------|----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. |   | The company’s other        certifying officer and I are responsible for establishing        and maintaining disclosure controls and procedures (as        defined in Exchange Act Rules 13a-15(e) and 15d-15(e))        for the company and have: |
|--------|----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) |   | Designed such disclosure        controls and procedures, or caused such disclosure        controls and procedures to be designed under our        supervision, to ensure that material information relating        to the company, including its consolidated subsidiaries,        is made known to us by others within those entities,        particularly during the period in which this report is        being prepared; |
|--------|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) |   | Evaluated the effectiveness        of the company’s disclosure controls and procedures        and presented in this report our conclusions about the        effectiveness of the disclosure controls and procedures,        as of the end of the period covered by this report based        on such evaluation; and |
|--------|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) |   | Disclosed in this report any        change in the company’s internal control over        financial reporting that occurred during the period        covered by the annual report that has materially        affected, or is reasonably likely to materially affect,        the company’s internal control over financial        reporting; and |
|--------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. |   | The company’s other        certifying officer and I have disclosed, based on our        most recent evaluation of internal control over financial        reporting, to the company’s auditors and the audit        committee of the company’s board of directors (or        persons performing the equivalent functions): |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) |   | All significant deficiencies        and material weaknesses in the design or operation of        internal control over financial reporting which are        reasonably likely to adversely affect the company’s        ability to record, process, summarize and report        financial information; and |
|--------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) |   | Any fraud, whether or not        material, that involves management or other employees who        have a significant role in the company’s internal        control over financial reporting. |
|--------|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

> 
Date: June 24, 2005

 

| /s/ROBERTO JAQUINTO                                                               |
|-----------------------------------------------------------------------------------|
|                                                                                   |
| Roberto Jaquinto        Title: The Group Senior Vice President for Administration |

 

----

##### Table of Contents

 

**EXHIBIT 13.1**

 

**Certification Pursuant to 18 U.S.C. Section1350**

 

For purposes of 18 U.S.C. Section 1350, the undersignedofficer of Eni SpA, a company incorporated under the laws ofItaly (the "Company"), hereby certifies, to suchofficer’s knowledge, that:

 

> 
(i) the Annual Report on Form 20-F of the Company for the    year ended December 31, 2004 (the "Report") fully    complies with the requirements of section 13(a) or 15(d) as    applicable, of the Securities Exchange Act of 1934; and

 

> 
(ii) the information contained in the Report fairly    presents, in all material respects, the financial condition    and results of operations of the Company.

 

Date: June 24, 2005

 

| /s/PAOLO SCARONI                                                          |
|---------------------------------------------------------------------------|
|                                                                           |
| Paolo Scaroni        Title: Managing Director and Chief Executive Officer |

 

The foregoing certification is not deemed filed for purpose ofSection 18 of the Exchange Act and not incorporated by referencewith any filing under the Securities Act.

----

##### Table of Contents

**EXHIBIT 13.2**

 

**Certification Pursuant to 18 U.S.C. Section1350**

 

For purposes of 18 U.S.C. Section 1350, the undersignedofficer of Eni SpA, a company incorporated under the laws ofItaly (the "Company"), hereby certifies, to suchofficer’s knowledge, that:

 

> 
(i) the Annual Report on Form 20-F of the Company for the    year ended December 31, 2004 (the "Report") fully    complies with the requirements of section 13(a) or 15(d) as    applicable, of the Securities Exchange Act of 1934; and

 

(ii) the information contained in the Report fairly    presents, in all material respects, the financial condition    and results of operations of the Company.

 

Date: June 24, 2005

 

| /s/ROBERTO JAQUINTO                                                               |
|-----------------------------------------------------------------------------------|
|                                                                                   |
| Roberto Jaquinto        Title: The Group Senior Vice President for Administration |

 

The foregoing certification is not deemed filed for purpose ofSection 18 of the Exchange Act and not incorporated by referencewith any filing under the Securities Act.