----

| **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****5** |
| OR   |
|      |   | TRANSITION REPORT PURSUANT        TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF        1934        For the transition period from _____ to _____    |
| OR   |
|      |   | SHELL COMPANY REPORT PURSUANT TO SECTION        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934        Date of event requiring this shell company report    |

**Commission file number:1-14090**

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

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

**PiazzaleEnrico Mattei 1, 00144 Rome, Italy***(Address of Principal Executive Offices)*

----

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

| Title of each class                                                                                  |   | Name of each exchange on which registered                   |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|
| **Shares        American Depositary Shares**(Which represent the right to        receive two Shares) |   | **New York Stock Exchange*        New York Stock Exchange** |

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

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

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** | **4,005,358,876** |
|-------------------------------------------|-------------------|

Indicate by check mark whether the Registrantis a well known seasoned issuer, as defined in Rule 405 of theSecurities Act: 

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

If this report is an annual or transitionreport, indicate by check mark whether the Registrant is norrequired to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934: 

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

Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days: 

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

Indicate by check mark whether the Registrantis a large accelerated filer, an accelerated filer, or a nonaccelerated filer. See definition of "Accelerated filer andlarge accelerated filer" in Rule 12b-2 of the Exchange Act:

| Large accelerated filer |  | Accelerated filer |  | Non-accelerated filer |  |
|-------------------------|--|-------------------|--|-----------------------|--|

Indicate by check mark which financialstatement Item the Registrant has elected to follow: 

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

If this is an annual report, indicate by checkmark whether the Registrant is a shell company (as defined inRule 12b-2 of the Exchange Act): 

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

----

* Not for trading, but only inconnection with the registration of American Depositary Shares,pursuant to the requirements of the Securities and ExchangeCommission.

----

##### **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 4A.        |   | UNRESOLVED STAFF COMMENTS                                                           |
| 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 IFRS and U.S. GAAP                |
| Item 6.         |   | DIRECTORS, SENIOR MANAGEMENT        AND EMPLOYEES                                   |
|            |   | Directors        and Senior Management                                              |
|            |   | Board        Practices                                                              |
|            |   | Compensation                                                                        |
|            |   | 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                                                                  |
|            |   | Documents        on Display                                                         |
|            |   | Exchange        Controls                                                            |
|            |   | Taxation                                                                            |
| 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.        |   |                                                                                |
| 16A.            |   | Board of Statutory Auditors        Financial Expert                                 |
| 16B.            |   | Code of Ethics                                                                      |
| 16C.            |   | Principal Accountant Fees        and Services                                       |
| 16D.            |   | Exemptions from the Listing        Standards for Audit Committees                   |
| 16E.            |   | Purchases of Equity        Securities by the Issuer and Affiliated Purchasers       |
|            |   |                                                                                |
| **PART III**    |   |                                                                                |
| Item        17. |   | FINANCIAL STATEMENTS (*)                                                            |
| Item        18. |   | FINANCIAL STATEMENTS (**)                                                           |
| Item 19.        |   | EXHIBITS                                                                            |

----

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

 

*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 suchwords, and similar expressions are intended to identify suchforward-looking statements. These forward-looking statements areonly predictions and are subject to risks, uncertainties, andassumptions that are difficult to predict because they relate toevents and depend on circumstances that will occur in the future.Therefore, Eni’s actual results may differ materially andadversely from those expressed or implied in any forward-lookingstatements. Factors that might cause or contribute to suchdifferences include, but are not limited to, those discussed inthis Report under the section entitled "Risk Factors"and elsewhere. Any forward-looking statements made by or onbehalf of Eni speak only as of the date they are made. Eni doesnot undertake to update forward-looking statements to reflect anychanges in Eni’s expectations with regard thereto or anychanges in events, conditions or circumstances on which any suchstatement is based. The reader should, however, consult anyfurther disclosures Eni may make in documents it files with theSEC.*

 

  

##### Table of Contents

**CERTAIN DEFINED TERMS**

In this Form 20-F, the term "Eni" or the"Company" refers to Eni SpA and its consolidatedsubsidiaries and, unless the context otherwise requires, theirrespective predecessor companies. All references to"Italy" or the "State" are references to theRepublic of Italy, all references to the "Government"are references to the government of the Republic of Italy. Fordefinitions of certain oil and gas terms used herein and certainconversions, see "Certain Oil and Gas Terms" and"Conversion Table".

 

##### Table of Contents

**PRESENTATION OF FINANCIAL ANDOTHER INFORMATION**

The Consolidated Financial Statements of Eni, included in thisannual report, have been prepared in accordance with IFRS issuedby the International Accounting Standards Board (IASB) andadopted by the European Commission following the procedurecontained in Article 6 of the EC Regulation No. 1606/2002 of theEuropean Parliament and Council of July 19, 2002. Until December31, 2004, Eni prepared its Consolidated Financial Statements andother interim financial information (including quarterly andsemi-annual data) in accordance with Italian GAAP. IFRS requireadopting companies to restate only one year of past financialstatements. Pursuant to SEC Release 33-8567, *"First-timeApplication of International Financial Reporting Standards"*,Eni is not required to include in this annual report financialstatements for any earlier periods. Accordingly this annualreport includes financial information prepared in accordance withIFRS as of and for the two years ended December 31, 2004 and2005.

IFRS, under which Eni’s Consolidated Financial Statementshave been prepared, differ in certain significant respects fromU.S. GAAP. For information on the differences between IFRS andU.S. GAAP as they relate to Eni, see Notes 33, 34 and 35 toEni’s Consolidated Financial Statements included herein.

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", "$","U.S. dollars" and "U.S. $" are to thecurrency of the United States and references to "euro"and "€" are to the currency of the EuropeanMonetary Union.

 

##### Table of Contents

**STATEMENTS REGARDINGCOMPETITIVE POSITION**

Statements made in "Item 4 – Information on theCompany", referring to Eni’s competitive position arebased on the company’s belief, and in some cases rely on arange of sources, including investment analysts’ reports,independent market studies and Eni’s internal assessment ofmarket share based on publicly available information about thefinancial results and performance of market participants. Marketshare estimates contained in this document are based onmanagement estimates unless otherwise indicated.

 

##### Table of Contents

****GLOSSARY****

A glossary of oil and gas terms is available on Eni’s webpage at 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *Enhanced recovery*                                     |   | Techniques used to increase        or stretch over time the production of wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *FPSO*                                                  |   | Floating Production Storage        and Offloading System.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *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,        among others, 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 that has an 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 the impact of changes on        existing prices on 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *Reserve replacement ratio*                             |   | Measure of the reserves        produced replaced by proved reserves. Indicates the        company’s ability to add new reserves through        exploration and purchase of property. A rate higher than        100% indicates that more reserves were added than        produced in the period. The ratio should be averaged on a        three year period in order to reduce the distortion        deriving from the purchase of property or upstream        assets, the revision of previous estimates, enhanced        recovery, improvement in recovery rates and changes in        the value of reserves – in PSAs – due to        changes in international oil prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *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                       |
|   |   |                                     |
| mmCM   | =      | million cubic meters                     |
|   |   |                                     |
| BCM    | =      | billion cubic meters                     |
|   |   |                                     |
| 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                                  |
|   |   |                                     |
| /y     | =      | per year                                 |

##### 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 had a negligible impact on production        expressed in BOE. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

##### 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 Consolidated Financial Statements of Eni have beenprepared in accordance with IFRS issued by the InternationalAccounting Standards Board (IASB) and adopted by the EuropeanCommission following the procedure contained in Article 6 of theEC Regulation No. 1606/2002 of the European Parliament andCouncil of July 19, 2002. Until December 31, 2004, Eni preparedits Consolidated Financial Statements and other interim financialinformation (including quarterly and semi-annual data) inaccordance with Italian GAAP. IFRS require adopting companies torestate only one year of past financial statements. Pursuant toSEC Release 33-8567, *"First-time Application ofInternational Financial Reporting Standards*", Eni is notrequired to include in this annual report financial statementsfor any earlier periods. Accordingly the tables below show Eniselected historical financial data prepared in accordance withIFRS as of and for the years ended December 31, 2004 and 2005 andin accordance with U.S. GAAP for the five year period endedDecember 31, 2005. The selected historical financial data arederived from Eni’s Consolidated Financial Statementsincluded herein. IFRS, under which Eni’s ConsolidatedFinancial Statements have been prepared, differ in certainsignificant respects from U.S. GAAP. For information on thedifferences between IFRS and U.S. GAAP as they relate to the Eni,see Notes 33, 34 and 35 to the Eni’s Consolidated FinancialStatements.

 

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| **CONSOLIDATED PROFIT STATEMENT DATA**                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **Amounts        in accordance with IFRS**(euro):                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales from operations                                                                        |   |   |   |   |   |   |   |   |   |   | 57,545 |   |   | 73,728 |   |
| Operating        profit                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Exploration &        Production                                |   |   |   |   |   |   |   |   |   |   | 8,185  |   |   | 12,574 |   |
|      Gas        & Power                                             |   |   |   |   |   |   |   |   |   |   | 3,428  |   |   | 3,321  |   |
|      Refining &        Marketing                                    |   |   |   |   |   |   |   |   |   |   | 1,080  |   |   | 1,857  |   |
|      Petrochemicals                                                     |   |   |   |   |   |   |   |   |   |   | 320    |   |   | 202    |   |
|      Oilfield Services        Construction and Engineering              |   |   |   |   |   |   |   |   |   |   | 203    |   |   | 307    |   |
|      Other        activities                                            |   | -      |   |   |   |   |   |   |   |   | (395   | )      |   | (902   | )      |
|      Corporate and        financial companies                           |   |   |   |   |   |   |   |   |   |   | (363   | )      |   | (391   | )      |
|      Unrealized        profit in inventory (1)                          |   |   |   |   |   |   |   |   |   |   | (59    | )      |   | (141   | )      |
| Operating profit                                                                                 |   |   |   |   |   |   |   |   |   |   | 12,399 |   |   | 16,827 |   |
| Net profit        pertaining to Eni                                                              |   |   |   |   |   |   |   |   |   |   | 7,059  |   |   | 8,788  |   |
| **Data per ordinary share** (euro) (2):                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating        profit                                                                          |   |   |   |   |   |   |   |   |   |   | 3.29   |   |   | 4.48   |   |
| Net profit: basic and diluted                                                                    |   |   |   |   |   |   |   |   |   |   | 1.87   |   |   | 2.34   |   |
| **Data        per ADS** ($) (2) (3):                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating profit                                                                                 |   |   |   |   |   |   |   |   |   |   | 8.91   |   |   | 10.61  |   |
| Net        profit: basic and diluted                                                             |   |   |   |   |   |   |   |   |   |   | 5.06   |   |   | 5.54   |   |
| **Amounts in accordance with U.S. GAAP**(euro):                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales        from operations                                                                 |   | 45,848 |   |   | 43,632 |   |   | 48,018 |   |   | 54,698 |   |   | 70,331 |   |
| Operating profit (4)                                                                             |   | 8,853  |   |   | 7,861  |   |   | 9,215  |   |   | 11,739 |   |   | 15,528 |   |
| Profit        before cumulative effect of change in accounting        principle and income taxes |   | 10,330 |   |   | 8,350  |   |   | 9,274  |   |   | 12,324 |   |   | 16,281 |   |
| Net profit before cumulative effect of change in        accounting principle                     |   |   |   |   |   |   |   | 6,098  |   |   |   |   |   |   |   |
| Effect of        adoption of SFAS No. 143                                                        |   |   |   |   |   |   |   | 198    |   |   |   |   |   |   |   |
| Net profit                                                                                       |   | 6,317  |   |   | 5,292  |   |   | 6,296  |   |   | 6,401  |   |   | 7,583  |   |
| **Data        per ordinary share** (euro) (2):                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating profit                                                                                 |   | 2.26   |   |   | 2.05   |   |   | 2.44   |   |   | 3.11   |   |   | 4.13   |   |
| Net        profit: basic and diluted                                                             |   | 1.62   |   |   | 1.38   |   |   | 1.67   |   |   | 1.70   |   |   | 2.02   |   |
| **Data per ADS** ($) (2) (3):                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating        profit                                                                          |   | 4.02   |   |   | 4.30   |   |   | 6.15   |   |   | 8.42   |   |   | 9.78   |   |
| Net profit: basic and diluted                                                                    |   | 2.88   |   |   | 2.89   |   |   | 4.21   |   |   | 4.60   |   |   | 4.78   |   |

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

   

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| **CONSOLIDATED        BALANCE SHEET DATA**                                     |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Amounts        in accordance with IFRS:**                                    |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| Total        assets                                                            |   |   |   |   |   |   |   | 72,853 |   | 83,850 |
| Short-term and long-term debt                                                  |   |   |   |   |   |   |   | 12,684 |   | 12,998 |
| Capital        stock issued                                                    |   |   |   |   |   |   |   | 4,004  |   | 4,005  |
| **Amounts in accordance with U.S. GAAP:**                                      |   |   |   |   |   |   |   |   |   |   |
| Total        assets                                                            |   | 64,976 |   | 66,122 |   | 71,995 |   | 72,354 |   | 82,977 |
| Short-term and long-term debt                                                  |   | 12,379 |   | 15,320 |   | 16,144 |   | 12,697 |   | 12,954 |
| Capital        stock issued                                                    |   | 4,001  |   | 4,002  |   | 4,003  |   | 4,004  |   | 4,005  |
| **Other Financial Information in accordance        with IFRS:**                |   |   |   |   |   |   |   |   |   |   |
| Capital        expenditure                                                     |   |   |   |   |   |   |   | 7,499  |   | 7,414  |
| Weighted average number of ordinary shares        outstanding (shares million) |   | 3,912  |   | 3,827  |   | 3,778  |   | 3,772  |   | 3,759  |
| Dividend        per share (euro)                                               |   | 0.750  |   | 0.750  |   | 0.750  |   | 0.900  |   | 1.100  |
| Dividend per ADS ($) (5)                                                       |   | 1.48   |   | 1.71   |   | 1.83   |   | 2.17   |   | 2.63   |

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

----

|   |   |                                                                                           |
|--------|--------|------------------------------------------------------------------------------------------------|
| (1)    |   | Unrealized        profit in inventory concerned intragroup sales of goods        and services. |

| (2) |   | Euro per        Share or dollars per American Depositary Share (ADS), as        the case may be. Starting from December 2005 one ADS        represents two Eni shares. Previously one ADS was        equivalent to five Eni shares. Data per ADS for prior        periods have been recalculated accordingly. Earnings per        share is calculated by dividing net profit 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.                                                                                                                                                                                                                                                                                                 |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) |   | The financial        statements are stated in euro. The translations of        certain euro amounts into U.S. dollars are included        solely for the convenience of the reader. The convenient        translations should not be construed as representations        that the amounts in euros have been, could have been, or        could in the future be, converted into U.S. dollars at        this or any other rate of exchange. Data per ADS, with        the exception of dividend per ADS in the years 2001 to        2004, were translated at the Noon Buying Rate of December        31 for each year presented ($0.8901, 1.0485, 1.2597        1.3538 and 1.1842 = euro 1.00 as of December 31, 2001,        2002, 2003, 2004 and 2005, respectively). Dividend per        ADS for the years 2001 through 2004 has been translated        into U.S. dollars using for each year presented the Noon        Buying Rate on the payment date. On June 12, 2006, the        Noon Buying Rate was $1.26 per euro 1.00. |
| (4) |   | See Note 34        to the Consolidated Financial Statements for details of        operating profit under U.S. GAAP by business segment for        the last two years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (5) |   | Historic        dividends of the four years 2001-2004 were converted at        the Noon Buying Rate of the pay-out date. The dividend        for 2005 was converted at the Noon Buying Rate of the        interim dividend (euro 0.45 per share) pay-out date,        occurred on October 27, 2005. The balance of euro 0.65        per share payable on June 22, 2006 was translated at the        Noon Buying Rate of December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

##### Table of Contents

**Selected Operating Information**

The table below sets forth selected operating information withrespect to Eni’s proved reserves, developed and undeveloped,of crude oil (including condensates and natural gas liquids) andnatural gas, as well as other data as of and for the years endedDecember 31, 2001, 2002, 2003, 2004, 2005. Data on provedreserves, production of oil and natural gas and hydrocarbonproduction sold includes Eni’s share of reserves andproduction of affiliates and joint ventures accounted for underthe equity or cost method of accounting.

 

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

| Proved        reserves of oil at period end (mmBBL)                                           |   | 3,948  |   | 3,783  |   | 4,138  |   | 4,008  |   | 3,773  |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Proved reserves of natural gas at period end        (BCF)                                     |   | 17,072 |   | 18,629 |   | 18,008 |   | 18,435 |   | 17,591 |
| Proved        reserves of hydrocarbons in mmBOE at period end (1)                             |   | 6,929  |   | 7,030  |   | 7,272  |   | 7,218  |   | 6,837  |
| Reserve replacement ratio (2) (three        year average)                                     |   | 226    |   | 202    |   | 179    |   | 117    |   | 89     |
| Reserve        life index (3)                                                                 |   | 13.7   |   | 13.2   |   | 12.7   |   | 12.1   |   | 10.8   |
| Average daily production of oil (KBBL/d)                                                      |   | 857    |   | 921    |   | 981    |   | 1,034  |   | 1,111  |
| Average        daily production of natural gas available for sale        (mmCF/d) (4)         |   | 2,827  |   | 3,015  |   | 3,174  |   | 3,171  |   | 3,344  |
| Average daily production of hydrocarbons        available for sale (KBOE/d) (4)               |   | 1,353  |   | 1,449  |   | 1,536  |   | 1,586  |   | 1,693  |
| Hydrocarbon        production sold (mmBOE)                                                    |   | 499.7  |   | 523.3  |   | 556.2  |   | 576.5  |   | 614.9  |
| Oil and gas production costs per BOE (5)                                                      |   | 3.85   |   | 3.83   |   | 4.16   |   | 4.92   |   | 5.59   |
| Profit per        barrel of oil equivalent (6)                                                |   | 5.48   |   | 5.08   |   | 5.95   |   | 8.87   |   | 12.20  |
| Sales of natural gas to third parties (7)                                                     |   | 63.72  |   | 64.12  |   | 69.49  |   | 72.79  |   | 77.08  |
| Natural        gas consumed by Eni (7)                                                        |   | 2.00   |   | 2.02   |   | 1.90   |   | 3.70   |   | 5.54   |
| Sales of natural gas of affiliates and relevant        companies (Eni’s share) (7)       |   | 1.38   |   | 2.40   |   | 6.94   |   | 7.32   |   | 8.53   |
| Total        sales and own consumption of natural gas (7)                                     |   | 67.10  |   | 68.54  |   | 78.33  |   | 83.81  |   | 91.15  |
| Transport of natural gas for third parties in        Italy (7)                                |   | 11.41  |   | 19.11  |   | 24.63  |   | 28.26  |   | 30.22  |
| Length of        natural gas transport network in Italy at period end (8)                     |   | 29.6   |   | 29.8   |   | 30.1   |   | 30.2   |   | 30.7   |
| Electricity production sold (9)                                                               |   | 4.99   |   | 5.00   |   | 5.55   |   | 13.85  |   | 22.77  |
| Refined        products production (10)                                                       |   | 37.78  |   | 35.55  |   | 33.52  |   | 35.75  |   | 36.68  |
| Balanced capacity of wholly-owned refineries (11)                                             |   | 664    |   | 504    |   | 504    |   | 504    |   | 524    |
| Capacity        utilization of wholly-owned refineries (12)                                   |   | 97     |   | 99     |   | 100    |   | 100    |   | 100    |
| Number of service stations at period end (in        Italy and outside Italy)                  |   | 11,707 |   | 10,762 |   | 10,647 |   | 9,140  |   | 6,282  |
| Average        throughput per service station (in Italy and outside        Italy) (13)        |   | 1,685  |   | 1,858  |   | 2,109  |   | 2,488  |   | 2,479  |
| Petrochemicals production (10)                                                                |   | 7.83   |   | 7.12   |   | 6.91   |   | 7.12   |   | 7.28   |
| Oilfield        Services Construction and Engineering order backlog at        period end (14) |   | 6,937  |   | 10,065 |   | 9,405  |   | 8,521  |   | 9,964  |
| Employees at period end (units)                                                               |   | 72,405 |   | 80,655 |   | 75,421 |   | 70,348 |   | 72,258 |

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

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Includes        approximately 728, 779, 747, 737 and 760 BCF of natural        gas held in storage in Italy at December 31, 2001, 2002,        2003, 2004 and 2005, respectively. See "Item 4        – Information on the Company – Exploration        & 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 35 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 35 to the        Consolidated Financial Statements. Expressed on a yearly        basis.                                                                                                                                                                                                                       |
| (4)    |   | Natural gas        production volumes exclude gas consumed in operations        (94, 132, 151, 220 and 250 mmCF/d in 2001, 2002, 2003,        2004 and 2005, respectively).                                                                                                                                                                                                                                                                                                                                                                                                   |
| (5)    |   | Consists of        production costs (costs incurred to operate and maintain        wells and field equipment including also royalties)        prepared under U.S. GAAP divided by actual production net        of production volumes of natural gas consumed in        operations. See the unaudited supplemental oil and gas        information in Note 35 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 35 to the Consolidated        Financial Statements for a calculation of results of        operations from oil and gas producing activities.        Expressed in dollars.                                                                                                                                                         |
| (7)    |   | Expressed in        BCM.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (8)    |   | Expressed in        thousand kilometers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (9)    |   | Expressed in        terawatthour.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (10)   |   | Expressed in        million tonnes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (11)   |   | Expressed in        KBBL/d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (12)   |   | Expressed in        production as a percentage of capacity taking into        account scheduled plant shutdowns.                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (13)   |   | Expressed in        thousand liters per day. Referred to the Agip        brandednetwork.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (14)   |   | The sum of        the order backlog of Saipem SpA and Snamprogetti SpA,        expressed in millions of euro.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

##### Table of Contents

**Exchange Rates**

The following table sets forth, for the periods indicated,certain information regarding the Noon Buying Rate in U.S.dollars per euro, rounded to the second decimal (Source: TheFederal Reserve Board).

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

|   | **U.S.        dollars per euro** |
|--------|----------------------------------|

| Year ended        December 31, |   |   |   |   |   |   |   |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| 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   |
| 2005                           |   | 1.35   |   | 1.17   |   | 1.24   |   | 1.18   |

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

----

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

 

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

|   | **U.S.        dollars per euro** |
|--------|----------------------------------|

| December 2005                     |   | 1.20 |   | 1.17 |   | 1.18 |
|-----------------------------------|--------|------|--------|------|--------|------|
| January        2006               |   | 1.23 |   | 1.20 |   | 1.22 |
| February 2006                     |   | 1.21 |   | 1.19 |   | 1.19 |
| March 2006                        |   | 1.22 |   | 1.19 |   | 1.21 |
| April 2006                        |   | 1.26 |   | 1.21 |   | 1.26 |
| May 2006                          |   | 1.29 |   | 1.26 |   | 1.28 |
| June 2006 (through June 12, 2006) |   | 1.30 |   | 1.26 |   | 1.26 |

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

Fluctuations in the exchange rate between the euro and thedollar affect the dollar equivalent of the euro price of theShares on the Telematico and the dollar price of the ADSs on theNYSE. Exchange rate fluctuations also affect the dollar amountsreceived by owners of ADSs upon conversion by the Depository ofcash dividends paid in euro on the underlying Shares. The NoonBuying Rate on June 12, 2006 was $1.26 per 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.

In the Exploration & Production business, Eni encounterscompetition from other international oil companies for obtainingexploration and development rights, particularly outside Italy.The current trend of the industry towards a reduction of thenumber of operators via takeovers or mergers might lead topossibly stronger competition from operators with greaterfinancial resources and a wider portfolio of developmentprojects.

In its natural gas business, Eni encounters increasinglystrong competition from both national and international naturalgas suppliers, also following the impact of the liberalization ofthe Italian natural gas market introduced by Legislative DecreeNo. 164/2000 which provides for, among other things, the openingof the Italian market to competition, limitations to the size ofgas companies relative to the market and third party access totransport infrastructure. In addition, Legislative Decree No.164/2000 grants the Italian Authority for Electricity and Gascertain regulatory powers in the matters of natural gas pricingand access to infrastructure, among others. In its electricitybusiness, Eni competes with other producers from Italy or outsideItaly which sell electricity on the Italian market.

Eni faces competition from several international oil companiesin its refinery and refined product marketing businesses. Inretail marketing both in and outside Italy, Eni competes withthird parties (including international oil companies and localoperators such as supermarket chains) to obtain concessions toestablish and operate service stations. Once established,Eni’s service stations compete primarily on the basis ofpricing, services and availability of non-petroleum products. InItaly plans for the upgrading and efficiency improvement of thenational service station network can advance only in accordancewith the evolution of the regulatory framework, which lags behindthat of other major European countries.

Eni also faces significant competition from certaininternational operators in the oilfield services, constructionand engineering industries. Such competition is primarily on thebasis of technical expertise, quality and number of services andavailability of technologically advanced facilities (for examplevessels 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. The oil and gas industry is subjectto the payment of royalties and excise duties, which tend to behigher than those payable in respect of many other commercialactivities.

> 
*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. Exploring or drilling inoffshore areas, in particular in deep water, is generally morecomplex and riskier than in onshore areas; so is exploratoryactivity in remote areas or in challenging environmentalconditions as in the case of the Caspian Region or Alaska.

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. Deep water operations generally require a significantamount of time between a discovery and the time that Eni canproduce and market the oil or gas increasing both the operationaland financial risks associated with these activities. Inaddition, lack of necessary equipments such as a shortage of deepwater rigs, could further delay operations, thus increasing bothoperational and financial risks.

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.Eni’s future results of operations rely upon its ability todevelop and operate major projects as planned. Key factors thatmay affect the economics of those projects include:

| • |   | the outcome of negotiations        with co-venturers, governments, suppliers, customers or        others (including, for example, Eni’s ability to        negotiate favorable long-term contracts with customers,        the development of reliable spot markets that may be        necessary to support the development of particular        production projects, or commercial arrangements for        pipelines and related equipment to transport and market        hydrocarbons); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | timely issuance of permits        and licenses by governmental agencies;                                                                                                                                                                                                                                                                                                                                                                                                                     |
| • |   | the occurrence of technical        difficulties including delays in manufacturing and        delivery of critical equipment, and, risks associated        with the use of new technologies;                                                                                                                                                                                                                                                                                                  |
| • |   | changes in operating        conditions and costs, including costs of third party        equipment or services such as drilling rigs and shipping;                                                                                                                                                                                                                                                                                                                                            |
| • |   | the actual performance of        the reservoir and natural field decline;                                                                                                                                                                                                                                                                                                                                                                                                                    |
| • |   | the availability of third        party equipment or services; and                                                                                                                                                                                                                                                                                                                                                                                                                            |
| • |   | the ability and time        necessary to realize suitable transport infrastructures        to export production towards final markets.                                                                                                                                                                                                                                                                                                                                                       |

Furthermore, deep water and other hostile environments, wherethe majority of Eni’s planned and existing developmentprojects are located, can exacerbate these problems. Delays anddifferences between estimated and actual timing of criticalevents may adversely affect the completion and start-up ofproduction from such projects and, consequently, the actualreturns on such projects.

> 
*Inability in replacing oil and natural gas reserves    could adversely impact operations and earnings*

Eni’s operations and earnings are substantially dependenton our ability to develop and sell oil and natural gas. Unless weare able to replace produced oil and natural gas, our reserveswill decline. Future oil and gas production are dependent on thecompany’s ability to access new reserves through newdiscoveries, application of improved techniques, success indevelopment activity, negotiation with countries and other ownersof known reserves and acquisitions. An inability to replacereserves could adversely impact future production and futureresults of operations.

> 
*Lifting and development costs are increasing and this    could reduce profit per BOE for the oil industry*

Profit margins in the oil industry are being affected by asteady rising trend in lifting and development costs as a resultof the following: (i) the increasingly high percentage of complexdevelopment projects (such as those in deep and ultra deep watersand in harsh environments) which bear higher development costs ascompared to development projects in traditional environments;(ii) inflationary pressure affecting purchase prices of rawmaterials and services in connection to the worldwide economicrecovery; and (iii) lack of specialized resources (such asengineers and other valuable technicians) especially in remoteareas. Eni’s management expects this rising trend of liftingand development costs to continue in the medium term and thiscould lead to a reduction in profit per BOE.

> 
*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 on 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 could have an adverse impact on Eni’s results ofoperations.

> 
***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’s reservoirs.                                                                                                                                                                                                                                                                                                                                                                                     |

Many of these factors, assumptions and variables involved inestimating proved reserves are beyond Eni’s control and mayprove to be incorrect over time. Accordingly, the estimatedreserves could be materially different from the quantities of oiland natural gas that ultimately will be recovered. Additionally,any downward revision in Eni’s estimated quantities ofproved reserves could adversely impact Eni’s financialresults, leading to increased depreciation, depletion andamortization charges and/or impairment charges, which wouldreduce earnings and shareholders’ equity.

> 
***Political Considerations***

Substantial portions of Eni’s hydrocarbon reserves arelocated in countries outside the EU and North America, some ofwhich may be politically or economically less stable than EU orNorth American countries. At December 31, 2005, approximately 73%of Eni’s proved hydrocarbon reserves were located in suchcountries. Similarly, a substantial portion of Eni’s naturalgas supply comes from countries outside the EU and North America.In 2005, approximately 60% of Eni’s supplies of natural gascame from 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 operating in politically unstable countries Enifaces risks in connection with the following: (i) lack ofwell-established and reliable legal systems; (ii) other politicaldevelopments and laws and regulations (such as expropriation orforced divestiture of assets and unilateral cancellation ormodification of contract terms), for example in April 2006,Eni’s titles and mineral assets relating to an important oilfield were transferred to the Venezuelan state oil companyfollowing its unilateral cancellation of the contract regulatingoil activities in the field; (iii) restrictions on exploration,production, imports and exports; (iv) tax or royalty increases(including retroactive claims); and (v) civil unrest, for examplein the first quarter of 2006 certain episodes of civil unrest inNigeria caused disruptions at certain Eni oil producingfacilities. See "Item 4 – Exploration & Production– Oil and Natural Gas Reserves"; and "Item 5– Recent Developments".

In August 1996, the United States adopted the Iran and LibyaSanctions Act (the "Sanctions Act") with the objectiveof denying Iran and Libya the ability to support acts ofinternational terrorism and fund the development or acquisitionof weapons of mass destruction. On April 23, 2004 the Presidentof the United States terminated the application of the SanctionsAct to Libya, with the remaining economic sanctions against Libyalifted on September 23, 2004. The Sanctions Act still applies toIran and authorizes the President of the United States to imposesanctions from a six-sanction menu under certain circumstancesagainst any person, including any foreign company, makinginvestments in Iran, thus contributing directly and significantlyto the enhancement of Iran’s ability to develop itshydrocarbons resources. The Sanctions Act is scheduled to expireon August 5, 2006. Eni does not believe that enforcement of theSanctions Act against it would have a material adverse effect onits financial condition or results of operations. However, a billto amend and extend the extra-territorial reach of the economicsanctions imposed by the United States with respect to Iran hasbeen passed by the U.S. House of Representatives and may lead tothe passage of new laws in this area. Iran continues to bedesignated by the U.S. State Department as a State sponsoringterrorism. For a description of Eni’s operations in Iran andLibya see "Item 4 – Information on the Company –Exploration and Production – North Africa and Rest ofWorld".

> 
***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. 164/2000 opened completely the Italiannatural gas market 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 thecompany is present in all the phases of the natural gas chain, inparticular:

| • |   | until December 31, 2010,        antitrust thresholds for operators will be calculated as        a percentage share of national consumption 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; and (ii) effective January        1, 2003, 50% for sales to final customers. Compliance        with these ceilings is verified annually by comparing the        allowed average percentage on a three year basis for        volumes input or sold to the average percentage obtained        by each operator in the same three year period. Allowed        percentages are calculated 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, LNG facilities 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; 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        certain conditions set by the Authority for Electricity        and Gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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 15 years.Existing contracts, which in general contain take-or-pay clauses,will ensure total delivery of approximately 67.3 BCM/y of naturalgas (Russia 28.5, Algeria 21.5, the Netherlands 9.8, Norway 6 andNigeria 1.5) by 2008. The above quantities are based on theannual contract quantity of the relevant contract. The averageannual minimum quantity that Eni is committed to purchase underits take-or-pay obligations is approximately 85% of saidquantities. In order to comply with the above mentionedregulatory thresholds relating to volumes input into the nationaltransport network and sales volumes in Italy, Eni signedmulti-year contracts with third party importers in Italy andstarted implementing a strategy of increasing natural gas salesin the rest of Europe in order to sell outside Italy natural gasvolumes available under its take-or pay contracts, exceedingmandatory thresholds. In prior years Eni sold the majority of itsnatural gas availability on the Italian market. This change inthe sale mix is structural and is adversely affecting Eni’sresults of operations. Further, management expects Eni’smargins on natural gas in Italy to come under pressure in futureyears due to the entry into the market of new competitors,including the impact of the build-up of Eni’s supplies tothe above mentioned Italian importers.

> 
*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 toincrease at a rate that cannot exceed the growth rate of naturalgas demand in Italy. Management believes this development mighthave a material adverse impact on Eni’s results ofoperations.

> 
*If Eni fails to grow natural gas sales in Europe as    planned, Eni may be unable to fulfill its minimum take    obligations under take-or-pay purchase contracts and this    could adversely impact results of operations*

Over the medium term, Eni plans to increase its natural gassales in Europe also to absorb its natural gas availability undertake-or-pay contracts. Should Eni fail to increase natural gassales in Europe as planned, Eni may be unable to sell all thevolumes of natural gas purchased under take-or-pay contracts, andthis could adversely impact 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 the natural gas    volumes which Eni is committed to purchase under take-or-pay    contract obligations*

Over the next few years, Eni plans to import certain volumesof natural gas using the highest purchase flexibility as providedfor by its take-or-pay purchase contracts. Eni also assumes thatit will be entitled to the necessary transport capacity on theItalian transport infrastructure. However, Eni planningassumptions are inconsistent with current rules regulating theaccess to Italian transport infrastructure as provided for by theNetwork Code drafted under Decision No. 137 of July 17, 2002 ofthe Authority for Electricity and Gas. Such rules establishedcertain priority criteria for the entitlement to transportcapacity of natural gas at points where the Italian transportinfrastructure connects with international transport networks(the so-called entry points to the Italian transport system). Inparticular current rules establish that take-or-pay contractsentered into before 1998, as in the case of Eni, have the rightto a priority in the entitlement to available transport capacityequal to average daily contractual volumes. There is therefore noguaranteed access priority for Eni’s contracted volumesexceeding average daily contractual volumes. In fact, take-or-paycontracts entered into by Eni before 1998 envisage Eni’sright to offtake daily volumes larger than the average dailycontractual volume; this contractual flexibility provided by thedifference between the maximum daily volume Eni is allowed topurchase and the average daily contractual volume is used whendemand peaks, usually during the winter. In the event ofcongestion at entry points, natural gas volumes not receivingpriority are entitled to available transport capacity inproportion with requests from operators. Eni considers DecisionNo. 137/2002 to be inconsistent with the overall rationale of theEuropean natural gas legislative framework, especially withreference to Directive 98/30/CE and Legislative Decree No.164/2000, and is challenging Decision No. 137/2002 before thecompetent administrative courts. See "Item 4 –Regulation of the Italian Hydrocarbons Industry – Gas &Power". However, Eni cannot rule out a negative outcome inthis matter. Accordingly, management believes that Eni’sresults of operations could be adversely affected should marketconditions and/or regulatory constraints prevent Eni from sellingits whole availability of natural gas purchased to fulfilltake-or pay contract obligations (i.e., in case congestion occursat the entry points of the Italian transport infrastructure whichwould force Eni to offtake a smaller volume of gas than theminimum contractual off take). See "Item 5 – ManagementExpectations 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 regulation ofthe Italian natural gas market. Also an institutional debate isongoing in Italy regarding the liberalization of the natural gasmarket and this may produce significant developments on thismatter. A brief description follows of certain recently enactedlaws and certain proceedings before the Authority for Electricityand Gas and the Italian Antitrust Authority in order to allowinvestors to gain some insight of the complexity of this matter.For a full discussion of laws and procedures described herein see"Item 4 – Regulation of the Italian HydrocarbonsIndustry – Gas & Power ".

In 2003, Law No. 290 was enacted which prohibits Eni fromholding an interest higher than 20% in undertakings owningnatural gas transport infrastructure in Italy (Eni currentlyholds a 50.07% interest in Snam Rete Gas, which owns and managesapproximately 97% of the Italian natural gas transportinfrastructure).

On the basis of the findings of a joint inquiry conducted from2003 through June 2004 on the Italian natural gas market, theAuthority for Electricity and Gas and the Italian AntitrustAuthority (the "Antitrust Authority") acknowledged thatthe overall level of competition of the Italian natural gasmarket is unsatisfactory due to the dominant position held by Eniin many phases of the natural gas chain. According to both theAuthority for Electricity and Gas and the Antitrust Authority,the vertical integration of Eni in the supply, transport andstorage of gas has restricted the development of competition inItaly notwithstanding the antitrust ceilings introduced byLegislative Decree 164/2000. It was further stated that the priceof natural gas in Italy (in particular for the industrial sector)is higher than in other European countries.

In October 2005, the Authority for Electricity and Gas startedan inquiry concerning the competitive behavior of operatorsselling natural gas to residential and commercial customers withthe aim of defining measures to improve competition.

In February 2006, the Antitrust Authority closed an inquiryconcerning Eni’s competitive behavior concluding that Eniabused its dominant position with regard to its decision tosuspend a plan for the upgrading of the import pipeline fromAlgeria and to unilaterally cancel certain contracts to sell therelevant transport capacity to third parties. Contracts weresigned early in 2003 and the relevant upgrade is expected tobecome effective in 2007. The Antitrust Authority fined Eni by anamount of euro 290 million.

On May 5, 2006, the European Commission started an inquiry inorder to verify an alleged abuse of dominant position on the partof Eni in violation of Article 82 of the EEC Treaty and Article54 of the CES Agreement in the activities of international gastransport and wholesale and retail supply of gas.

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 developmentson these matters.

> 
*Eni believes an oversupply of natural gas is likely to    occur in the long-term (beyond 2009)*

Eni plans to upgrade its natural gas import infrastructurefrom Algeria and Russia to Italy, with expected start-up in 2008and late 2008/2009, respectively. Taking into account thebuild-up of supplies of natural gas from Libya through theGreeenstream gasline and of Eni’s fourth long termtake-or-pay purchase contract from Russia, an additional importcapacity of 883 BCF/y is expected to be available for the Italiannatural gas market starting in 2009. A large portion of thisexpected import capacity has been or is planned to be awarded tothird parties. In addition, certain operators in the Italiannatural gas market have publicly announced plans to develop LNGterminals in Italy. Eni expects at least one new LNG terminalwith a 283 BCF/y capacity to start operations by 2009 thus addingnew import capacity to the Italian market. Management believesthe pace of demand growth in the Italian natural gas market maynot meet the expected increase in supplies of natural gas marketstarting in 2009 and beyond. If this projections materialize, adecrease in natural gas margins is likely to occur.

> 
*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 monitoring 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. In particular, with Decision No.248/2004 the Authority for Electricity and Gas established, amongother things: (i) that an increase in the internationalprice of Brent crude oil is only partially transferred on toresidential and commercial users of natural gas in caseinternational prices of Brent crude oil exceed the 35 dollars perbarrel threshold; and (ii) that Italian natural gas importers– including Eni – must renegotiate supply contracts towholesalers in order to take account of the reduction of theprice of natural gas sold to residential and commercial users. Aproceeding has commenced between the Authority for Electricityand Gas and Eni, which appealed Decision No. 248/2004 to anadministrative court.

Eni’s management expects a negative outcome of thismatter. Eni has accrued a material provision in its 2005Consolidated Financial Statements in order to reflect the risksassociated with this matter. In 2006 management expectsEni’s results of operations to be adversely impacted by amaterial amount in light of the high Brent crude oil prices, inthe event Decision 248/2004 is implemented in its original form.See "Item 4 – Regulation of the Italian HydrocarbonsIndustry – Gas & Power" and "Item 5 –Financial Review and Prospects".

> 
***Environmental Regulation***

*Eni may incur material operating costs and liabilities    in relation to compliance with applicable environmental    regulations and future 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 production, 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 incertain operations and products of Eni, 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 on Eni’s Consolidated FinancialStatements as a result of its compliance with such laws andregulations, there are risks that Eni may incur significant costsand liabilities in future years due to: (i) the chance of as yetunknown contamination; (ii) future developments in environmentalregulation; (iii) the results of on-going surveys or surveys tobe carried out on the environmental status of Eni’sindustrial sites and other possible effects deriving from theimplementation of Decree No. 471/1999 of the Ministry ofEnvironment; (iv) the possible effects deriving from theimplementation of certain enacted regulations 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 deriving from the application of Europeandirective 2004/35/EC concerning environmental responsibility forprevention and reclamation of environmental damage; 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 results ofoperations on the basis of information available to date andtaking account of existing provisions, Eni’s managementcannot rule out that in future years Eni may incur materiallosses in connection with pending legal proceedings due to: (i)uncertainty regarding the outcome of each proceeding; (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 segmentsare affected by changes in the price of oil and by their impacton prices and margins of natural gas and refined andpetrochemical products.

> 
*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 U.S.dollar can have a material impact on Eni’s results ofoperations. Prices of oil, natural gas and refined productsgenerally are denominated in, or linked to, U.S. dollars, while asignificant portion of Eni’s expenses are denominated ineuro. Similarly, prices of Eni’s petrochemical products aregenerally denominated in, or linked to, the euro, whereasexpenses in the Petrochemicals segment are denominated both ineuro and U.S. dollars. Accordingly a depreciation of the U.S.dollar versus the euro generally has an adverse impact on Eniresults of operations.

> 
***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 to its financial debt.

***Critical Accounting Estimates***

The preparation of financial statements entails accountingestimates that are characterized by a high degree of uncertainty,complexity and judgment. 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".

 

##### 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 72,258 employees as of December 31, 2005.

Eni, the former Ente Nazionale Idrocarburi, a public lawagency, established by Law No. 136 of February 10, 1953, wastransformed into a joint stock company by Law Decree No. 333published in the Official Gazette of the Republic of Italy No.162 of July 11, 1992 (converted into law on August 8, 1992, byLaw No. 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, R.E.A. Rome No. 756453. Eni isexpected to remain in existence until December 31, 2100; itsduration can however be extended by resolution of theshareholders.

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; and     |
|--------|--------|------------------------------------------------------------|
|   |   |                                                       |
| • |   | 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.

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 SpA was established bythe Italian Government with a mandate to explore for and developoil and natural gas. Agip SpA was merged into Eni SpA effectiveas of January 1, 1997 to become Eni’s Exploration &Production Division.

Eni is engaged in exploration and production of hydrocarbonsin Italy, North Africa, West Africa, the North Sea, the Gulf ofMexico, Australia, South America and areas with great developmentpotential such as the Caspian Sea, the Middle and Far East, Indiaand Alaska. In 2005, Eni’s hydrocarbon production availablefor sale averaged 1,693 KBOE/d and, at December 31, 2005,Eni’s estimated proved reserves totalled 6,837 mmBOE with alife index of 10.8 years. In 2005, Eni’s Exploration &Production segment had net sales from operations (includingintersegment sales) of euro 22,477 million and operating profitof euro 12,574 million.

Eni conducts its natural gas and electricity generationactivities through its Gas & Power Division and certainoperating subsidiaries. Eni’s natural gas supply,transmission and distribution activities commenced in the 1940swith the commercial sale of natural gas to industrial users inNorthern Italy. Snam SpA was merged into Eni SpA effective as ofFebruary 1, 2002 to become Eni’s Gas & Power Division.In 2005, Eni’s sales of natural gas to third partiestotalled 52.47 BCM in Italy and 23.44 BCM in the rest of Europe;Eni’s share of natural gas volumes sold by its affiliatestotalled 8.53 BCM (of which 7.85 billion was sold in the rest ofEurope). Natural gas volumes consumed in operations by Eni andEni’s subsidiaries – mainly in electricity generation,refining and petrochemicals operations – totalled 5.54 BCM.Natural gas sales in Italy include: (i) sales to wholesalers,mainly local companies selling natural gas to residential andcommercial customers, and to large industrial and thermoelectriccustomers which are supplied by a high and medium pressurepipeline network; and (ii) sales to residential and commercialcustomers which are supplied by a low pressure pipeline network.Eni’s high and medium pressure gas pipeline network fornatural gas transport is about 30,700-kilometer long in Italy,while outside Italy Eni holds transmission rights onapproximately 5,000 kilometers of high pressure pipelines.Eni’s natural gas transport network in Italy is owned andmanaged by Snam Rete Gas SpA. Snam Rete Gas is listed on theItalian Stock Exchange, Eni’s share being 50.07%. Snam ReteGas transports natural gas on behalf of Eni and third parties("shippers"); in 2005 its transported volumes were85.10 BCM, of which 30.22 billion were on behalf of thirdparties. Eni, through its 100% subsidiary Italgas and othersubsidiaries, is engaged in natural gas distribution activity inItaly serving 1,282 municipalities through a low pressure networkconsisting of approximately 48,000 kilometers of pipelines as ofDecember 31, 2005.

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 4.5 gigawatt as of December 31, 2005. In 2005, soldproduction of electricity totalled 22.77 terawatthours. Eni ownsother minor power stations located in Eni’s petrochemicalplants and refineries whose production is mainly for internalconsumption. The accounts of these power stations are reportedwithin Eni’s Refining & Marketing and Petrochemicalssegments.

In 2005, Eni’s Gas & Power segment had net sales fromoperations (including intersegment sales) of euro 22,969 millionand operating profit of euro 3,321 million.

Eni conducts 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. AgipPetroli SpA was merged intoEni SpA effective December 31, 2002 to become Eni’s Refining& Marketing Division. Eni’s refining and marketingactivities are located primarily in Italy and in the rest ofEurope. In 2005, Eni’s retailing market share for refinedproducts in Italy through its Agip-branded network of servicestations was 29.7%. In 2005, Eni divested its wholly-ownedsubsidiary Italiana Petroli which is engaged in the retailmarketing of refined products through a network consistingprimarily of leased service stations, under the IP brand. In2005, sales of refined products totalled 51.63 million tonnes, ofwhich 30.29 million were in Italy. The balanced refining capacityof Eni’s wholly-owned refineries totalled 524 KBBL/d as ofDecember 31, 2005. In 2005, Eni’s Refining & Marketingsegment had net sales from operations (including intersegmentsales) of euro 33,732 million and operating profit of euro 1,857million.

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 2005, Enisold 5.4 million tonnes of petrochemical products. In 2005,Eni’s Petrochemicals segment had net sales from operations(including intersegment sales) of euro 6,255 million and anoperating profit of euro 202 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 2005,Eni’s Oilfield Services, Construction and Engineeringsegment had net sales from operations (including intersegmentsales) of euro 5,733 million and operating profit of euro 307million.

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

> 
***Strategy***

Eni plans to deploy a strategy of organic growth intended tosustain the group’s business over the long-term.

In the Exploration & Production activities, Eni plans togrow production of oil and natural gas through organic growth,targeting a production level of more than 2 mmBOE/d in 2009,which corresponds to a compound average growth rate ofapproximately 4% under certain trading environment assumptions(See "Item 5 – Management Expectations ofOperations"). Eni plans to reach said production target byleveraging in particular on the contribution of recentlycompleted large development projects and projects in thedevelopment phase in Angola, Libya, Nigeria, Egypt, Iran, Algeriaand Kazakhstan. Management will continue to evaluateopportunities to increase production through the purchase ofcorporations or individual assets. Eni intends to pay specialattention to reserve replacement in order to ensure the medium tolong-term sustainability of its business. Eni intends to optimizeits portfolio of development properties by focusing on areaswhere its presence is established, seeking for new opportunitiesand divesting marginal assets. Eni intends to develop its LNGbusiness also through the purchase of interests in liquefactionplants in order to better exploit its natural gas reserves inNorth and West Africa. In exploration activities Eni intends torenew its portfolio of properties focusing on such areas wheremanagement believes a high mineral potential exists, on assets inareas where its presence is established (in particular Egypt,Nigeria, the United States, Italy and Norway) and to startexploration in newly acquired areas (in particular Alaska, Libyaand India).

In the Gas & Power activities, Eni plans to grow naturalgas sales in the rest of Europe and to develop its presence inthe LNG business in order to compensate for lower growthopportunities on the domestic market due to the limits imposed onoperators by the sector regulation and increasingly intensecompetition. In Italy, Eni plans to comply with regulatory limitson direct sales and input volumes to the national transportnetwork by optimizing allocation of supplies between direct salesin Italy and in the rest of Europe and by using natural gas atits own electricity generation plants and, at the same time,leveraging on the expected consumption growth. In the mediumterm, management expects its natural gas sales in Italy todecline from the 58 BCM level recorded in 2005 as a consequenceof increasing competition from third parties. Eni plans toimplement a more attractive commercial offer than Eni’scompetitors’ on the basis of the quality of services,pricing formulas including different indexation schemes to suitvarious customers’ purchasing profile and the integration ofsupply of gas and electricity. Management plans to grow naturalgas sales on European markets by leveraging on the availabilityof Eni’s equity gas and on a diversified portfolio of supplycontracts, an extensive gas pipeline network, which allows forthe supply of natural gas from several sources, and long standingrelationships with producing countries. Eni intends to strengthenits presence in markets where its presence is already established– such as the Iberian Peninsula, Germany and Turkey –and to develop sales in markets with significant growth andprofitability prospects (in particular France and the UnitedKingdom).

In the Refining & Marketing activities, Eni intends tomaximize returns from its existing assets. In the refiningactivity Eni plans to invest in new primary distillation capacityand in new conversion capacity to make its refining systemflexible enough to obtain a higher yield of middle distillatesand to achieve a greater vertical integration with its upstreamactivities. In marketing Eni aims to improve its competitiveposition in Italy and to increase sales in selected neighboringcountries in the Rest of Europe. 

Eni’s oilfield services construction and engineeringactivities play an essential role in contributing totechnological innovations and in the implementation ofworld-scale projects thus supporting Eni’s growth process inthe oil & gas business.

In technological research and innovation activities Eni plansto implement a relevant capital expenditure programme to developsuch technologies that management believes may ensure competitiveadvantages in the long-term and promote sustainable growth. Eniplans to continue developing existing programmes on clean fuels,sulphur and greenhouse gas management as well as projects such asthe upgrading of heavy crudes (EST), high pressure gastransmission (TAP) and Gas to Liquids (GTL).

In pursuing this strategy Eni plans a capital expenditureprogramme amounting to euro 35.2 billion over the next fouryears. Eni plans to finance this capital expenditure programme byusing the cash provided by operating activities. Over the nextfour year period, the Company expects to distribute to itsshareholders a flow of dividends in line with the level of 2005under certain assumptions (See "Item 8 –Dividends"). Eni aims to allocate cash flow in excess ofcapital expenditure and dividend requirements to continue itsprogramme of share buy-back while at the same time maintaining astrong balance sheet. See "Item 5 – ManagementExpectations of Operations".

> 
***Key Developments***

The most significant events that occurred during 2005 and todate in 2006 were the following:

| • |   | In 2005, hydrocarbon        production available for sale averaged 1,693 mmBOE/d, a        6.7% increase compared to year 2004. Eni’s net        proved reserves of oil and natural gas were 6.84 BBOE        (55% crude and condensates), down 381 mmBOE from 2004 due        to an estimated 478 mmBOE adverse impact related to lower        entitlements in certain PSAs and buy-back contracts due        to higher oil prices (58.21 dollar per barrel at year end        2005 as compared to 40.47 at year end 2004). Eni’s        reserves replacement ratio was 40%; the average reserve        life index was 10.8 years (12.1 in 2004).                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | In May 2005, the new setup        of the consortium operating the North Caspian Sea PSA was        defined. As a result of the transaction, Eni’s        operatorship interest in the Kashagan project increased        from 16.67% to 18.52%. Eni plans a capital expenditure        programme amounting to $29 billion in order to develop        the field reserve. Management is currently reviewing this        amount in order to take account of the depreciation of        the U.S. dollar versus the euro and rising trends in the        cost of certain production factors (such as materials and        oilfield services). The development of the project is        advancing as planned: first oil is expected by the end of        2008 and the production plateau is targeted at over 1.2        mmBBL/d.                                                                                                                                                                         |
| • |   | As part of its strategy of        expansion in areas with high mineral potential, Eni        enhanced its portfolio of mineral rights via acquisition        of exploration permits and production licenses located in        Libya, India, Alaska, Brazil, Nigeria, Australia,        Pakistan and the Gulf of Mexico for a total acreage of        67,000 square kilometers (44,000 net to Eni, of these 93%        as operator).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| • |   | In Angola oil production        increased approximately 50% from the level of 2004        reflecting mainly certain significant start-ups: phase B        of the development of the fields discovered in the        Kizomba offshore area in Block 15 (Eni’s interest        20%) and the North Sanha and Bomboco oil, condensate and        LPG fields in Block 0 former Cabinda (Eni’s        interest 9.8%).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| • |   | As part of the Western        Libyan Gas Project (Eni’s interest 50%), in August        2005 the offshore Bahr Essalam field was started-up, less        than a year after the start-up of the onshore Wafa field.        Peak production of the two fields is expected in 2006 at        256,000 BOE/d (128,000 net to Eni). When fully        operational in 2006 volumes produced and carried to Italy        via the Greenstream pipeline will be 8 BCM/y of natural        gas (4 billion net to Eni) already booked under long term        supply contracts with operators.                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • |   | Natural gas sales (91.15        BCM) were up 8.8% due to increased demand for power        generation in Italy and the acquisition of new customers        combined with growth in markets in the rest of Europe as        a result of the expansion strategy pursued by Eni.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | The agreement signed by Eni,        Amorim Energia and Rede Eléctrica Nacional –        shareholders of Galp with 33.34, 13.312 and 18.30%,        respectively – confers stability to the shareholding        structure of the Portuguese energy company and sets the        stage for future developments aimed at enhancing        Eni’s investment. The Portuguese Government is        expected to sell part of its Galp holding through a        public offer before the end of 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| • |   | As part of its strategy of        international expansion in LNG, Eni purchased 6 BCM/y for        20 years of the regasification capacity of the Cameron        terminal on the coast of Louisiana in the USA with        start-up planned for 2008-2009. This will allow Eni        access to markets in the United States for part of its        natural gas reserves in North Africa and Nigeria.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • |   | Eni continues its        development in power generation aimed at reaching 5.5        gigawatt of installed capacity by 2009; at year end 2005        installed capacity was 4.5 gigawatt. The new combined        cycle power plants will absorb over 6 BCM/y of natural        gas from Eni’s portfolio of supplies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| • |   | In 2005 Eni divested its        total interest in Italiana Petroli SpA, which distributes        fuels in Italy through a lease concession network under        the IP brand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | On April 1, 2006 the        Venezuelan State oil company Petróleos de Venezuela SA        (PDVSA) unilaterally cancelled the service contract        regulating activities at the Dación oil field where Eni        acted as contractor with a 100% working interest.        Accordingly, starting on the same day, operations at the        Dación oil field have been run by PDVSA which took over        Eni Dación BV, Eni’s wholly-owned subsidiary that        had been operating the field until that date. In 2005 and        in the first quarter of 2006, oil production from the        Dación field averaged approximately 60 KBBL/d.        Management expects Eni’s proved reserves of        hydrocarbons to be reduced by an amount of approximately        175 mmBBL corresponding to Eni’s net proved reserves        of the Dación field as of December 31, 2005 as a        consequence of the loss of Eni’s title to the field. |

In 2005, capital expenditure amounted to euro 7.4 billion, ofwhich 91% related to the Exploration & Production, Gas &Power and Refining & Marketing segments, and was primarilyrelated to: (i) the development of oil and gas reserves (euro3,952 million) in particular in Kazakhstan, Libya, Angola, Italyand Egypt, exploration projects (euro 656 million) and thepurchase of proved and unproved property (euro 301 million); (ii)upgrading of Eni’s natural gas transport and distributionnetworks in Italy (euro 825 million); (iii) the continuation ofconstruction of combined cycle power plants (euro 239 million);(iv) actions for improving flexibility and yields of refineries,including the completion of construction of the tar gasificationplant at the Sannazzaro refinery, and the upgrade of the refinedproduct distribution network in Italy and in the rest of Europe(overall euro 656 million); and (v) upgrading of vessels andother equipment and facilities in Kazakhstan and West Africa inthe Oilfield services and construction business (euro 346million).

In 2005 capital expenditure decreased by euro 85 billion over2004, or 1.1%, due to a euro 299 billion reduction, or 20.6%, inthe Gas & Power business due principally to the completion ofthe Greenstream underwater pipeline project and the nearing tocompletion of the power generation development plan.

In 2004, capital expenditure amounted to euro 7.5 billion (ofwhich 94% related to the Exploration & Production, Gas &Power and Refining & Marketing segments) and concerned: (i)development of hydrocarbon fields (euro 4,369 million) inparticular in Libya, Iran, Angola, Italy, Kazakhstan, Egypt,Nigeria and Norway, and exploration (euro 499 million);(ii) upgrading of Eni’s natural gas transmission anddistribution network in Italy (euro 721 million); (iii) theconstruction of the tar gasification plant at the Sannazzarorefinery, actions on refineries for the adjustment of automotivefuel characteristics to new European specifications and theupgrade of the refined product distribution network in Italy andin the rest of Europe (for a total of euro 669 million); and (iv)the continuation of construction of electricity generation plants(euro 451 million) and the completion of the Greenstreamunderwater pipeline project (euro 159 million).

##### Table of Contents

**BUSINESS OVERVIEW**

**Exploration & Production**

Eni operates in the exploration and production of hydrocarbonsin Italy, North Africa, West Africa, the North Sea, the Gulf ofMexico, Australia and South America. It also operates in areassuch as the Caspian Sea, the Middle and Far East, India andAlaska where management believes a great mineral potentialexists. In 2005, Eni produced 1,693 KBOE/d; as of December 31,2005, Eni’s proved reserves totalled 6,837 mmBOE. Eni plansto grow production of oil and natural through organic growth,targeting a production level of more than 2 mmBOE/d in 2009 whichcorresponds to a compound average growth rate of approximately 4%under certain trading environment assumptions (See "Item 5– Management Expectations of Operations"). Eni plans toreach said production target by leveraging in particular on thecontribution of recently completed great development projects andprojects in the development phase in Angola, Libya, Nigeria,Egypt, Iran, Algeria and Kazakhstan. Management will continue toevaluate opportunities to increase production through thepurchase of corporations or individual assets. Eni intends to payspecial attention to reserve replacement in order to guaranteethe medium to long-term sustainability of its business. Eniintends to optimize its portfolio of development properties byfocusing on areas where its presence is established, seeking fornew opportunities and divesting marginal assets. Eni intends todevelop its LNG business also through the purchase of interestsin liquefaction plants in order to better exploit its natural gasreserves in North and West Africa.

In exploration activities Eni intends to renew its portfolioof properties focusing on such areas where management believes ahigh mineral potential exists, assets in areas where its presenceis already established (in particular Egypt, Nigeria, the UnitedStates, Italy and Norway) and to start exploration in newlyacquired areas (in particular Alaska, Libya and India).

Eni plans 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, isentrusted with the task of keeping reserve classificationcriteria ("criteria") constantly updated and ofmonitoring their periodic process of estimate. The criteriafollow Regulation S-X rule 4-10 of the Securities and ExchangeCommission (SEC) as well as, on specific issues not regulated byrules, the consolidated practice recognized by qualifiedreference institutions. The current criteria applied by Eni havebeen examined by DeGolyer and MacNaughton (D&M), anindependent oil engineers company, which confirmed that they arecompliant with the SEC rules. D&M also stated that thecriteria regulate situations for which the SEC rules are lessprecise, providing a reasonable interpretation in line with thegenerally accepted practices in international markets. Eniestimates its proved reserves on the basis of the 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 independentevaluation2 of its proved reserveson a rotation basis. In particular in 2005 a total of 1.64 BBOEof proved reserves, or about 24% of Eni’s total provedreserves at December 31, 2005, have been evaluated. The resultsof this independent evaluation confirmed Eni’s evaluations,as they did in past years. In the 2003-2005 three year periodindependent evaluations concerned 84% of Eni’s total provedreserves; in particular evaluations concerned all the newdevelopment projects, including Kashagan, and most large-sizedmature fields.

Eni’s proved reserves of oil and natural gas at December31, 2005 totalled 6,837 mmBOE (oil and condensates 3,773 mmBBL;natural gas 17,591 BCF) representing a decrease of 381 mmBOE, or5.3%, from December 31, 2004. The reserve replacement ratio was40% in 2005; the average reserve replacement ratio for the lastthree years was 89%. The average reserve life index is 10.8 years(12.1 at December 31, 2004). The reserve replacement ratio wascalculated dividing additions to proved reserves for year 2005 bytotal production, each as derived from the tables of changes inproved reserves prepared in accordance with SFAS No. 69 presentedin Note 35 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.

Addition to proved reserves booked in 2005 were 253 mmBOEderived from : (i) extensions and discoveries (156 mmBOE), inparticular in Nigeria, Norway, Kazakhstan and Algeria; (ii)revisions of previous estimates (down 98 mmBOE) related to lowerentitlement in certain Production Sharing Agreements (PSAs)3 and buy-back contracts due to higheroil prices recorded mainly in Kazakhstan, Angola and Libya; (iii)improved recovery (89 mmBOE), in particular in Algeria, Angolaand Kazakhstan; and (iv) purchase of proved property (106 mmBOE)in Kazakhstan, Australia, Italy and Angola. The increase offsetin part the decline related to production for the year (634mmBOE). Due to risks inherent in the exploration and productionbusiness, a degree of uncertainty still exists as to whetherthese additions will actually be produced. See "Item 3– Risks associated with exploration and production of oiland natural gas and – Uncertainties in estimates of oil andnatural gas reserves.

Proved developed reserves at December 31, 2005 amounted to4,306 mmBOE (2,350 mmBBL of oil and condensates and 11,229 BCF ofnatural gas), representing 63% of total estimated proved reserves(60% and 58% at December 31, 2004 and 2003, respectively). 

Proved reserves of oil and natural gas applicable to long-termsupply agreements with foreign governments in mineral assetswhere Eni is operator represented approximately 11% of all provedreserves at December 31, 2005 (10% at December 31, 2004; 8% atDecember 31, 2003). 

With effective date April 1, 2006, the Venezuelan State oilcompany Petróleos de Venezuela SA (PDVSA) unilaterallyterminated the service contract governing activities at theDación oil field where Eni acted as a contractor, holding a 100%working interest. As a consequence, starting on the same day,operations at the Dación oil field are conducted by PDVSA whichreplaced Eni Dación BV, Eni’s wholly-owned subsidiary thathad been operating the field until that date.

Eni believes that it is entitled to a market valuecompensation for the expropriation of the Dación field. On thesebasis, Eni is available to reach an agreement with the Venezuelanauthorities. In case an amicable settlement is not possible, Eniwill take any other action in order to protect its interest inVenezuela. Based on internal and external independent evaluation,Eni is confident that a fair market compensation will not belower than the book value of the Dación related assets.Accordingly, management decided not to impair the book value ofEni’s Dación assets. In 2005 and in the first quarter 2006,the Dación field production rate was about 60 KBBL/d. Managementexpects Eni’s proved reserves of hydrocarbons to be reducedby an amount of approximately 175 mmBBL corresponding toEni’s net proved reserves of the Dación field as ofDecember 31, 2005 as a consequence of the loss of Eni’stitle to the field.

The table below sets forth a geographical breakdown ofEni’s proved reserves and proved developed reserves ofhydrocarbons, on a barrel of oil equivalent basis, for theperiods indicated. 

**Proved reserves**

Eni’s proved reserves of hydrocarbons by geographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| Italy                           |   | 1,315     |   | 1,199     |   | 996       |   | 890       |   | 868       |
|---------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| North Africa                    |   | 2,122     |   | 2,033     |   | 2,024     |   | 2,117     |   | 2,026     |
| West        Africa              |   | 1,136     |   | 1,287     |   | 1,324     |   | 1,357     |   | 1,279     |
| North Sea                       |   | 879       |   | 825       |   | 912       |   | 807       |   | 758       |
| Rest of        the World        |   | 1,477     |   | 1,686     |   | 2,016     |   | 2,047     |   | 1,865     |
| Total consolidated subsidiaries |   | 6,929     |   | 7,030     |   | 7,272     |   | 7,218     |   | 6,796     |
| Unconsolidated        entities  |   |      |   |      |   |      |   |      |   | 41        |
|                            |   | **6,929** |   | **7,030** |   | **7,272** |   | **7,218** |   | **6,837** |

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

Eni’s proved reserves of oil by geographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(mmBBL)** |
|--------|-------------|

| Italy                           |   | 309       |   | 255       |   | 252       |   | 225       |   | 228       |
|---------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| North Africa                    |   | 1,171     |   | 1,072     |   | 1,080     |   | 993       |   | 961       |
| West        Africa              |   | 976       |   | 1,022     |   | 1,038     |   | 1,056     |   | 936       |
| North Sea                       |   | 552       |   | 498       |   | 529       |   | 450       |   | 433       |
| Rest of        the World        |   | 940       |   | 936       |   | 1,239     |   | 1,284     |   | 1,190     |
| Total consolidated subsidiaries |   | 3,948     |   | 3,783     |   | 4,138     |   | 4,008     |   | 3,748     |
| Unconsolidated        entities  |   |      |   |      |   |      |   |      |   | 25        |
|                            |   | **3,948** |   | **3,783** |   | **4,138** |   | **4,008** |   | **3,773** |

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

Eni’s proved reserves of natural gas by geographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(BCF)** |
|--------|-----------|

| Italy                           |   | 5,640      |   | 5,295      |   | 4,166      |   | 3,818      |   | 3,676      |
|---------------------------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|
| North Africa                    |   | 5,509      |   | 5,563      |   | 5,467      |   | 6,453      |   | 6,117      |
| West        Africa              |   | 925        |   | 1,533      |   | 1,656      |   | 1,729      |   | 1,965      |
| North Sea                       |   | 1,892      |   | 1,899      |   | 2,223      |   | 2,051      |   | 1,864      |
| Rest of        the World        |   | 3,106      |   | 4,339      |   | 4,496      |   | 4,384      |   | 3,879      |
| Total consolidated subsidiaries |   | 17,072     |   | 18,629     |   | 18,008     |   | 18,435     |   | 17,501     |
| Unconsolidated        entities  |   |       |   |       |   |       |   |       |   | 90         |
|                            |   | **17,072** |   | **18,629** |   | **18,008** |   | **18,435** |   | **17,591** |

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

Eni’s proved developed reserves of hydrocarbons bygeographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| Italy                           |   | 825       |   | 774       |   | 702       |   | 671       |   | 620       |
|---------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| North Africa                    |   | 875       |   | 797       |   | 806       |   | 961       |   | 1,230     |
| West        Africa              |   | 640       |   | 703       |   | 710       |   | 749       |   | 793       |
| North Sea                       |   | 773       |   | 724       |   | 822       |   | 707       |   | 611       |
| Rest of        the World        |   | 654       |   | 705       |   | 1,190     |   | 1,212     |   | 1,021     |
| Total consolidated subsidiaries |   | 3,767     |   | 3,703     |   | 4,230     |   | 4,300     |   | 4,275     |
| Unconsolidated        entities  |   |      |   |      |   |      |   |      |   | 31        |
|                            |   | **3,767** |   | **3,703** |   | **4,230** |   | **4,300** |   | **4,306** |

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

Eni’s proved developed reserves of oil by geographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(mmBBL)** |
|--------|-------------|

| Italy                           |   | 171       |   | 168       |   | 173       |   | 174       |   | 149       |
|---------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| North Africa                    |   | 685       |   | 610       |   | 640       |   | 655       |   | 697       |
| West        Africa              |   | 539       |   | 554       |   | 560       |   | 588       |   | 568       |
| North Sea                       |   | 476       |   | 426       |   | 464       |   | 386       |   | 353       |
| Rest of        the World        |   | 443       |   | 483       |   | 610       |   | 668       |   | 564       |
| Total consolidated subsidiaries |   | 2,314     |   | 2,241     |   | 2,447     |   | 2,471     |   | 2,331     |
| Unconsolidated        entities  |   |      |   |      |   |      |   |      |   | 19        |
|                            |   | **2,314** |   | **2,241** |   | **2,447** |   | **2,471** |   | **2,350** |

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

Eni’s proved developed reserves of natural gas bygeographic area

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

|   | **(BCF)** |
|--------|-----------|

| Italy                           |   | 3,665     |   | 3,397     |   | 2,966      |   | 2,850      |   | 2,704      |
|---------------------------------|--------|-----------|--------|-----------|--------|------------|--------|------------|--------|------------|
| North Africa                    |   | 1,103     |   | 1,084     |   | 962        |   | 1,760      |   | 3,060      |
| West        Africa              |   | 584       |   | 863       |   | 866        |   | 924        |   | 1,289      |
| North Sea                       |   | 1,721     |   | 1,727     |   | 2,075      |   | 1,845      |   | 1,484      |
| Rest of        the World        |   | 1,221     |   | 1,283     |   | 3,355      |   | 3,122      |   | 2,622      |
| Total consolidated subsidiaries |   | 8,294     |   | 8,354     |   | 10,224     |   | 10,501     |   | 11,159     |
| Unconsolidated        entities  |   |      |   |      |   |       |   |       |   | 70         |
|                            |   | **8,294** |   | **8,354** |   | **10,224** |   | **10,501** |   | **11,229** |

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

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

As of December 31, 2005, Eni’s portfolio of mineralrights consisted of 1,0414exclusive or shared rights for exploration and development in 34countries on five continents, for a total net acreage of 266,0025 square kilometers (234,180 atDecember 31, 2004). Of these, 55,098 square kilometers concernedproduction and development (41,997 at December 31, 2004). OutsideItaly net acreage increased by 41,403 square kilometers due tothe acquisition of assets after international bid procedures inLibya, Egypt, India, Pakistan, Angola, Algeria, the United Statesand Ireland and purchases of mineral assets in Nigeria, Alaskaand Australia. These increases were offset in part by releases inItaly, Brazil, Congo, Morocco and Tunisia and divestments ofassets in the British section of the North Sea. In Italy netacreage declined by 9,582 square kilometers due to releases.

A total of 52 new exploratory wells were drilled (21.85 ofwhich represented Eni’s share on the basis of its workinginterest in relevant properties), as compared to 66 exploratorywells completed in 2004 (29.5 of which represented Eni’sshare). Overall success rate was 39.3% in 2005, as compared to52.1% in 2004; the success rate of Eni’s share ofexploratory wells was 47.4% in 2005, as compared to 57.3% in2004.

> 
***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 2005 oil and natural gas production available for saleaveraged 1,693 KBOE/d (oil and condensates 1,111 KBBL/d; naturalgas 3,344 mmCF/d) increasing by 107 KBOE/d compared to 2004, up6.7%, due to: (i) production increases registered mainly inLibya, Angola, Iran, Algeria, Egypt and Kazakhstan; and (ii) thestart-up of fields in Angola and Libya. These increases werepartly offset by: (i) an estimated 32 KBOE adverse entitlementimpact in PSAs and buy-back contracts related to higherinternational oil prices; (ii) declines in mature fields mainlyin Italy and the United Kingdom; and (iii) the effect of thedivestment of proved property carried out in 2004 (16 KBOE) andof hurricanes in the Gulf of Mexico (10 KBOE). The share ofproduction outside Italy was 85% (82.6% in 2004). 

Production of oil and condensates (1,111 KBBL/d) increased by77 KBBL/d compared to 2004, up 7.4%, due to increases registeredin: (i) Angola, due to full production of the Hungo and Chocalhofields within phase A of the development of the Kizomba area inBlock 15 and the start-up of the Kissanje and Dikanza fieldswithin phase B of the same project in Block 15 (Eni’sinterest 20%) and the start-up of the Sanha-Bomboco fields inarea B of Block 0 (Eni’s interest 9.8%); (ii) Libya, due tofull production at the Wafa field and the start-up of the BahrEssalam field (Eni’s interest 50%); (iii) Iran, due to fullproduction at the South Pars field Phases 4-5 (Eni operator witha 60% interest) and production increases at the Dorood(Eni’s interest 45%) and Darquain fields (Eni operator witha 60% interest); (iv) Algeria, due to full production at the Rodand satellite fields (Eni operator with a 63.96% interest);(v) Kazakhstan, in the Karachaganak field (Eni co-operatorwith a 32.5% interest) due to increased exports from Novorossiyskterminal on the Russian coast of the Black Sea; and (vi) Italy,due to increased production in Val d’Agri resulting fromfull production of the fourth treatment train of the oil center.These increases were partly offset by declines of mature fields,in particular in the United Kingdom, and by the effect of thedivestment of assets carried out in 2004. 

Production of natural gas available for sale (3,344 mmCF/d)increased by 173 mmCF/d compared to 2004, up 5.5%, due toincreases registered in: (i) Libya, due to full production at theWafa field and the start-up of the Bahr Essalam field (Eni’sinterest 50%); (ii) Egypt, due to the start-up of the Barbonifield and the Temsah 4 platform in the offshore of the NileDelta; and (iii) Kazakhstan and Pakistan. These increases werepartly offset by declines of mature fields, in particular inItaly, the effect of the divestment of assets effected in 2004and of the hurricanes in the Gulf of Mexico. 

Hydrocarbon production sold totalled 614.9 mmBOE. About 68% ofoil and condensate production sold (402.6 mmBBL) was delivered toEni’s Refining & Marketing segment (70% in 2004). About44% of natural gas production sold (1,219 BCF) was delivered toEni’s Gas & Power segment (40% in 2004). 

The tables below set forth Eni’s production of oil andcondensates and natural gas for the periods indicated.

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| **Production of oil and condensates**(1)        (2) |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Italy                                               |   | 69     |   | 86     |   | 84     |   | 80     |   | 86     |
| North Africa                                        |   | 228    |   | 252    |   | 250    |   | 261    |   | 308    |
| West        Africa                                  |   | 219    |   | 222    |   | 236    |   | 285    |   | 310    |
| North Sea                                           |   | 204    |   | 213    |   | 235    |   | 203    |   | 179    |
| Rest of        the World                            |   | 137    |   | 148    |   | 176    |   | 205    |   | 228    |
| Total                                               |   | 857    |   | 921    |   | 981    |   | 1,034  |   | 1,111  |

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

 

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

|   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |   |          |

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

| **Natural gas production available for sale**(1)(2) (3) |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Italy                                                   |   | 1,313  |   | 1,260  |   | 1,181  |   | 1,067  |   | 972    |
| North Africa                                            |   | 497    |   | 560    |   | 559    |   | 619    |   | 900    |
| West        Africa                                      |   | 82     |   | 87     |   | 128    |   | 143    |   | 151    |
| North Sea                                               |   | 450    |   | 516    |   | 596    |   | 560    |   | 563    |
| Rest of        the World                                |   | 485    |   | 592    |   | 710    |   | 782    |   | 758    |
| Total                                                   |   | 2,827  |   | 3,015  |   | 3,174  |   | 3,171  |   | 3,344  |

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

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Production        information set forth above differs from production as        reported in the reserve tables in Note 35 to the        Consolidated Financial Statements - Supplemental oil and        gas information (unaudited), because yearly production        presented in such reserve tables is based on estimates        made 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 proved reserves for each period. |
| (2)    |   | Data includes        Eni’ share of production of affiliates and joint        ventures accounted for under the equity or cost method of        accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (3)    |   | Natural gas production volumes        consumed in operations are excluded. The effect was 94,        132, 151, 220 and 250 mmCF/d in 2001, 2002, 2003, 2004        and 2005, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

Volumes of oil and natural gas purchased under long termsupply contracts with foreign governments or similar authoritiesin properties where Eni acts as producer totalled 20.5 KBOE/d and2.9 KBOE/d in 2005 and 2004, respectively (2003 amounts wereimmaterial).

The table below sets forth certain information and operatingdata regarding Eni’s principal oil and natural gas interestsfor the year ended December 31, 2005. 

**Principal oil and natural gas interests at December 31,2005**

|   |   | **Commencement of operations** |   | **Number of interests** |   | **Gross exploration        and development acreage**(1) |   | **Net exploration        and development acreage**(1) |   | **Net development acreage**(1) |   | **Type of fields** |   | **Number of producing fields** |   | **Number of other fields** |
|--------|--------|--------------------------------|--------|-------------------------|--------|---------------------------------------------------------|--------|-------------------------------------------------------|--------|--------------------------------|--------|--------------------|--------|--------------------------------|--------|----------------------------|
|   |   |                                |   |                         |   |                                                         |   |                                                       |   |                                |   |                    |   |                                |   |                            |

| **Italy**                                      |   | 1926   |   | **180**   |   | **31,048**  |   | **24,053**  |   | **12,700** |   | Onshore/Offshore |   | **83**  |   | **79**  |
|------------------------------------------------|--------|--------|--------|-----------|--------|-------------|--------|-------------|--------|------------|--------|------------------|--------|---------|--------|---------|
|                                           |   |   |   |      |   |        |   |        |   |       |   |             |   |    |   |    |
| **North Africa**                               |   |   |   |      |   |        |   |        |   |       |   |             |   |    |   |    |
| Algeria                                        |   | 1981   |   | 37        |   | 14,352      |   | 3,792       |   | 860        |   | Onshore/Offshore |   | 23      |   | 15      |
| Egypt                                          |   | 1954   |   | 56        |   | 34,918      |   | 22,644      |   | 4,180      |   | Onshore/Offshore |   | 35      |   | 28      |
| Libya                                          |   | 1959   |   | 15        |   | 44,955      |   | 37,703      |   | 15,466     |   | Onshore/Offshore |   | 11      |   | 7       |
| Tunisia                                        |   | 1961   |   | 11        |   | 6,464       |   | 2,317       |   | 1,601      |   | Onshore/Offshore |   | 9       |   | 6       |
|                                           |   |   |   | **119**   |   | **100,689** |   | **66,456**  |   | **22,107** |   |             |   | **78**  |   | **56**  |
| **West Africa**                                |   |   |   |      |   |        |   |        |   |       |   |             |   |    |   |    |
| Angola                                         |   | 1980   |   | 53        |   | 15,234      |   | 2,310       |   | 715        |   | Offshore         |   | 36      |   | 32      |
| Congo                                          |   | 1968   |   | 20        |   | 9,855       |   | 4,224       |   | 880        |   | Offshore         |   | 16      |   | 8       |
| Nigeria                                        |   | 1962   |   | 49        |   | 46,075      |   | 8,922       |   | 6,539      |   | Onshore/Offshore |   | 119     |   | 69      |
|                                           |   |   |   | **122**   |   | **71,164**  |   | **15,456**  |   | **8,134**  |   |             |   | **171** |   | **109** |
| **North        Sea**                           |   |   |   |      |   |        |   |        |   |       |   |             |   |    |   |    |
| Norway                                         |   | 1965   |   | 51        |   | 26,601      |   | 8,814       |   | 128        |   | Offshore         |   | 14      |   | 13      |
| The United        Kingdom                      |   | 1964   |   | 84        |   | 6,504       |   | 1,506       |   | 652        |   | Offshore         |   | 29      |   | 15      |
|                                           |   |   |   | **135**   |   | **33,105**  |   | **10,320**  |   | **780**    |   |             |   | **43**  |   | **28**  |
| **Rest of        World**                       |   |   |   |      |   |        |   |        |   |       |   |             |   |    |   |    |
| Australia                                      |   | 2001   |   | 15        |   | 31,948      |   | 22,349      |   | 3,299      |   | Offshore         |   | 2       |   | 1       |
| Brazil                                         |   | 1999   |   | 2         |   | 2,203       |   | 2,057       |   |       |   | Offshore         |   |    |   |    |
| China                                          |   | 1983   |   | 4         |   | 866         |   | 181         |   | 103        |   | Offshore         |   | 8       |   | 4       |
| Croatia                                        |   | 1996   |   | 3         |   | 6,056       |   | 3,029       |   | 988        |   | Offshore         |   | 2       |   | 6       |
| Ecuador                                        |   | 1988   |   | 1         |   | 2,000       |   | 2,000       |   | 2,000      |   | Onshore          |   | 1       |   | 1       |
| India                                          |   | 2005   |   | 2         |   | 14,445      |   | 5,698       |   |       |   | Onshore/Offshore |   |    |   |    |
| Indonesia                                      |   | 2001   |   | 12        |   | 31,419      |   | 15,859      |   | 984        |   | Onshore/Offshore |   | 7       |   | 8       |
| Iran                                           |   | 1957   |   | 4         |   | 1,456       |   | 820         |   | 820        |   | Onshore/Offshore |   | 4       |   |    |
| Kazakhstan                                     |   | 1995   |   | 6         |   | 4,934       |   | 959         |   | 488        |   | Onshore/Offshore |   | 1       |   | 5       |
| Pakistan                                       |   | 2000   |   | 14        |   | 21,876      |   | 11,692      |   | 615        |   | Onshore/Offshore |   | 6       |   | 1       |
| Saudi Arabia                                   |   | 2004   |   | 1         |   | 51,687      |   | 25,844      |   |       |   | Onshore          |   |    |   |    |
| Trinidad        & Tobago                   |   | 1970   |   | 1         |   | 382         |   | 66          |   | 66         |   | Offshore         |   | 3       |   | 2       |
| The United States                              |   | 1968   |   | 389       |   | 7,890       |   | 3,569       |   | 389        |   | Onshore/Offshore |   | 17      |   | 8       |
| Venezuela                                      |   | 1998   |   | 4         |   | 1,701       |   | 867         |   | 511        |   | Onshore/Offshore |   | 5       |   | 2       |
|                                           |   |   |   | **458**   |   | **178,863** |   | **94,990**  |   | **10,263** |   |             |   | **56**  |   | **38**  |
| Other                                          |   |   |   | **9**     |   | **6,276**   |   | **1,279**   |   | **1,114**  |   | Offshore         |   |    |   | **1**   |
| Other countries with only exploration activity |   |   |   | **18**    |   | **89,056**  |   | **53,448**  |   |       |   | Onshore/Offshore |   |    |   |    |
| Outside        Italy                           |   |   |   | 861       |   | 479,153     |   | 241,949     |   | 42,398     |   |             |   | 348     |   | 232     |
| **Total**                                      |   |   |   | **1,041** |   | **510,201** |   | **266,002** |   | **55,098** |   |             |   | **431** |   | **311** |

----

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

 

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 2005, Eni’s hydrocarbon production in Italy totalled256 KBOE/d and represented 15% 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 972 mmCF/d and representedapproximately 67% of Eni’s hydrocarbon production in Italy.Eni’s principal natural gas fields are located in theAdriatic Sea (Barbara, Angela/Angelina, Porto Garibaldi/Agostino,Cervia/Arianna, Porto Corsini, Regina and Bonaccia, whichcollectively accounted for 50% of Eni’s natural gasproduction in Italy in 2005) and in the Ionian Sea (Luna, whichaccounted for 9.2%). 

Production of oil in Italy averaged 86 KBBL/d. Eni’sthree major oil fields, Val d’Agri in Southern Italy,Villafortuna in the Po Valley and Gela in Sicily, represented 82%of Eni’s total oil production in Italy in 2005. 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 Mezzocolle 1 well (Eni’s interest 100%) containingnatural gas in the Imola permit in the central Apennines, withthe Longanesi 1 well containing natural gas in the Po Plain(Eni’s interest 100%) and with Argo-1 well (Eni’sinterest 60%) testing an offshore gas accumulation in the SicilyChannel. 

In the Val d’Agri the expected production peak of 73KBOE/d net to Eni was reached as planned. Oil production derivesfrom the first 19 wells drilled of the 38 foreseen by thedevelopment plan.

Production maintenance actions were performed on the offshoreAnnabella, Armida, Barbara, Garibaldi gas fields and the Rospooilfield through the drilling of infilling wells and sidetrackactivities, increasing production by about 75 mmCF/d. 

During 2005 development activities concerned: (i) continuationof the development plan of the onshore Candela and Miglianicofields and the completion of the development of the Naide field;(ii) continuation of drilling and connection of development wellsin the Val d’Agri; (iii) the optimization of producingfields by means of sidetracking and infilling (the Annabella,Armida, Barbara, Garibaldi gas fields and the Rospo oilfield);(iv) construction of an additional sealine for the optimalmanagement of the fields connected to the Fano terminal; and (v)the beginning of the development phase of the Annamaria field.

As part of the development of onshore gas fields in Sicily thefollowing projects are in an advanced phase: (i) in thePizzo Tamburino field, the first well is scheduled for the secondhalf of 2006 with expected production of approximately 6 mmCF/d;in 2007 according to the actual production of the first well asecond one is expected to be drilled; (ii) in the Fiumetto field,an infilling well is expected to start production in the firsthalf of 2007 with an expected peak flow of approximately 7mmCF/d; and (iii) in the Samperi field, start-up is expected inthe second half of 2006 peaking at approximately 7 mmCF/d.

In December 2005 Eni acquired for euro 90 million (includingnet financial debt transferred of euro 17 million) a 90% interestin Sarcis SpA holding onshore permits/concessions in Sicily.

> 
*North Africa*

Eni’s operations in North Africa are conducted inAlgeria, Egypt, Libya and Tunisia. In 2005, North Africaaccounted for 27% of Eni’s total worldwide production ofhydrocarbons. 

*Algeria* Eni has been present in Algeria since 1981. In2005, Eni’s oil production averaged 86 KBBL/d. The principaloil producing fields operated by Eni are located in the Bir Rebaaarea in the South-Eastern desert and include Blocks 401a, 402a,403, 403a and 403d (Eni’s share between 50%-100%), whichaccounted for approximately 52% of Eni’s production in 2005in Algeria. Other interests held by Eni are HBN, HBNS, HBNSE andsatellites (Eni’s interest 12.25%) and Ourhoud (Eni’sinterest 4.59%), which in 2005 accounted for approximately 48% ofEni’s production in Algeria.

Exploration activities yielded positive results in permits P404 in area C (Eni’s interest 25%), near the HBNE field,with the SFSW-3 appraisal well on the Sif Fatima discovery and P403 c/e (Eni’s interest 33.33%) with the ZNNW-1 appraisalwell. In both permits the presence of hydrocarbons was confirmedat a depth of about 3,000 meters.

In Block P 403a/d (Eni’s interest 50%) the NFW ROM-6discovery well and the ROM North-1 appraisal well were drilled ata depth of about 3,400 meters and confirmed the extension of thenew oil levels in the ROM field. The ROM integrated developmentproject entails production from these new levels also through thereinjection of gas produced in the nearby BRN field, reducing gasflaring by nearly 90%. Management expects production of the ROMfield to peak at 16 KBOE/d net to Eni in 2009.

The EKT, EMK, EMN and EME fields are in the development phasein block 208 (Eni’s interest 12.25%). The development planprovides for the drilling of 142 wells and the construction of acentral facility for the production of stabilized oil,condensates and LNG. Management expects production of this fieldto commence in 2008, peaking at 13 KBOE/d net to Eni in 2010.

*Egypt* Eni has been present in Egypt since 1954. In2005, Eni’s share of production in this country amounting to207 KBOE/d accounted for 12% of Eni’s total annualhydrocarbon production. 

In 2005, oil and condensate production averaged 90 KBBL/d netto Eni and came mainly from the Eni operated Belayim and Ashrafifields in the Gulf of Suez and Melehia in the Western Desert,which covered 74% of Eni’s crude oil production in Egypt. 

In 2005, natural gas production available for sale averaged671 mmCF/d net to Eni. The main natural gas producing interestsoperated by Eni are concentrated in the Nile Delta: onshore theAbu 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 nearly all of Eni’s natural gas production in Egypt.

Exploration yielded positive results in the followingconcessions: (i) Ashrafi (Eni’s interest 50%) in the Gulf ofSuez with the drilling of the NFW Ashrafi 1X well that foundhydrocarbons at a depth of about 1,700 meters; (ii) BelayimLand (Eni’s interest 50%) with the drilling of NFW BLSW-1well that found gas at a depth of over 3,000 meters; (iii)Belayim Marine (Eni’s interest 50%) in the Gulf of Suez withthe drilling of the BMNW-4 outpost well which allowed to reportmineralized levels at a depth of about 3,000 meters. This wellwas linked to the existing production facilities; and (iv) NorthPort Said (Eni operator with a 50% interest) with the drilling ofthe PFM-D-1 well which found gas and condensates at a depth ofabout 5,000 meters.

Development activities are underway in concessions in theoffshore of the Nile Delta: (i) North Port Said (Eni’sinterest 50%) where the Barboni gas platform started productionin May 2005 at an initial level of about 35 mmCF/d while workcontinued for the expansion of the el Gamil terminal where in2005 natural gas production net to Eni increased from 388 to 459mmCF/d; and (ii) el Temsah (Eni operator with a 25% interest)where in August 2005 gas and liquid production started at theTemsah 4 platform. In the second quarter of 2006 production ofgas and condensates is expected to start from platform Temsah NW.Peak production at 41 KBOE/d net to Eni is expected in 2008.

In January 2005 the LNG production plant at Damietta wasstarted-up. The plant (Eni’s interest 40%) has a treatmentcapacity of 247 BCF/y. Eni plans to supply 106 BCF/y of itsnatural gas production volumes in Egypt to this plant in the next20 years. A second liquefaction train is planned to be installedat the plant with the same capacity of the first train. Eni plansto supply 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. Theplant (Eni’s interest 33%) has a treatment capacity of 1,095mmCF/d of natural gas and annual production of 330,000 tonnes ofpropane, 280,000 tonnes of LPG and 1.2 mmBBL of condensates. 

In the medium term management plans to increase Eni’shydrocarbon production in Egypt leveraging on the development ofnatural gas reserves in existing areas. This increase is expectedto be offset in part by production decline of certain mature oilfields. 

*Libya* Eni started operations in Libya in 1959. In 2005,Eni’ s share of production in this country amounting to 158KBOE/d accounted for approximately 9% of Eni’s total annualhydrocarbon production. 

In 2005 Eni’s hydrocarbon production averaged 158 KBOE/d,of which 76% was oil. The main oil, condensates and gas fieldsoperated by Eni are Wafa onshore in permit NC-169 A and BahrEssalam located in the NC-41 permit in the Mediterranean offshorenorth of Tripoli started up in September 2004 and August 2005,respectively, as part of the Western Libyan Gas Project(Eni’s interest 50%). Production from the two fields istreated at the Mellitah plant under completion on the Libyancoast. Natural gas is carried to Italy through the underwaterGreenstream pipeline. In 2005 the two fields produced 74 KBOE/d.Total peak production at 128 KBOE/d net to Eni is expected in2006. When fully operational in 2006 the gasline is expected totransport and export to Italy a total volume of 283 BCF/y (141BCF/y net to Eni). This volume will be entirely sold to thirdparties on the Italian natural gas market under long termcontracts. In addition 71 BCF/y are expected to be sold on theLibyan market. In 2005, volumes transported to Italy through thisgasline amounted to approximately to 163 BCF for the year.

Other significant fields are: (i) Bu-Attifel (Eni’sinterest 50%) onshore in the central-eastern desert and Bouri(Eni’s interest 30%) in the Mediterranean offshore facingTripoli which accounted for 43% of Eni’s production in Libyain 2005; and (ii) Elephant in the NC-174 onshore permit in thesouth-western desert (Eni’s interest 23.33%) which in 2005produced 9 KBBL/d net to Eni. 

In October 2005 following an international bid procedure Eniobtained an exploration license as operator of four onshoreblocks with a total acreage of 18,220 square kilometers, locatedin the Murzuk basin (161/1, 161/2&4, 176/3) and in the Kufraarea (186/1, 2, 3, 4).

Exploration yielded positive results in offshore block NC-41(Eni operator with a 50% interest) with the drilling of well NFWT1-NC41 which found oil and gas at a depth of 2,770 meters andyielded 4.6 KBBL/d of crude oil and 13 mmCF/d of gas in testproduction.

In the NC-174 permit (Eni’s interest 23.33%) about 800kilometers south of Tripoli the development of the Elephant oilfield continued. In October 2005 the new 725-kilometer longpipeline linking it to the Mellitah plant started operations. Theupgrading of the Mellitah plant will be completed in the firsthalf of 2006. Management expects production of this field to peakat 150 KBBL/d (35 KBBL/d net to Eni) in the second half of 2006.

In the medium term, management expects to increasesignificantly Eni’s production in Libya from the 158 KBOE/dlevel of 2005 benefiting from the expected achievement of fullproduction at the Western Libya Gas Project and at Elephantfields.

> 
*West Africa*

Eni’s operations in West Africa are conducted in Angola,Congo and Nigeria. In 2005, West Africa accounted for 20% ofEni’s total worldwide production of hydrocarbons. 

*Angola* Eni has been present in Angola since 1980. In2005 Eni’s oil production averaged 122 KBBL/d and accountedfor 11% of Eni’s total annual oil production. 

Eni’s main oil producing fields are located in Block 0 inCabinda (Eni’s interest 9.8%), Block 14 (Eni’s interest20%) and Block 15 (Eni’s interest 20%). 

The main oil fields in Block 0 are Takula, Nemba and Malongo.In the first half of 2005 production started at the NorthSanha/Bomboco oil, condensate and LPG offshore fields. LPG isproduced through an FPSO (Floating Production Storage Offloading)unit, the largest in its class in the world. At Sanha a complexfor the reinjection of gas into the fields has been built aimingat reducing gas flaring by 50%. In 2005 production from thisblock (38 KBBL/d) accounted for approximately 31% of Eni’sproduction in Angola. Peak production of oil, condensate and LPGis expected at 100 KBBL/d (10 KBBL/d net to Eni) in 2007. Themain field in the deep waters of Block 14 is Kuito which in 2005produced approximately 58 KBBL/d (10 KBBL/d net to Eni).

In Block 15 the Hungo and Chocalho fields started-up in August2004, and the Kissanje and Dikanza fields, started-up in July2005 within phase A and B of the development of the Kizomba area,are now in production. Both fields are developed by means of anFPSO unit. Peak production of phase B at 250 KBBL/d (47 KBBL/dnet to Eni) was reached in late 2005. Peak production of phase Aat 250 KBBL/d (43 KBBL/d net to Eni) is expected in 2006 and willbe kept at the same level by means of additional production frommarginal fields. Another relevant field in Block 15 is Xikomba.In 2005 production from Block 15 (70 KBBL/d) accounted forapproximately 56% of Eni’s production in Angola. Developmentis underway at: (i) Mondo field with expected start up in 2007and expected capital expenditure net to Eni amounting toapproximately $360 million; and (ii) at Saxi-Batuque fields withexpected start up in 2008 and expected capital expenditure net toEni amounting to approximately $380 million.

The project is underway for the development of the Benguela,Belize, Lobito and Tomboco oilfields at a depth between 300 and500 meters in Block 14 (Eni’s interest 20%). The projectprovides for the drilling of 50 wells and the installation of acompliant tower with production facilities for Benguela/Belize.The first oil was produced in January 2006. Lobito and Tombocoare planned to be developed by means of underwater completion andto be connected to the compliant tower of Benguela/Belize withstart-up scheduled in the second half of 2006. Management expectsproduction from these four fields to peak at 188 KBBL/d (32KBBL/d net to Eni) in 2008. Total capital expenditure net to Eniis expected to amount to approximately $460 million. 

Offshore exploration activities were successful in thefollowing areas: (i) Block 0, former Cabinda (Eni’s interest9.8%) with the NFW 70-5X well that found hydrocarbons at a depthof 2,335 meters and yielded 2 KBBL/d of crude oil and natural gasin test production; (ii) Block 14K/A-IMI (Eni’s share 10%)with the drilling of the Lianzi-2ST and Lianzi-2OH appraisalwells on the Lianzi discovery which showed the presence ofnatural gas and crude oil layers at a depth of more than 3,000meters; and (iii) Block 15 (Eni’s interest 20%) with theBatuque-3 appraisal well on the Batuque discovery which confirmedthe presence of hydrocarbons at a depth of about 2,000 meters.

In May 2006, Eni acquired the operatorship (Eni’sinterest 35%) of a new exploration area in Block 15. 

In the medium term, management expects to increase Eni’sproduction to approximately 200 KBBL/d benefiting from theexpected achievement of full production of fields started-up in2005 and the contribution of new development projects.

*Congo* Eni has been present in Congo since 1968 and itsproduction in 2005 was 67 KBOE/d. 

Eni is the second largest international oil producer, with oilfields operated by Eni accounting for 28% of Congo’s totaloil production in 2005 (65 KBBL/d net to Eni). Eni’sprincipal oil producing interests operated in Congo are locatedin the offshore facing Pointe Noire: the Zatchi, Foukanda, Mwafiand Djambala fields (Eni’s interest 65%), the Loango field(Eni’s interest 50%) and the Kitina field (Eni’sinterest 35.75%) operated by Eni accounted for approximately 59%of Eni’s production in Congo in 2005. Eni holds a 35%interest in the Pointe Noire Grand Fond and Pex permits.

*Nigeria* Eni has been present in Nigeria since 1962. In2005, Eni’s hydrocarbon production averaged 149 KBOE/d andaccounted for 9% of Eni’s hydrocarbon production. 

Eni’s principal producing fields in Nigeria are locatedin: (i) four onshore blocks (OML 60, 61, 62 and 63) in the NigerDelta (Eni’s interest 20%), which in 2005 accounted for 35%of Eni’s production in Nigeria; (ii) the offshore OML 125block (Eni’s interest 50.19%), where the Abo field islocated which produced over 14 KBBL/d net to Eni in 2005. Thedevelopment of other levels of the Abo field are expected toreach a production peak of 38 KBBL/d (15 KBBL/d net to Eni) in2007; and (iii) the offshore OML 119 block, operated through aservice contract, where the Okono and Okpoho oil fields arelocated, which produced 55 KBBL/d (19 KBBL/d net to Eni) in 2005.

Eni also holds a 5% interest in the 31 onshore blocks and a12.86% interest in the 5 offshore blocks of NASE, the largest oiljoint venture in the country. In 2005 production of this jointventure net to Eni accounted for about 34% of Eni’sproduction in Nigeria.

In November 2005 the Bonga oil field (Eni’s interest12.5%), situated in the OML 118 permit offshore Nigeria in watersof a depth between 950 and 1,150 meters, was started up.Development is achieved by means of an FPSO vessel connected to17 producing wells (9 already drilled). Production is expected topeak at 200 KBBL/d (23 KBBL/d net to Eni) in 2006.

In September 2005 Eni acquired as operator the OML 120 and OML121 development licenses from Nigerian companies. Theconcessions, where the Oyo field was discovered, are locatedapproximately 70 kilometers offshore the western coast of theNiger Delta in Nigeria. Two exploration wells are going to bedrilled in 2006.

Exploration yielded positive results in the offshore OML 125block (Eni operator with a 50.2% interest) with the drilling ofthe Abo 8 appraisal well that found oil layers at a depth of2,142 meters and in the offshore OPL 219 block (Eni’sinterest 12.5%) with the drilling of the Bolia 3X appraisal wellthat found oil levels at a depth of over 3,000 meters.

Eni holds a 10.4% interest in Nigeria LNG Ltd which managesthe liquefaction plant located on Bonny Island with a treatmentcapacity of approximately 812 BCF/y of natural gas correspondingto a production of 17 million tonnes/y of LNG, along with over2.2 million tonnes/y of LPG and 1.1 million tonnes/y ofcondensates on five trains. The fourth train was started up inlate 2005 and the fifth in January 2006. The fourth train and thefifth train are expected to reach full production in 2007.Nigeria LNG’s partners have planned a further capacityexpansion to 1,448 BCF/y, corresponding to a production of 30million tonnes of LNG by means of the installation of two moretrains (one already under construction) with start-up expectedbetween 2007 and 2011. Eni expects its share of capitalexpenditure for the planned capacity expansion to amount to $1.2billion; this expenditure is expected to be completely financedby cash generated from the plant operations.

Natural gas supplies to the plant (first six trains) will beprovided under a gas supply agreement with a 20 year term fromproduction of the NASE joint venture (Eni’s interest 5%) andof Blocks OML 60 and 61 (Eni operator with a 20% interest). Whenfully operational in 2008 they will supply approximately 3.5BCF/d (0.27 BCF/d net to Eni, corresponding to approximately47,000 BBL/d). Capital expenditure net to Eni for the developmentactivity is expected to amount to approximately $560 million.

In April 2005, the Okpai power station (independent powerplant, Eni’s interest 20%) started operations, with ageneration capacity of 480 megawatt on two gas and one steamturbines. The power station is fed with gas from the nearby Kwalefields in permit OML 60 (Eni operator with a 20% interest), whichwill supply 71 mmCF/d of natural gas when the power station isfully operational. The project is part of Eni’s and theNigerian government’s plan to reduce CO2emissions in the atmosphere.

In the medium term, management expects to increasesignificantly Eni’s production in Nigeria to approximately200 KBBL/d leveraging on the development of natural gas reserves,in particular in order to ensure supplies to the Bonny plant, andthe contribution of fields started-up recently, as in the case ofBonga, and of new development projects.

> 
*North Sea*

Eni’s operations in the North Sea area are conducted inNorway and the United Kingdom. In 2005, the North Sea accountedfor 16% of Eni’s total worldwide production of hydrocarbons.

*Norway* Eni has been operating in Norway since 1964. In2004 Eni’s hydrocarbon production averaged 136 KBOE/d.Eni’s principal producing interests are the Ekofisk field(Eni’s interest 12.39%) in the North Sea, and the Aasgard,Mikkel (both with a 14.9% interest) and Norne (Eni’sinterest 6.9%) fields in the Norwegian Sea which togetheraccounted for 90% of Eni’s production in Norway in 2005. 

In November 2005 production started at the Kristin oil and gasfield (Eni’s interest 8.25%) located in the PL134 permit inthe Haltenbanken area about 200 kilometers off the coast in theNorwegian Sea. Oil production is treated on a semi-submersibleplatform with a capacity of 125 KBBL/d. Production is expected topeak at 218 KBOE/d (18 KBOE/d net to Eni) in 2007. In the samepermit the Tofte formation discovered with the first producingwell on Kristin will be developed. The synergies with the Kristinproduction facilities will allow a viable development of thenearby Tyrihans field (Eni’s interest 7.9%), expected tostart-up in 2009, in coincidence with the expected productiondecline of Kristin.

In November 2005 the Svale and Stær oil fields in the PL128permit (Eni’s interest 11.5%) were started up, exploitingsynergies with the nearby Norne production facilities. Productionis expected to peak at 56 KBBL/d (6 KBBL/d net to Eni) in 2006.

The exploration activities yielded positive results in theBarents Sea with the second appraisal Goliath South well on theGoliath oil and gas discovery. Management expects the GoliathSouth well may results in the discovery of additional hydrocarbonreserves either from the expected reservoir or from deeperlayers. Goliath is located in Block PL 229 (Eni’s interest65%). 

*The United Kingdom* Eni has been present in the UnitedKingdom since 1964. In 2005 Eni’s net production ofhydrocarbons averaged 141 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 2005 these fields accounted for 77% of Eni’sproduction in the United Kingdom. 

Exploration yielded positive results in the P/233 permit inblocks 15/25a (Eni’s interest 12%) in the central section ofthe North Sea with the NWF 15/25°-DD well drilled at a depth ofover 2,000 meters and flowed about 4 KBBL/d of high quality oiland natural gas in test production.

Development activities concerned: (i) the start-up of theFarragon field (Eni’s interest 30%); and (ii) linkage of thegas and condensate Glenelg (Eni’s interest 8%) and WestFranklin (Eni’s interest 21.87%) fields to the ElginFranklin production platform.

In July 2005 Eni divested some exploration assets located inthe central section of the North Sea as part of its strategy ofasset portfolio rationalization.

In November 2005 the British government announced a draft lawto increase corporate income taxes by levying a supplementarycharge increase of 10 percentage points (from 10 to 20%). In theevent this draft law is enacted, management estimates an adverse1.2 percentage points impact on Eni Group’s tax rate in 2006as compared to 2005. Approximately half of the expected increasewill relate to a provision for deferred taxation. Given theexpected production decline of the area for the decline of maturefields, the adverse impact of higher rates of taxes in the UnitedKingdom will diminish with time.

> 
*Rest of the World*

In 2005, Eni’s operations in the rest of the worldaccounted for 21% of its total worldwide production ofhydrocarbons.

In *Brazil* in January 2006 following an internationalbid procedure held in October 2005 Eni acquired the operatorshipof a six year exploration license in Block BM Cal-14, covering anarea of about 745 square kilometers in the deep waters of theCamamu-Almada basin, about 1,300 kilometers north of Rio deJaneiro. In March 2005 the exploration license of Block BM-C-3(Eni’s interest 40%) was converted into an evaluation area.The test phase of the Peroba discovery well containing oil isscheduled within 2006. Exploration yielded positive results inBlock BM-S-4 (Eni’s interest 100%) with the drilling of theNFW Belmonte-1A well which found natural gas at a depth of over5,000 meters. The relevant authorities allowed a thirdexploration period for this block which will last two years andprovides for the drilling of one well.

In *China* offshore exploration activity yielded positiveresults in Block 16/19 (Eni’s interest 33%) in the SouthChina Sea about 180 kilometers south east of Hong Kong with thedrilling of the HZ25-4-1 well (Eni’s interest 100%), whichfound hydrocarbons at a depth between 2,200 and 3,800 meters andflowed about 5 KBBL/d of oil in test production. The HZ25-4 fieldwill be started up by means of the production facilities existingin the area. In Block 16/19 the HZ25-3-2 appraisal well confirmedthe extension of the reserves of the HZ25-3 oil field.

In *India* in July 2005, Eni was awarded the right toconduct exploration activities as operator in Blocks 8 and D-6,following an international bid tender. Block 8 (Eni’sinterest 34%) is located onshore in Rajasthan in the northwest ofIndia, and extends for 1,335 square kilometers. Block D-6(Eni’s interest 40%) is located deep water in the IndianOcean, some 130 kilometers east of the Andaman Islands, andcovers an area of 13,110 square kilometers. This contract marksthe beginning of Eni’s upstream activities in India. InSeptember 2005 Eni and the Indian Oil & Natural GasCorporation signed a memorandum of understanding establishingmutual cooperation between the companies aimed at finding newexploration and production opportunities. In particular, thecompanies will exchange information on a range of deep offshoreexploration projects in India and in other countries, with anoption to exchange equity interests in selected upstream andmidstream projects.

In *Mozambique* in March 2006, following an internationalbid tender, Eni obtained the exploration license for Area 4,located in the deep offshore of the Rovuma Basin 2,000 kilometersnorth of Maputo. The block covers an area of 17,646 squarekilometers in an unexplored geological basin with great mineralpotential according to surveys performed.

In *Turkey* in September 2005 an agreement has beenreached with the Turkish Group Calik concerning feasibility studyfor the realization of a new oil pipeline from the Black SeaTurkish coast east of Samsun (Unye) to Ceyhan, on the TurkishMediterranean coast. The new oil transportation infrastructurewill include: (i) a new loading terminal in Samsun; (ii) a550-kilometer long pipeline with design capacity of 1.5 millionbarrels of oil per day; and (iii) oil storage facilities to bebuilt in the existing terminal in Ceyhan. The construction of apipeline represents a faster, environmentally safer and moreeconomic alternative to the transportation of oil by ship throughthe Turkish Straits of the Bosphorus and Dardanelles.

*Australia* Eni has been present in Australia since 2000.In 2005 Eni’s hydrocarbon production averaged 21 KBOE/dmainly of oil.

Eni is operator with a 65% interest of the offshore Woollybuttoil field, which in 2005 accounted for 51% of Eni’sproduction in Australia.

Eni holds a 12.04% interest in the liquids and gas Bayu Undanfield where liquid production was started-up in 2004. Productionof natural gas currently under development will be treated at theDarwin liquefaction plant which has a capacity of 3.5 milliontonnes/y. In January 2006 the first shipment of LNG was made tothe Japanese market. A production peak of 160 KBOE/d from thisfield (18 KBOE/d net to Eni) is expected in 2008.

Offshore exploration was successful in: (i) Block AC/P-21(Eni’s interest 40%) with the NFW Vesta-1 well that locatedoil and gas at a depth of over 3,300 meters; (ii) Block WA-25-L(Eni’s interest 65%) with the Woollybutt-4 appraisal wellwhich confirmed the presence of oil in the western extension ofWollybutt-3 at a depth of over 2,000 meters; and (iii) BlockWA-208 P (Eni’s interest 18.66%) with the NFW Hurricane-1well that identified natural gas at a depth of over 3,000 meters.

In December 2005 Eni purchased further interests and reached100% in permits WA 279-P and WA 313-P in the Bonaparte offshorebasin off the northern coast of Australia where the Blacktip andPenguin fields are located. Total capital expenditure net to Eniis expected to amount to approximately $325 million. In the samebasin Eni purchased a 39% interest in the WA 34-R permit wherethe Rubicon and Prometeus fields are located.

In December 2005 Eni signed Heads of Agreement with the DarwinPower and Water Utility Company for the supply of a total amountof 20 BCM of natural gas from the Blacktip field for a 25 yearperiod starting in January 2009.

*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.

As part of the development plan of the natural gas discoveriesin the area between the end of 2005 and the beginning of 2006 theIka, Ida, Ivana C and K fields were started up. Production fromthese fields is sent to the Ivana K platform and from thisplatform through a 57-kilometer long pipeline to the Garibaldi Kplatform. A 43-kilometer long pipeline is under construction toreach the Croatian coast near Pula. Two fields, Katarina andAnnamaria, are under development and are expected to start-up inlate 2006 and early 2009, respectively.

In the medium term, management expects to increase Eni’sproduction to approximately 7 KBOE/d benefiting from the fullproduction of the new fields.

*Indonesia* Eni has been present in Indonesia since 2000.In 2005 hydrocarbon production net to Eni averaged 22 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.

Offshore exploration activity yielded positive results in theBukat block (Eni operator with a 41.25% interest) in the Tarakanbasin offshore Borneo with the drilling of appraisal wells on theAster oil discovery made in 2004. The Aster 2 and 3 wellsconfirmed the presence of additional reserves of high qualityhydrocarbons and the exploration potential of the basin. In 2006and 2007 further appraisal activities are scheduled in order toreach a definition of the field’s development plan.

*Iran* Eni has been present in Iran since 1957. In 2005liquid production net to Eni averaged 35 KBBL/d. The mainproducing oil fields operated by Eni under buy-back contractsare: (i) South Pars phases 4 and 5 (Eni operator with a 60%interest, the remaining 40% interest being held by Iranianpartners) in the offshore of the Persian Gulf. These phases werestarted up in 2004. At the beginning of 2005 the gas treatmentplant as part of the development project of the field wascompleted. In 2005, production of gas reached a rate equivalentto the 706 BCF/y production plateau; the field produced also onemillion tonnes/y of propane and butane and 108 KBBL/d ofcondensates (33 KBBL/d of condensates net to Eni) throughseparation from natural gas. Eni’s share of condensates isdestined to cover development costs incurred by Eni and toremunerate capital employed by Eni; and (ii) the Darquain oilfield (Eni operator with a 60% interest, the remaining 40%interest being held by Iranian partners) located onshoreapproximately 50 kilometers north-east of Abadan. On this fieldthe second development phase is underway and aims at increasingproduction from the present 50 KBBL/d to over 160 KBBL/d (14KBBL/d net to Eni) through the increase of the existing treatmentcapacity, the drilling of new producing wells and the injectionof gas. These two fields account for 85% of Eni’s productionin Iran.

Eni also holds interests in the Dorood (45%) and Balal (45%)oil fields in the offshore of the Persian Gulf locatedrespectively near the Kharg island and about 100 kilometerssouth-west of the Lavan island. The development of Dorood isexpected to be completed at the end of 2006 with a peakproduction of 50 KBBL/d.

*Kazakhstan* Eni has been present in Kazakhstan since1992. Eni is co-operator with British Gas with a 32.5% interestof the Karachaganak oil, gas and condensate field. In 2005production from this field (net to Eni) averaged 64 KBBL/d ofliquids and 207 mmCF/d of natural gas. Most of the liquidsproduced are exported to Western markets through the CaspianPipeline Consortium pipeline (Eni’s interest 2%). Thispipeline is connected to the Novorossiysk terminal on the Russiancoast of the Black Sea. In 2005 exports amounted to 42.5 KBBL/dnet to Eni, corresponding to 41.7% of oil and gas produced by thefield net to Eni. The rest of liquid production is exported andsold, as unstabilized condensates, on the Russian and Kazakhmarkets. The development plan of the field provides for theproduction of additional liquid and gas reserves by means of agas treatment plant and the drilling of production wells.

As part of the North Caspian Sea PSA, where the Kashagan fieldis located, on March 31, 2005 Eni (operator) and the othermembers of the consortium, except for one, purchased BritishGas’s interest (16.67%) in proportional shares, according tothe option exercised in May 2003, and sold half of this newlyacquired interest to the national Kazakh company Kazmunaygaz(KMG), a new partner in the PSA with an 8.335% interest.Following these two transactions (the sale to KMG was closed inMay 2005), Eni increased its interest from 16.67% to 18.52% andcontinues acting as operator. The outlay for this transactionamounted to $200 million. The development plan of the Kashaganfield, presented at the end of 2002 and approved in February2004, mainly foresees: (i) production start-up in 2008 at aninitial level of 75 KBBL/d. Management plans production level toincrease to 450 KBBL/d at the end of the first phase ofdevelopment and to reach a plateau of 1.2 mmBBL/d at the end ofthe field development; (ii) total capital expenditure estimatedat $29 billion ($5.4 billion being Eni’s share). Suchcapital expenditure plan is currently under revision in order totake into account depreciation of the U.S. dollar versus the euroand the rising trends in the costs of certain production factors(such as materials and oilfield services). The above mentionedamount does not include the capital expenditure for theconstruction of the infrastructure for exporting production tointernational markets, for which various, options are underscrutiny by the consortium. These include: (i) the use ofexisting infrastructure, such as the Caspian Pipeline Consortiumpipeline and the Atyrau-Samara pipeline; and (ii) the laying of apipeline connecting the Bolashak production center with theBaku-Tbilisi-Cehyan pipeline (BTC, Eni’s interest 5%). Thisnew system includes the laying of a 750-kilometer long pipelinewith a 42 inch diameter from Bolashak to Kuryk and a receptionterminal on the other side of the Caspian Sea near the startingpoint of the BTC pipeline.

At December 31, 2005, the total amount of contracts awardedfor the development of the field was over $8.8 billion for thecompletion of the first phase of the field’s developmentplan (Tranches 1 and 2) which includes the drilling ofdevelopment wells, the construction of infrastructure andfacilities for offshore production (drilling, treatment andreinjection of sour gas for maximizing the oil yield) and onshoretreatment plants. The most advanced techniques are going to beapplied in the construction of the planned infrastructure andfacilities in order to cope with high pressures in the field andthe presence of hydrogen sulphide.

In the medium term, management expects to increase Eni’sproduction in Kazakhstan from the current level of 100 KBOE/dleveraging on the development of natural gas reserves atKarachaganak and the start-up of Kashagan.

*Pakistan* Eni has been present in Pakistan since 2000.In 2005 production net to Eni averaged 48 KBOE/d, mainly ofnatural gas. The main natural gas producing fields operated byEni are Bhit (Eni’s interest 40%) and Kadanwari (Eni’sinterest 18.42%), which in 2005 accounted for 43% of Eni’sproduction in Pakistan. Eni also holds interests in the Sawan(23.68%), Zamzama (17.75%) and Miano (15.16%) fields. In thefirst quarter of 2005 the Rehmat field (Eni’s interest 30%)was started-up. 

Eni is operator in the Gorakh permit (Eni’s interest92.5%) in Kirthar Foldbet area and holds an interest in otherpermits in the Middle Indus Basin.

Eni purchased the Indus M and Indus N exploration permits inthe offshore of the Indus Delta with a total area of 5,000 squarekilometers. In February 2006 Eni purchased the permits Rajar,Mithi, Thar and Umarkot in the East Sindh area.

*United States* Eni has been present in the United Statessince 1966 and holds various mineral interests in the Gulf ofMexico and Alaska. In 2005 Eni’s hydrocarbon productionaveraged 33 KBOE/d and was obtained in the Gulf of Mexico. Themain producing fields operated by Eni are Allegheny (Eni’sinterest 100%) and King Kong (Eni’s interest 50%). Anotherrelevant field is Medusa (Eni’s interest 25%). These fieldsaccounted for 71% of Eni’s production in 2005.

In May 2005 the K2 oil field (Eni operator of the developmentphase with an 18.17% interest) was started-up. The field’sdevelopment includes two additional subsea wells linked to thenearby Marco Polo platform, operated by a partner. A peakproduction of 38 KBOE/d (7 KBOE/d net to Eni) is expected in2007.

Eni purchased 22 exploration blocks in the Gulf of Mexicofollowing its participation to the 194 (March 2005) and 196(August 2005) Lease Sale.

In Alaska in August 2005, Eni purchased from the U.S.independent company Armstrong Oil & Gas 104 explorationblocks onshore in the North Slope and offshore in the BeaufortSea. The blocks, with a total acreage of 1,409 (1,111 net to Eni)square kilometers, include two fields in the pre-developmentphase holding estimated 170 mmBBL of oil of reserves.

Production for 2005 was adversely impacted by shutdowns ofcertain facilities as a consequence of the hurricane season.Management expects residual hurricane-related impact in 2006. Seethe paragraph "Production" above and "Item 5– Recent Developments".

*Venezuela* Eni has been present in Venezuela since 1998.In 2005 daily production averaged 61 KBBL/d net to Eni and camefrom the Dación oil field. See the paragraph "Oil andnatural gas reserves" above.

The development of the Corocoro oil field (Eni’s interest26%) in the West Paria Gulf is in progress. The plan provides fora phased development depending on the results from wells andreaction of the field to water and gas reinjection. Production isexpected to start in 2008 with a peak of about 70 KBBL/d (17KBBL/d net to Eni) in 2009.

In January 2006, following an international bid, Eni wasawarded the Cardon IV Block exploration license in joint venturewith another international oil company in the Gulf of Venezuela.

> 
***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 2005 Stogit increased the share of storage capacity used bythird parties up to 56% (53% in 2004). From the beginning of itsoperations Stogit markedly increased the number of customersserved and the share of revenues from third parties: from anearly negligible amount, the latter accounted for 44% of totalrevenues in 2005.

| **Storage** |   |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|-------------|--------|--------|----------|--------|----------|--------|----------|--------|----------|
|        |   |   |          |   |          |   |          |   |          |

| Available        capacity:                                           |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| - modulation and mineral                                             |   | (BCM)  |   | 7.1    |   | 7.1    |   | 7.5    |   | 7.5    |
|    .        share utilized by Eni                     |   | (%)    |   | 66     |   | 53     |   | 47     |   | 44     |
| - strategic                                                          |   | (BCM)  |   | 5.1    |   | 5.1    |   | 5.1    |   | 5.1    |
| Total        customers                                               |   | (No.)  |   | 20     |   | 30     |   | 39     |   | 44     |
|    . modulation and upstream        storage customers |   | (No.)  |   | 14     |   | 24     |   | 29     |   | 35     |

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

##### 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 plans to grow natural gas sales in the rest of Europe andto develop its presence in the LNG business in order tocompensate for lower growth opportunities on the domestic marketdue to the limits imposed on operators by the sector regulationand increasingly intense competition. In Italy, Eni plans tocomply with regulatory limits on direct sales and input volumesto the national transport network through an optimal allocationof supplies between direct sales in Italy and in the rest ofEurope and by using natural gas at its own electricity generationplants and, at the same time, leveraging on the expectedconsumption growth. In the medium term, management expectsnatural gas sales in Italy to decline from the 58 BCM levelrecorded in 2005 as a consequence of increasing competition fromthird parties. Eni plans to implement a more attractivecommercial offer than Eni’s competitors’ on the basisof the quality of services, pricing formulas, including differentindexation schemes to suit various customer’s purchasingprofile, and the integration of supply of gas and electricity.Management plans to grow natural gas sales on the European marketleveraging on Eni’s availability of equity gas and adiversified portfolio of supply contracts, an extensive gaspipeline network, which allows for the supply of natural gas fromseveral sources, and long standing relationships with producingcountries. Eni intends to strengthen its presence in marketswhere its presence is already established – such as theIberian Peninsula, Germany and Turkey – and to develop salesin markets with significant growth and profitability prospects(in particular France and the United Kingdom).

Eni also intends to accelerate the development of its LNGbusiness on a global scale through the acquisition of interestsin assets covering the whole LNG chain (in particularregasification terminals) and also to monetize its natural gasreserves in West and North Africa, in the Far East.

*The matters regarding future natural gas demand and salestarget discussed in this section and elsewhere here in 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***

In 2005, natural gas demand in Italy totalled 86 BCM(increasing by over 7% over 2004). In 2005, about 18% of naturalgas requirements were met through domestic production (includingnatural gas volumes offtaken from storage), while imports covered82%. Eni expects natural gas consumption in Italy to reach about95 BCM in 2010, corresponding to an compound annual growth rateof about 2%.

Most of this increase is expected in electricity generation,because of the significant advantages of the use of natural gasin combined cycle plants, due to its lower investment cost,higher yields and reduced polluting emissions as compared toother fuels. Demand is expected also to increase from residentialand commercial users, due to the increased use of natural gas inresidential space heating, in households and services, in largetertiary firms and as vehicle fuel.

> 
***Natural Gas Purchases***

In 2005, Eni’s Gas & Power segment purchased 82.56BCM of natural gas, with a 6.47 BCM increase over 2004, up 8.5%,in line with the increase in sales and related to higher volumespurchased outside Italy (7.04 BCM), offset in part by lowerproduction volumes supplied in Italy (0.57 BCM). Natural gasvolumes supplied outside Italy (71.83 BCM) represented 87% oftotal supplies (85% in 2004).

Outside Italy increases concerned purchases from Libya (3.29BCM) and from Algeria (0.72 BCM). Imports of LNG destined toItaly increased by 0.18 BCM due to the partial resumption ofsupplies from Sonatrach after the accident occurred in early 2004at the Skikda liquefaction plant in Nigeria.

In 2005, a total of 0.84 BCM of natural gas were withdrawnfrom the storage sites of Stoccaggi Gas Italia SpA (Eni’sinterest 100%) as compared to 0.93 BCM in 2004.

The table below sets forth Eni’s purchases of natural gasby source for the periods indicated.

| **Natural        gas supplies** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|---------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                            |   |          |   |          |   |          |   |          |   |          |

|   |   | **(BCM)** |
|--------|--------|-----------|

| ***Italy***                                       |   | **14.62** |   |   | **12.67** |   |   | **12.16** |   |   | **11.30** |   |   | **10.73** |   |
|---------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Russia for        Italy                           |   | 19.51     |   |   | 18.62     |   |   | 18.92     |   |   | 20.62     |   |   | 21.03     |   |
| Russia for Turkey                                 |   |      |   |   |      |   |   | 0.63      |   |   | 1.60      |   |   | 2.47      |   |
| Algeria                                           |   | 18.39     |   |   | 16.35     |   |   | 16.53     |   |   | 18.86     |   |   | 19.58     |   |
| the Netherlands                                   |   | 7.00      |   |   | 7.55      |   |   | 7.41      |   |   | 8.45      |   |   | 8.29      |   |
| Norway                                            |   | 1.10      |   |   | 4.83      |   |   | 5.44      |   |   | 5.74      |   |   | 5.78      |   |
| Croatia                                           |   |      |   |   | 0.31      |   |   | 0.65      |   |   | 0.35      |   |   | 0.43      |   |
| the United        Kingdom                         |   |      |   |   | 1.48      |   |   | 1.98      |   |   | 1.76      |   |   | 2.28      |   |
| Hungary                                           |   | 3.11      |   |   | 3.05      |   |   | 3.56      |   |   | 3.57      |   |   | 3.63      |   |
| Libya                                             |   |      |   |   |      |   |   |      |   |   | 0.55      |   |   | 3.84      |   |
| Algeria (LNG)                                     |   | 1.79      |   |   | 1.92      |   |   | 1.98      |   |   | 1.27      |   |   | 1.45      |   |
| Others        (LNG)                               |   |      |   |   | 0.30      |   |   | 0.72      |   |   | 0.70      |   |   | 0.69      |   |
| Other supplies                                    |   | 0.03      |   |   | 0.03      |   |   | 0.04      |   |   | 0.12      |   |   | 1.18      |   |
| Others        outside Europe                      |   | 0.96      |   |   | 0.96      |   |   | 1.14      |   |   | 1.20      |   |   | 1.18      |   |
| ***Outside Italy***                               |   | **51.89** |   |   | **55.40** |   |   | **59.00** |   |   | **64.79** |   |   | **71.83** |   |
| **Total        supplies**                         |   | **66.51** |   |   | **68.07** |   |   | **71.16** |   |   | **76.09** |   |   | **82.56** |   |
| Withdrawals from (inputs to) storage              |   | 0.13      |   |   | (1.43     | )      |   | 0.84      |   |   | 0.93      |   |   | 0.84      |   |
| Network        losses and measurement differences |   | (0.92     | )      |   | (0.50     | )      |   | (0.61     | )      |   | (0.53     | )      |   | (0.78     | )      |
| **Available for sale**                            |   | **65.72** |   |   | **66.14** |   |   | **71.39** |   |   | **76.49** |   |   | **82.62** |   |

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

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 15 years.Existing contracts, which in general contain take-or-pay clauses,will ensure a total of about 67.3 BCM/y of natural gas (Russia28.5, Algeria 21.5, the Netherlands 9.8, Norway 6 and Nigeria LNG1.5) by 2008. The average annual minimum quantity (take-or-pay)is approximately 85% of said quantities. Despite the fact thatmanagement plans to sell outside Italy the increasing volumes ofnatural gas available under Eni’s take-or-pay contracts, theexpected development of Italian demand and supply of natural gasin the medium and long-term and the evolution of regulations inthis segment represent a risk element in the management oftake-or-pay contracts. See "Item 5 – ContractualObligations".

In 2005 Eni withdrew about 3.8 BCM more than its minimumofftake obligation. See "Item 5 – Recent Developmentsand 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. The European Commission approved thistransaction and requested Eni to assume additional obligationsfavoring competition, in particular: (i) Eni should make volumesof natural gas purchased from Gazexport (Gazprom) availableoutside Italy; and (ii) Eni shall promote the upgrading of theTAG gasline (from Austria into Italy) with deadlines consistentwith the decision of third parties to build LNG terminals inItaly.

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

In 2005 natural gas sales (91.15 BCM, including ownconsumption and Eni’s share of sales of affiliates)increased by 7.34 BCM over 2004, up 8.8%, due mainly to highersales in the rest of Europe (up 3.15 BCM), in the Italian market(up 2.39 BCM, or 4.8%) and natural gas supplies for powergeneration at EniPower’s power stations (up 1.84 BCM, or49.7%).

In an increasingly competitive market, natural gas sales tothird parties in Italy (52.47 BCM) increased by 2.39 BCM over2004, down 4.8%, reflecting an increase in sales to end users,also due to a cold winter, primarily relating to power generation(up 1.68 BCM or 10.6%), industries (up 0.68 BCM or 5.5%) and theresidential and commercial segment (up 0.44 BCM or 6%). Theseincreases were offset in part by lower sales to wholesalers (down1.82 BCM or 13.1%) related to the so called gas release carriedout in accordance with certain decisions of the AntitrustAuthority. See "Regulation of the Italian HydrocarbonIndustry – Gas & Power – Inquiries by Italian andEuropean Antitrust Authorities – Sales contracts outsideItaly" below. 

Natural gas sales in the rest of Europe (23.44 BCM) increasedby 1.9 BCM (up 8.8%) due to increases registered in: (i) suppliesto the Turkish market via the Blue Stream gasline (up 0.86 BCM);(ii) sales under long-term supply contracts to importers to Italy(up 0.57 BCM), also due to reaching full supplies from Eni’sLibyan fields; (iii) France, related to the increase in suppliesto industrial customers and to wholesalers (up 0.5 BCM); and (iv)Germany and Austria related to increased supplies (up 0.3 BCM) toEni’s affiliate GVS (Eni’s interest 50%) and otheroperators.

Own consumption7 was 5.54 BCM,up 1.84 BCM from 2004, or 49.7%, reflecting primarily highersupplies to EniPower due to the coming on stream of newgeneration capacity, primarily reflecting supplies to EniPower(4.41 BCM), to Polimeri Europa (0.35 BCM) and to Eni’sRefining & Marketing segment (0.27 BCM).

Sales of natural gas by Eni’s affiliates (net to Eni andnet of Eni’s supplies) amounted to 8.53 BCM, increasing by1.21 BCM over 2004, up 16.5%, and concerned: (i) GVS (Eni’sinterest 50%) with 3.39 BCM; (ii) Galp Energia (Eni’sinterest 33.34%) with 1.56 BCM; (iii) Unión Fenosa Gas(Eni’s interest 50%) with 1.52 BCM; and (iv) volumes ofnatural gas (1.45 BCM) treated at the Nigeria LNG Ltdliquefaction plant (Eni’s interest 10.4%) in Nigeria, soldby Nigeria LNG Ltd to U.S. and European markets.

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

| **Natural        gas sales** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                         |   |          |   |          |   |          |   |          |   |          |

|   |   | **(BCM)** |
|--------|--------|-----------|

| ***Italy***                                                          |   | **56.74** |   | **50.43** |   | **50.86** |   | **50.08** |   | **52.47** |
|----------------------------------------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Wholesalers                                                          |   | 21.09     |   | 17.02     |   | 15.36     |   | 13.87     |   | 12.05     |
| Gas        release                                                   |   |      |   |      |   |      |   | 0.54      |   | 1.95      |
| End customers                                                        |   | 35.65     |   | 33.41     |   | 35.50     |   | 35.67     |   | 38.47     |
| Industrial        users                                              |   | 18.53     |   | 14.43     |   | 13.17     |   | 12.39     |   | 13.07     |
| Thermoelectric users                                                 |   | 12.21     |   | 12.48     |   | 15.03     |   | 15.92     |   | 17.60     |
| Residential                                                          |   | 4.91      |   | 6.50      |   | 7.30      |   | 7.36      |   | 7.80      |
| ***Rest of Europe*****                                               |   | **6.05**  |   | **12.77** |   | **17.54** |   | **21.54** |   | **23.44** |
| ***Outside        Europe***                                          |   | **0.93**  |   | **0.92**  |   | **1.09**  |   | **1.17**  |   | **1.17**  |
| **Total sales to third parties**                                     |   | **63.72** |   | **64.12** |   | **69.49** |   | **72.79** |   | **77.08** |
| Own        consumption                                               |   | 2.00      |   | 2.02      |   | 1.90      |   | 3.70      |   | 5.54      |
| **Total sales to third parties and own        consumption**          |   | **65.72** |   | **66.14** |   | **71.39** |   | **76.49** |   | **82.62** |
| **Sales        of natural gas of Eni’s affiliates**(net to Eni) |   | **1.38**  |   | **2.40**  |   | **6.94**  |   | **7.32**  |   | **8.53**  |
| Europe                                                               |   | 0.93      |   | 1.93      |   | 6.23      |   | 6.60      |   | 7.85      |
| Outside        Europe                                                |   | 0.45      |   | 0.47      |   | 0.71      |   | 0.72      |   | 0.68      |
| **Total sales of natural gas**                                       |   | **67.10** |   | **68.54** |   | **78.33** |   | **83.81** |   | **91.15** |

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

> 
***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 (industries and powerstations); (ii) customers of the residential and commercialsector such as residential and commercial users, hospitals,schools, public utilities, small enterprises located in urbancenters supplied by wholesalers through low pressure networks;and (iii) wholesalers (mainly local selling companies anddistributors of natural gas for automotive use) purchasingnatural gas to sell it to residential and commercial customers.

In 2005, Eni’s natural gas sales to wholesalers amountedto 12.05 BCM (down 13.1% over 2004).

In 2005, natural gas consumption in the Italian industrialsegment amounted to approximately 21.8 BCM (approximately 25% oftotal final consumption), with a 2.3% decrease from 2004. In2005, Eni’s sales of natural gas to industrial usersamounted to 13.07 BCM (up 5.5% over 2004).

In 2005, natural gas consumption in the Italian thermoelectricsegment amounted to approximately 33 BCM (approximately 38% oftotal demand), with an approximately 14% increase over 2004. In2005, Eni’s sales of natural gas to thermoelectric usersamounted to 17.60 BCM (up 10.6% over 2004).

Natural gas consumption in the residential and commercialsegment amounted to over 30 BCM (35% of total demand), with a6.9% increase from 2004 due to the effect of weather conditions.Eni manages directly over 5 million residential customers and in2005 Eni’s sales to this segment amounted to 7.8 BCM (up 6%from 2004).

> 
***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 33,000 kilometers, of which 30,712 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, 2005 the national pipeline network owned byEni extended for 8,392 kilometers.

Underground pipelines have a maximum diameter of 48 inches andcarry natural gas at pressures of 24 to 75 bars. The underwaterpipeline crossing the Messina Strait has a diameter of 20 to 26inches and carries natural gas at a pressure equal to or higherthan 115 bars.

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

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

|   |   | - |   | two lines with 48/42-inch        diameter, each approximately 1,500-kilometer long,        including the smaller pipe that crosses underwater the        Messina Strait, which links Mazara del Vallo (on the        Southern coast of Sicily) to Minerbio (near Bologna).        This pipeline is undergoing an upgrade with the laying of        a third line with 48 inch diameter that is 290-kilometer        long (of these 241 are already operating). Transport        capacity at the Mazara del Vallo entry point is        approximately 83 mmCM/d; |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   |   | - |   | a 36-inch line, 67-kilometer        long linking Gela, the entry point of the Greenstream        underwater pipeline into the national network near Enna        along the import pipeline from Algeria. Transport        capacity at the Gela entry point is approximately 26        mmCM/d; |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   |   | - |   | two lines with 42/36/34-inch        diameters extending for a total length of approximately        900 kilometers that are linked to the Austrian network in        Tarvisio and cross the Po Valley reaching Sergnano (near        Cremona) and Minerbio. The pipeline is being upgraded by        the laying of a third 264-kilometer long line with        diameter from 48 to 56 inches; 214 kilometers were        already operating at the end of 2005, from Tarvisio to        Zimella (Verona). The pipeline transport capacity at the        Tarvisio entry point amounts to approximately 99 mmCM/d; |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • |   | 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 63        mmCM/d. |
|--------|--------|---|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

In 2005 Eni’s national network increased by 196kilometers due to the upgrade of the trunklines for gas importedfrom Russia and Algeria.

Eni’s regional transmission network is made up of pipeswith smaller diameter than the national lines for a total lengthof 22,320 kilometers. These pipes carry natural gas at pressuresbetween 5 and 12 bars, between 12 and 24 bars and between 24 and75 bars. In 2005, Eni’s regional network decreased by 29kilometers despite the entry into service of new lines.

Eni’s system is completed by: (i) 11 compressor stationswith a total power of 683 megawatt; 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 for the Greenstream pipeline.

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 2005 this systemobtained the ISO 9001-2000 certification. Peripheral units arerepresented by eight districts that monitor the transmissionnetwork through 60 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 also enters Eni’s system 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 BCM/y into the transmissionnetwork. In 2005, volumes of LNG regasified amounted to theequivalent of approximately 2.49 BCM of natural gas. 

In 2005 a total of 85.1 BCM of natural gas were input into thenational network, of 64% of which was owned by Eni.

In the next four years Eni plans to carry out capitalexpenditure of approximately euro 3.5 billion aimed at theupgrade of its transport network in view of the expected increasein import capacity (in particular from Russia and Algeria).

 

| **Natural        gas transported in Italy**(1) |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                                           |   |          |   |          |   |          |   |          |   |          |

|   |   | **(BCM)** |
|--------|--------|-----------|

| **Eni**           |   | **58.17** |   | **54.56** |   | **51.74** |   | **52.15** |   | **54.88** |
|-------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| **Third parties** |   | **11.41** |   | **19.11** |   | **24.63** |   | **28.26** |   | **30.22** |
| Enel              |   | 6.28      |   | 8.28      |   | 9.18      |   | 9.25      |   | 9.90      |
| Edison Gas        |   | 2.98      |   | 4.61      |   | 7.49      |   | 8.00      |   | 7.78      |
| Other             |   | 2.15      |   | 6.22      |   | 7.96      |   | 11.01     |   | 12.54     |
| **Total**         |   | **69.58** |   | **74.40** |   | **76.37** |   | **80.41** |   | **85.10** |

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

----

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

The Italian natural gas system is supplied for about 82% 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 TAG pipeline, a        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 81.3 mmCM/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. Eni        plans to upgrade this pipeline. See "Development        Projects" below;                                                                                                                                                                                                                                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the Transitgas pipeline, a        291-kilometer long pipeline, 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 mmCM/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 TTPC pipeline, a        742-kilometer long pipeline, made up of two lines each        371-kilometer long with a transit capacity of 81.2 mmCM/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, which is 775-kilometer long, made        up of five lines, each 155-kilometer long with a transit        capacity of 101 mmCM/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; and                                                                                                                                                                                                                                                                                                                                                                                                                           |
| • |   | the Greenstream pipeline for        the import of Libyan gas, a 520-kilometer long, with a        transit capacity of 24.4 mmCM/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, in which Eni has a 75% interest        (the remaining 25% share being held by the National Oil        Company), started operations in October 2004 and by 2006        is expected to transport 8 BCM/y already booked under        long-term contracts with Italian operators. In the long        term, Eni plans to upgrade the transport capacity of this        gasline from 8 to 11 BCM/y, starting in 2010 with an        expected capital expenditure of euro 80 million. |

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 mmCM/d, is expected to transport 16BCM/y in 2010 (Eni’s share 8 billion) of Russian natural gasto be sold on the Turkish market (see "DevelopmentProjects" below). At the end of 2005 the first section ofthe Dzhubga compression station on the Russian coast of the BlackSea started operations. It is made up of three turbocompressorsand three turbogenerators that will allow to increase the volumesof gas transported.

> 
***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 distribution activity in Italyserving 1,282 municipalities through a low pressure networkconsisting of over 48,000 kilometers of pipelines, supplying 5.8million customers at December 31, 2005. Legislative Decree No.164/2000 concerning the opening up of the natural gas market inItaly defines distribution as a public service which is subjectto regulation and its management is entrusted to natural gascompanies by local governments exclusively under bid procedures.Concessions existing at the coming into force of the Decree andawarded with a bid procedure expire on December 31, 2012; allother concessions expire on December 31, 2007 (with an optionalthree year extension in case of public interest). See"Regulation of the Italian Hydrocarbon Industry 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 strengthen its market share in area where itspresence is already established (Iberian Peninsula, Germany,Turkey) and to develop sales in markets with interesting growthand profitability prospects (in particular France and the UnitedKingdom). Eni plans to increase the flexibility of its operationsby upgrading its logistical assets.

In these European markets Eni can leverage on the availabilityof equity gas and a diversified portfolio of supply contracts, anextensive gas pipeline network, which allows for the supply ofnatural gas from several sources, and long standing relationshipswith producing countries. Eni intends to develop its presence inthe LNG business which provides interesting growth prospects,leveraging on the value of its assets, on its participation inliquefaction projects aimed at exploiting its natural gasreserves (mainly in North and West Africa, the Far East andAustralia) and on the purchase of interests in regasificationterminals located in strategic consumption markets (such as theUnited 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 holds a 50% interest. Through a 1,863-kilometerlong gas pipeline network (of these 1,750 are owned and 113 aremanaged) it transports and markets about 7 BCM/y of gas to localdistribution companies serving about 750 municipalities in theSouth-Western areas of the country.

In January 2005 Eni agreed a 14 year contract, starting in2006, for the supply of 1.2 BCM/y of natural gas to the Germancompany Wingas. The gas will be delivered at Eynatten at theGerman-Belgian border. In the medium term, Eni plans to increaseits natural gas sales from the 4.2 BCM level recorded in 2005.

> 
*Iberian Peninsula*

*Portugal* Eni operates on the Portuguese market throughGalp Energia (Eni’s interest 33.34%). On December 29, 2005,Eni, Amorim Energia (a privately held Portuguese company in whichSonangol, the national oil company of Angola, holds a minoritystake) and Rede Electrica Nacional (REN) entered an eight yearlong shareholders agreement for the joint management of GalpEnergia (Galp). The agreement came in force on March 29, 2006after the occurrence of all the suspensive conditions, amongwhich: (i) the authorization of the European Commission issued onMarch 24, 2006; (ii) the purchase on March 28, 2006 of a 1% stakein Galp by Caixa (a primary Portuguese financial institution)which also entered the shareholder agreement of December 2005;and (iii) the change in the powers of the Portuguese State inGalp (golden share) resulting from the approval by Galp’sShareholders’ Meeting held on March 29, 2006 of new by-lawsconsistent with the agreement between Eni, Amorim Energia, RENand Caixa. At the present date shareholders of Galp are: Eni(33.34%), the Portuguese State (17.711%), Parpublica (12.293%),REN (18.30%), Amorim Energia (13.312%), Iberdrola (4%), CaixaGeral de Depositos (1%), Setgas (0.044%).

Key guidelines of the agreement are as follows: (i) theestablishment of a new set of corporate governance rules setting,among others, percentages of share capital voting rightsnecessary to make relevant decisions; (ii) an industrial plantargeting the achievement of a leading market position in naturalgas, refining and petroleum products marketing in the IberianPeninsula, an increase in the weight of upstream activities inGalp’s asset portfolio and access to the Portugueseelectricity sector; (iii) placement of part of the stake held bythe Portuguese State in Galp through an initial public offeringby year end of 2006; (iv) spin-off of certain regulated asset ofGalp (natural gas transport network, storage sites and the SinesLNG regasification plant) ideally by the end of 2006; thoseassets are agreed to be sold to REN; (v) transfer of REN’sstake in Galp to Amorim Energia within an 18 month period fromthe effective date of the agreement; and (vi) a five year lock inperiod. 

This agreement replaces the pre-existing agreement between Eniand the Portuguese State.

In 2005 Galp sold about 1.56 BCM of gas to approximately820,000 customers and managed a high, medium and low pressurenetwork covering about 11,700 kilometers. The assets of Galpinclude among other things two import infrastructures: theTransmaghreb pipeline and the Sines LNG regasification plant.Following the entry into force of the new agreement, thesetransport and regasification infrastructures are expected to bespun off.

*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 sales to final users and to power generationcompanies. In 2005 natural gas sales of Unión Fenosa Gasamounted to 1.52 BCM. Unión Fenosa Gas is active in LNG throughan 80% interest in a liquefaction plant with a capacity of over 7BCM/y, located at Damietta on the Egyptian coast, that startedoperations in January 2005, and through a 7.36% interest in aliquefaction plant under construction in Oman, completed in 2005.In addition, it holds an 18.9% and a 42.5% interest in the ElFerrol and Sagunto regasification plants under construction,managed by the Reganosa and Saggas companies. The Sagunto plantis expected to start operations between 2006 and 2007.

In the medium term, Eni plans to increase its natural gassales from the 5.3 BCM level recorded in 2005.

*Turkey* Blue Stream Eni and Gazprom hold equal shares inBlue Stream Pipeline Company BV, which operates the Blue Streamtransport system, that links the Russian (Dzhubga) to the Turkish(Samsun) coast of the Black Sea. In November 2005 the firstsection of the compressor station at Dzhubga on the Russian coastof the Black Sea started operating. This station is made up ofthree turbocompressors and three turbogenerators and will allowto increase volumes transported. The gasline transports naturalgas produced in Russia which is sold jointly by Eni and Gazpromin Turkey to the Turkish company Botas under a long-termcontract. In 2005 volumes transported and sold in Turkey amountedto 5.14 BCM of natural gas (50% of which were Eni’s share)corresponding to an 18% market share. Volumes transported andmarketed will increase progressively in future years and aretargeted to about 16 BCM/y (8 billion net to Eni) in 2010.

*France* In July 2005 Eni signed a long term agreementwith French company EDF for the supply of 860 mmCM/y of naturalgas starting in October 2006.

*Upgrading of the international transport network* Enihas defined a program for the upgrade of transport gaslines fromAlgeria and Russia. Eni plans to increase the transport capacityof the TTPC gasline from Algeria by 6.5 BCM/y, with a 3.2 BCMstarting on April 1, 2008 and an additional 3.3 BCM increasestarting on October 1, 2008 with an expected expenditure of euro345 million. A corresponding capacity on the TMPC downstreamgasline is already available. The first section of the upgradewas assigned to third parties in November 2005.

Eni plans to upgrade the transport capacity of the TAG gaslinefrom Russia by 6.5 BCM/y with a 3.2 BCM increase starting onOctober 1, 2008 and an additional 3.3 BCM increase starting onApril 1, 2009 with an expected expenditure of euro 275 million.The first section of the upgrade was assigned to third parties inFebruary 2006. In addition, the upgrade related to the build-upof the fourth import contract from Russia is nearly completed (up4 BCM from 2007).

Considering also the full capacity from 2006 of theGreenstream gasline from Libya (8 BCM/y) and the upgrade underwayof the TAG gasline in the light of the build-up of the fourthimport contract from Russia (up 4 BCM/y from 2007), from 2009 atotal of about 25 BCM/y of new import capacity are expected beavailable for the Italian market. Except for the 4 BCM/y of theRussian contract, 14.4 BCM of this new capacity have already beensold to third parties and a further 6.6 BCM/y are expected to besold under open bidding procedures.

*Libya* Eni’s Gas & Power segment purchase 80%of the natural gas production of the Libyan natural gas producingfield of Wafa and Bahr Essalam operated by Eni (with a 50%interest). The share of production belonging to the Libyanpartner National Oil Company is purchased under a long termsupply contract with a 24 year term. When the two fields achievefull production in 2006, production plateau volume are expectedto be 10 BCM/y of which 8 BCM/y will be purchased by Eni’sGas & Power segment and imported to Italy via theGreeenstream gasline. These volumes are sold to Italian thirdparty importers under long term supply contracts with a 24 yearterm and delivery point at Gela in Sicily. The remaining 2 BCM/ynatural gas availability from production is expected to be soldon the Libyan market by the two partners.

> 
***LNG***

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

*United States* On August 1, 2005, Eni signed anagreement with the U.S. company Cameron LNG LLC (belonging to theSempra Energy group) to purchase a share of the regasificationcapacity of the Cameron liquefied natural gas terminal underconstruction in Louisiana expected to be completed in 2008-2009.The share of regasification capacity purchased amounts to 6 BCM/yfor a period of 20 years, which corresponds to about 40% of theoverall initial capacity of the terminal (15.5 BCM/y). Thistransaction will enable Eni to sell part of its natural gasreserves from North African and Nigerian fields in the UnitedStates.

*Egypt* In January 2005, the first LNG shipment was madefrom the Damietta liquefaction plant (Eni’s interest 40%through its 50% interest in Unión Fenosa Gas) that is targetedto produce about 7 BCM/y. The partners in the project (UniónFenosa Gas, the Egyptian company EGAS and oil producers Eni andBP) have planned an expansion of the plant consisting in theconstruction of a second train with the same capacity of thefirst one with expected capital expenditure amounting toapproximately $1.5 billion and start-up in 2009. Eni will supplyabout 3 BCM/y of natural gas to the first train for twenty years.Further volumes will be supplied to the second train under anintent protocol signed in March 2005 with the EgyptianGovernment.

*Spain* Eni holds a 9.5% and a 21.25% interest in the ElFerrol and Sagunto regasification plants under construction andexpected to start operations between 2006 and 2007. Eni’sshare of regasification capacity amounts to 1.8 BCM/y.

> 
***Other Developments***

> 
*Agreement between Eni and Gazprom/Gazexport*

In October 2005 Eni and Gazprom agreed to promote a new set ofagreements aimed at widening their cooperation agreeing also tocease a previous agreement signed in May 2005. Negotiations areunderway.

> 
*Sale of the water business*

In March 2005, after receiving the authorization of theItalian Antitrust Authority, Italgas divested its majorityinterest (67.05%) in Società Azionaria per la Condotta di AcquePotabili to Amga SpA and Smat SpA for a cash consideration ofeuro 85 million (euro 15.57 per share). In May 2005, afterreceiving the authorization of the Italian Antitrust Authority,Italgas divested its 100% interest in Acquedotto Vesuviano SpA toGori SpA for a cash consideration of euro 20 million. The abovetransactions are part of Eni’s strategy of concentrating itsresources in its core natural gas business.

> 
*Purchase of Siciliana Gas*

In May 2006 Eni purchased a 50% interest of Siciliana Gas SpAfor a cash outlay of euro 98 million. The Italian AntitrustAuthority approved the transaction on February 1, 2006. With thispurchase Eni becomes the sole owner of Siciliana Gas SpA andthrough this company also of 100% of Siciliana Gas Vendite SpA.Siciliana Gas SpA has been operating in Sicily since 1979 andholds the rights for the distribution of gas to 76 Sicilianmunicipalities, including Agrigento, Enna, Trapani and Gela (ofthese 70 concessions are operating) through a 2,600-kilometerlong network and with 186 employees. It owns Siciliana GasVendite SpA operating in the sale of natural gas to end userswith approximately 215,000 customers and sales volumes of about190 mmCM/y and 50 employees.

> 
*Toscana Energia SpA*

On January 24, 2006, Eni, Italgas and the local authoritiespartners of Fiorentina Gas SpA and Toscana Gas SpA signed aframework agreement for developing an alliance in the area ofnatural gas distribution and sale. As part of the agreement, thepartners incorporated Toscana Energia SpA (Eni’s interest48.7% the remaining 51.3% interest being held by municipalitiesand local banks) to which they contributed in kind theirinterests in Fiorentina Gas and Toscana Gas. These two companiesoperate in natural gas distribution to 97 municipalities througha 7,900-kilometer long network serving 1.6 million customers.They will be merged in Toscana Energia within two years under theframework agreement. The local authority partners will play arole of strategic guidance and control, while Italgas is theindustrial partner and has operating and managementresponsibilities. The agreement provides also for theestablishment of a regional sales company (600,000 customers, 1.1BCM sold in 147 Tuscan municipalities) under Eni’s control,through the merger of Toscana Gas Clienti SpA (Eni’sinterest 46.1% through Italgas) and Fiorentina Gas Clienti SpA(Eni’s interest 100%).

> 
***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 approximately4.5 gigawatt at December 31, 2005 (3.3 gigawatt in 2004).

In 2005, Eni sold 27.56 terawatthours of electricity, of whichabout 22.77 were produced by EniPower, corresponding to over 5%of the Italian market, and 10.66 million tonnes of steam.Approximately 57% of sales were directed to end users, 28% to theElectricity Exchange, 8% to GRTN/Terna (under CIP 6/92 contractsand imbalances in input) and 7% to wholesalers. All the steamproduced was sold to end users.

Eni is completing a plan for expanding its electricitygeneration capacity targeting in 2009 an installed capacity of5.5 gigawatt with production amounting to 30 terawatthours from2008, corresponding to over 10% of electricity generated in Italyat that date. Planned expenditure amounts to euro 2.4 billion, ofwhich euro 1.8 billion is already expensed.

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"8.

Eni estimates that with the same amount of energy (electricityand heat) produced, EniPower power stations will reduce emissionsof carbon dioxide by approximately 11 million tonnes, as comparedto emissions caused by conventional power stations. 

EniPower intends to become a cost leader in the Italianelectricity industry thanks to the high technology content andoptimal size of the plants it is building. When fully operationalin 2008, consumption of natural gas of Eni’s plants isexpected to reach over 6 BCM/y, supplied by Eni.

| **Power        Generation** |   |   |     |   |     |   |     |
|-----------------------------|--------|--------|----------|--------|----------|--------|----------|
|                        |   |   | **2003** |   | **2004** |   | **2005** |
|                        |   |   |          |   |          |   |          |

| **Purchases**               |   |                                       |   |   |   |   |   |   |
|-----------------------------|--------|--------------------------------------------|--------|--------|--------|--------|--------|--------|
| Natural        gas          |   | (mmCM)                                     |   | 940    |   | 2,617  |   | 4,384  |
| Other fuels                 |   | (thousand tonnes of oil        equivalent) |   | 847    |   | 695    |   | 563    |
| **Sales**                   |   |                                       |   |   |   |   |   |   |
| Electricity production sold |   | (terawatthour)                             |   | 5.55   |   | 13.85  |   | 22.77  |
| Electricity        trading  |   | (terawatthour)                             |   | 3.10   |   | 3.10   |   | 4.79   |
| Steam                       |   | (thousand tonnes)                          |   | 9,303  |   | 10,040 |   | 10,660 |

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

 

The development plan has been completed at all sites exceptfor Ferrara (Eni’s interest 51%), where in partnership withSwiss company EGL AG construction is underway of two new 390megawatt combined cycle units which will bring installed capacityto 840 megawatt with startup expected in 2007.

**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 megawatt articulated inthree combined cycle units, two of them with approximately 390megawatt capacity are fired with natural gas, the third one withapproximately 250 megawatt capacity is fired in part with naturalgas 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 megawatt unitsstarted operations in 2004. Added to the existing 190 megawatt,the power station’s installed capacity reached approximately970 megawatt.

**Brindisi** Three new combined cycle 390 megawatt units,two of which started operations in 2005, the last is expected tostart operation in the second half of 2006. When fullyoperational the power station will have a total capacity ofapproximately 1,320 megawatt, including already existing amounts.The completion of the power station is expected between the endof 2005 and the second quarter of 2006.

**Mantova** Two new combined cycle 390 megawatt unitsstarted operations in 2005 with full operation in early 2006. Thepower station will have a total installed capacity toapproximately 840 megawatt. This power station will provide steamfor heating purposes delivered to Mantova’s urban networkthrough a remote heating system. 

**Ferrara** EniPower owns 51% of the share capital ofSocietà EniPower Ferrara (SEF) in partnership with EGL Swiss.SEF started the construction of two new combined cycle units witha capacity of 390 megawatt each which will bring total installedcapacity at Ferrara to 840 megawatt. Operations are expected tostart in 2007. In 2004, some 80 megawatt of capacity werepurchased.

> 
***Capital Expenditure***

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

 

##### Table of Contents

**Refining & Marketing**

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

In the refining business, Eni plans to strengthen thecompetitive positioning of its refining system by increasing theprimary refining capacity and conversion capacity andimplementing actions to improve flexibility of refineries.Eni’s objectives are optimization of processed feedstocks,adjustment of the slate of refined products to the evolution ofdemand and strengthening of the degree of integration withEni’s upstream activities. Eni’s strategy in itsrefining business is based on the following assumptions regardingtrends in demand and the trading environment: (i) an expectedworldwide decline in gasoline consumption in favor of dieselfuel, in connection with the expected evolution of the car fleettowards an increasingly high spread of diesel engine cars; (ii)the progressive substitution of fuel oil with natural gas inItaly; (iii) a further increase in worldwide differential betweenlight and heavy crudes that favors high conversion capacityrefineries; and (iv) the implementation of European fuelspecifications as concerns quality standards of fuels. 

In the marketing of refined products, Eni plans to strengthenits competitive positioning in Italy by restructuring andupgrading its distribution network and implementing an innovativemarketing strategy, the key elements of which are expected to bean offer of high quality fuels and differentiated promotionalinitiatives intended to support customer loyalty. In the rest ofEurope, Eni intends to develop or strengthen its market share incertain geographic areas where it can obtain logistical andoperating synergies and exploit its Agip brand. Eni plans to growsales volumes buying, leasing and building well equipped and highthroughput services stations and by launching marketing campaignsaimed at consolidating the perception of the Agip brand in targetmarkets.

*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 2005, a total of 66.48 million tonnes of oil were purchased(67.05 in 2004), of which 37.30 million tonnes were fromEni’s Exploration & Production segment9,14.85 million tonnes under long-term contracts with producingcountries and 14.33 million tonnes on the spot market. Some 24%of oil purchased came from West Africa, 19% from North Africa,17% from countries of the former Soviet Union, 16% from theMiddle East, 14% from the North Sea, 7% from Italy and 3% fromother areas. Some 31.07 million tonnes were resold, representingan increase of 1.32 million tonnes over 2004, up 4.1%. Inaddition, 3.58 million tonnes of intermediate products werepurchased (3.10 in 2004) to be used as feedstocks in conversionplants and 16.21 million tonnes of refined products (18.8 in2004) sold as a complement to own production on the Italianmarket (4.97 million tonnes) and on markets outside Italy (11.24million tonnes).

> 
***Refining***

Eni is engaged in the refining business in Italy and ownsinterests in refineries in Germany and the Czech Republic with atotal refining capacity (balanced with conversion capacity) ofapproximately 35 million tonnes (equal to 701 KBBL/d) of which30.2 million tonnes capacity 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. Eni plans to upgrade its refining system with a capitalexpenditure for the next four years amounting to approximatelyeuro 2.4 billion (including logistics activities). Main actionsplanned are: (i) an increase of primary processing and conversioncapacity, also in light of an expected increased availability ofequity oil in the Mediterranean area; (ii) an improvement ofrefinery flexibility with the aim of optimizing feedstockprocessing; and (iii) the production of fuels in line withdemand and in compliance with European environmental standards.Eni also aims at achieving a higher degree of verticalintegration with Eni’s upstream and downstream activities,increasing intake processing of equity crudes and feedstockvolumes transferred to petrochemicals activities.

The table below sets forth certain statistics regardingEni’s refineries at December 31, 2005.

|                                                                         |   | **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 has an operational andstrategic setup adequate to maximizing return on assets andmonetizing its geographic location with respect to end marketsand integration with 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 supplies mainly markets in north-western Italy andSwitzerland. The high degree of flexibility of this refineryallows it to process a wide range of oil from Russia, Africa andAsia, CPC Blend crude oil from the Caspian Sea carried throughthe CPC pipeline and oil from Eni’s nearby Villafortunafield. From a logistical standpoint this refinery is locatedalong the route of the Central Europe Pipeline, which links theGenova terminal with French speaking Switzerland. This refinerycontains two primary distillation plants and a vacuum unit.

The conversion plants are: a fluid catalytic cracker (FCC), anHDCK middle distillate conversion, a visbreaking thermalconversion unit, two catalytic reforming plants, an isomerizationplant, an alchilation plant, an MTBE plant and threedesulphurization plants for middle distillates and one fornaphtha from cracking. In 2005 works continued for the completionof the tar (heavy residue from visbreaking) gasification plantthat will produce syngas that will be used to fire the nearbyEniPower power station at Ferrera Erbognone. In the medium termEni plans to upgrade the conversion capacity of this refinery;planned actions include: (i) construction of a new hydrocrackingunit with a capacity of 28,000 BBL/d which will allow for theproduction of one million tonnes/y of high quality diesel fuelwith low sulphur content; and (ii) construction of a newdeasphalting unit with a capacity of 18,000 BBL/d for theseparation of vacuum residues of asphaltenes with the aim ofobtaining additional feedstocks for the cracking plant. Works areexpected to be completed by 2008. Capital expenditure for thisproject is expected to amount to euro 400 million.

**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 two reforming units, an alchilationunit, an MTBE unit and plants for desulphurization of gasoil andnaphtha from cracking. The power plant of this refinery alsocontains modern residue and exhaust fume treatment plants whichallow the complex to comply with the most exacting environmentalstandards.

**Taranto**, with a balanced primary refining capacity of110 KBBL/d and an equivalent conversion index of 60.5%, 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 a flash vacuum unit, two plantsfor the desulphurization of middle distillates, a reforming unit,an isomerization unit and conversions plants such as: a two-stagethermal conversion plant (visbreaking/thermal cracking) and anRHU conversion plant, that allows to convert high sulphur contentresidues into valuable products and cracking feedstocks. Itprocesses most of the oil produced in Eni’s Val d’Agrifields carried to Taranto through the Monte Alpi pipeline; in2005 a total of 3.1 million tonnes of this oil were processed. Inthe medium-term Eni plans a relevant upgrade of this refinery bymeans of two projects for increasing primary refining andconversion capacity with an expected expenditure of euro 800million. The first project entails construction of a new 17,000BBL/d capacity hydrocracking plant with a new associated hydrogenunit for the manufacture of approximately 0.6 million tonnes/y ofhigh quality diesel fuel. Works are expected to be completed by2008. The second project entails the construction of: (i) a newtopping plant with a capacity of 4 million tonnes/y with anassociated vacuum unit with a capacity of 2.5 million tonnes/y;(ii) a new plant for the desulphurization of middle distillateswith a capacity of 2.3 million tonnes/y; and (iii) ancillaryunits and utilities with other logistical assets. Works areexpected to be completed by 2009.

**Livorno**, with a balanced primary refining capacity of84 KBBL/d and an equivalent conversion index of 11.4%,manufactures mainly gasolines, fuel oil for bunkering, specialtyproducts and lubricant bases. Besides its primary distillationplants, this refinery contains a vacuum unit, a reformer unit, anisomerization plant, two desulphurization units for middledistillates and two lubricant manufacturing lines. Its pipelinelinks with the local harbor and with the Florence storage sitesallow the Livorno facility to operate with great efficiency asconcerns reception, handling and distribution 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 reformer plant, an isomerization plant, two gasoildesulphurization units and a two-stage thermal conversion plant(visbreaking/thermal cracking) for increasing yields of valuableproducts.

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 27 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.

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/y of crude oil retains validity untilDecember 31, 2006 at the conditions (yields and payments)reflecting the current setup of the refinery.

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

| **Petroleum        products availability** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                                       |   |          |   |          |   |          |   |          |   |          |

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

| **Italy**                                                       |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |
|-----------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Products processed in wholly-owned refineries                   |   | 32.24     |   |   | 30.09     |   |   | 25.09     |   |   | 26.75     |   |   | 27.34     |   |
| Products        processed for third parties                     |   | (1.45     | )      |   | (1.88     | )      |   | (1.72     | )      |   | (1.50     | )      |   | (1.70     | )      |
| Products processed in non owned refineries                      |   | 5.92      |   |   | 6.27      |   |   | 8.43      |   |   | 8.10      |   |   | 8.58      |   |
| Products        consumed and lost                               |   | (1.95     | )      |   | (1.91     | )      |   | (1.64     | )      |   | (1.64     | )      |   | (1.87     | )      |
| ***Products available***                                        |   | **34.76** |   |   | **32.57** |   |   | **30.16** |   |   | **31.71** |   |   | **32.35** |   |
| Purchases        of finished products and change in inventories |   | 5.19      |   |   | 6.27      |   |   | 5.86      |   |   | 5.07      |   |   | 4.85      |   |
| Finished products transferred to foreign cycle                  |   | (4.96     | )      |   | (5.56     | )      |   | (5.19     | )      |   | (5.03     | )      |   | (5.82     | )      |
| Consumption        for power production                         |   |      |   |   | (1.74     | )      |   | (1.07     | )      |   | (1.06     | )      |   | (1.09     | )      |
| ***Sales***                                                     |   | **34.99** |   |   | **31.54** |   |   | **29.76** |   |   | **30.69** |   |   | **30.29** |   |
| **Outside        Italy**                                        |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |
| Products available                                              |   | 3.02      |   |   | 2.98      |   |   | 3.36      |   |   | 4.04      |   |   | 4.33      |   |
| Purchases        and change in inventories                      |   | 10.27     |   |   | 12.16     |   |   | 12.12     |   |   | 13.78     |   |   | 11.19     |   |
| Finished products transferred from Italian cycle                |   | 4.96      |   |   | 5.56      |   |   | 5.19      |   |   | 5.03      |   |   | 5.82      |   |
| ***Sales***                                                     |   | **18.25** |   |   | **20.70** |   |   | **20.67** |   |   | **22.85** |   |   | **21.34** |   |
| ***Sales in Italy and outside Italy***                          |   | **53.24** |   |   | **52.24** |   |   | **50.43** |   |   | **53.54** |   |   | **51.63** |   |

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

In 2005 refining throughputs on own account in Italy andoutside Italy were 38.79 million tonnes, up 1.10 million tonnesfrom 2004, or 2.9%, due to higher processing at Eni’swholly-owned refineries of Taranto, Livorno and Sannazzaro alsoas a result of fewer maintenance standstills. These increaseswere offset in part by the impact of the maintenance standstillof the Porto Marghera refinery and lower processing at the Gelarefinery following the damage caused by a sea storm to thedocking infrastructure in December 2004. Processing on thirdparty refineries increased, especially at the Milazzo refinery(Eni’s interest 50%). Total throughputs on wholly ownedrefineries (27.34 million tonnes) increased 0.59 million tonnesfrom 2004, or 2.2%, with full balanced capacity utilization.About 32.3% of all oil processed came from Eni’s Exploration& Production segment (33% in 2004).

> 
***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. Transport bysea of crudes and refined products takes place through spot andlong-term lease contracts of tanker ships. For the secondarydistribution of refined products to retail markets Eni owns afleet of tanker trucks and manages third-party owned vehicles.

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 CM of propane.

In the medium-term Eni intends to upgrade the integration ofits logistics system with its refining system. Eni plans toupgrade logistical assets in order to support the development ofthe Taranto refinery. In particular Eni is evaluating theconstruction of a new storage site for gasoils and gasolines inCampania and of three pipelines, of which two linking therefinery to the new storage site and one for the transport ofvirgin naphtha to the Eni’s Brindisi petrochemical complex.Eni intends also to optimize its logistics system byrationalizing its structures in Lazio, the Po Valley and theNaples area.

> 
***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 outside Italy** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|----------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|
|                                                     |   |          |   |          |   |          |   |          |   |          |

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

| *Italy*                            |   |      |   |      |   |      |   |      |   |      |
|------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|--------|-----------|
| Retail sales                       |   | 11.64     |   | 11.14     |   | 10.99     |   | 10.93     |   | 10.05     |
| Wholesale        sales             |   | 11.24     |   | 10.64     |   | 10.35     |   | 10.70     |   | 10.48     |
|                               |   | **22.88** |   | **21.78** |   | **21.34** |   | **21.63** |   | **20.53** |
| Petrochemicals                     |   | 4.23      |   | 3.82      |   | 2.79      |   | 3.05      |   | 3.07      |
| Other sales (1)                    |   | 7.88      |   | 5.94      |   | 5.63      |   | 6.01      |   | 6.69      |
| **Sales        in Italy**          |   | **34.99** |   | **31.54** |   | **29.76** |   | **30.69** |   | **30.29** |
| *Outside Italy*                    |   |      |   |      |   |      |   |      |   |      |
| Retail        sales rest of Europe |   | 2.47      |   | 2.57      |   | 3.02      |   | 3.47      |   | 3.67      |
| Retail sales Africa and Brazil     |   | 1.71      |   | 1.44      |   | 1.18      |   | 0.57      |   |      |
|                               |   | **4.18**  |   | **4.01**  |   | **4.20**  |   | **4.04**  |   | **3.67**  |
| Wholesale sales                    |   | 5.55      |   | 5.65      |   | 6.01      |   | 5.30      |   | 4.50      |
|                               |   | **9.73**  |   | **9.66**  |   | **10.21** |   | **9.34**  |   | **8.17**  |
| Other sales (1)                    |   | 8.52      |   | 11.04     |   | 10.46     |   | 13.51     |   | 13.17     |
| **Sales        outside Italy**     |   | **18.25** |   | **20.70** |   | **20.67** |   | **22.85** |   | **21.34** |
|                               |   | **53.24** |   | **52.24** |   | **50.43** |   | **53.54** |   | **51.63** |

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

----

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

In 2005 sales of refined products (51.63 million tonnes) weredown 1.91 million tonnes over 2004, or 6.2%, mainly due to thedivestment of activities in Brazil carried out in August 2004(down 1.51 million tonnes), lower sales volumes to oil companiesand traders outside Italy (down 305,000 tonnes), decliningwholesale sales volumes in Italy (220,000 tonnes) and lower saleson the Agip branded network (130,000 tonnes) related to lowerdomestic consumption. These declines were offset in part byhigher retail and wholesale sales in the rest of Europe (357,000tonnes) due to the implementation of Eni’s developmentstrategy.

Following the approval of the Italian Antitrust Authoritygranted on August 25, 2005, on September 6, 2005 Eni divested100% of the share capital of Italiana Petroli ("IP") toapi - anonima petroli italiana SpA for euro 190 million. IP isengaged in the retail marketing of refined products through alease concession network of approximately 2,900 units, under theIP brand. As part of the sale transaction, the parties signed:(i) a five year fuel supply agreement under which IP willpurchase from Eni agreed amounts of fuel each year; and (ii) an18 month long agreement for the supply of lubricants and fueltransport services from storage sites to service stations.Consequently the impact on sales of the divestment of IP wasmarginal since the lower volumes sold on the retail market weresubstantially offset by the volumes supplied to the divestedcompany under the contracts in force.

> 
***Retail Marketing***

> 
*Retail sales in Italy*

Sales of refined products on retail markets in Italy in 2005(10.05 million tonnes) were down 0.88 million tonnes from 2004,or 8.1%, reflecting primarily the divestment of IP. Sales volumeson the Agip branded network (8.76 million tonnes) were down130,000 tonnes, or 1.5%, due mainly to a decline in domesticconsumption (down 1.9%) in particular of gasoline and LPG, whoseeffects were offset in part by an improved performance. Marketshare of the Agip network was up 0.2 percentage points from 29.5to 29.7%. Average throughput of gasoline and diesel fuel of theAgip network was substantially unchanged at 2,509,000 liters(down 0.7% from 2004).

At December 31, 2005, Eni’s retail distribution networkin Italy consisted of 4,349 service stations, 2,895 less than atDecember 31, 2004 (7,244 service station), due to the divestmentof IP (2,915 service stations). Excluding the effect of IP’ssale, the Agip branded network increased by 20 units fromDecember 31, 2004 as a result of the positive balance ofacquisitions/releases of lease concessions (27 units), theopening of 12 new service stations and an increase in highwayservice stations (two service stations) offset in part by theclosure of 21 less efficient service stations.

Eni plans to strengthen its competitive positioning in Italyby restructuring and upgrading its distribution network andimplementing an innovative marketing, the key elements of whichare expected to be an offer of high quality fuels anddifferentiated promotional initiatives intended to supportcustomer loyalty.

In 2005 sales volumes of BluDiesel – a high performancediesel fuel virtually sulphur free that improves engineperformance – on the Agip branded network amounted to nearly1 billion liters, a decline of about 13% from 2004 due mainly tothe increasingly high sensitivity of consumers to the price offuels in light of the increase in prices in the year. At 2005year end service stations selling BluDiesel were over 4,000(about 3,900 at 2004 year end) corresponding to approximately 92%of Eni’s Agip branded network.

In 2004, Eni started to sell the new BluSuper gasoline, whichguarantees better engine performance and efficiency and reducespolluting emissions, due 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 2005 salesvolumes of BluSuper amounted to 150 million liters. At 2005 yearend Agip branded service stations selling BluSuper were 1,719(about 1,000 at 2004 year end) corresponding to approximately 39%of Eni’s network.

In January 2006 Eni started to sell "Ad-Blue®",a water solution containing urea for technologically advancedheavy duty vehicles. This additive, compatible with the newcharacteristics of most trucks built in Europe reacts withexhaust gases thus reducing emissions and consumption andimproving engine performance.

In 2005, Eni continued its 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; turnover on cardsincreased by 9% from 2004. The amount of fuel purchased withthese cards was about 37% of all fuel sold on Agip brandedservice stations. 

Eni also continued 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, 2005 nearly all Agip branded servicestations were provided with a corporate credit card system.

In 2005, Eni continued the development of the EuropeanMulticard Routex paying card addressed to professional transport(transporters and car fleets) with sales of 1.414 billion liters(up 3.4% over 2004), while the number of customers provided withthis card increased by about 5,000 to 50,000 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, and services to customersin particular 1,000 café and fast food outlets as well asinnovative 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 2005, a total of 80 new affiliates were added to theAgipCafè® branded outlets launched in 2003, and byyear end 287 franchises were active, while 10 new conveniencestores under the "SpazioAgip" brand name were opened,thus reaching a total of 19 locations. Also 45 new car-washfacilities were opened at Agip branded service stations, thusreaching a total of 685 units. In the next four years Eni intendsto continue the development of its non oil activities and expectsto provide 70% of its Agip branded network with these structuresby 2009 (50% in 2005).

> 
*Retail sales outside Italy*

At December 31, 2005, Eni’s retail distribution networkoutside Italy was represented by service stations located in therest of Europe, mainly in South-Central Germany, Spain,South-Western France, Austria, Switzerland, the Czech Republicand Hungary, and consisted of 1,933 service stations, 37 morethan at December 31, 2004, due in particular to the acquisitionof lease concessions in Spain, France and Germany. Throughput perservice station averaged 2,427,000 liters, up 1.4% from 2004.Sales of refined products totalled 3.67 million tonnes,representing an increase of 0.20 million tonnes over 2004, up5.8%, reflecting higher sales mainly in Germany, Spain and theCzech Republic.

Eni intends to develop or strengthen its market share incertain geographic areas where it can obtain logistical andoperating synergies and exploit its Agip brand. Eni plans to growsales volumes buying, leasing and building well equipped and highthroughput services stations and by launching marketing campaignsaimed at consolidating the perception of the Agip brand in targetmarkets.

Non oil activities outside Italy are performed under the"CiaoAgip" brand name in 1,120 service stations, ofthese 330 are in Germany and 163 in France, representing 58% ofthe whole Agip branded network outside Italy (97% whencalculating the percentage on all owned service stations).

> 
***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 90 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 heavyduty public and private transports.

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 (10.48 million tonnes)were down 0.22 million tonnes from 2004, or 2.1%, mainly due to adecline in domestic consumption and lower sales of fuel oil tothe power generation segment, due to the progressive substitutionof fuel oil with natural gas as feedstock for power plants.

Sales on wholesale markets outside Italy (4.50 million tonnes)declined by 0.80 million tonnes, or 15.1%, due mainly to lowerLPG sales resulting from the divestment of activities in Brazil,offset in part by higher sales in the rest of Europe, inparticular in Central-Eastern Europe, while they declined inGermany and Spain. 

Other sales (22.93 million tonnes) increased by 0.36 milliontonnes, or 1.6%, due mainly to higher sales in Italy related tosupplies to IP (up 650,000 tonnes) offset in part by lower salesto oil companies and traders outside Italy (down 305,000 tonnes).

> 
***Other Businesses***

> 
*LPG*

In Italy Eni is engaged in the production, distribution andsale of LPG. In 2005 Eni sold 649,000 tonnes of LPG for heatingand automotive use (under the Agip brand and wholesale), with a19% market share. An additional 400,000 tonnes of LPG were soldthrough other channels mainly to oil companies and traders. LPGactivities in Italy derive their products from five Italianrefineries and from imports received at the three coastal storagesites located in Livorno, Naples and Ravenna. Productavailability and customer requirements are met also with 10 otherowned plants/storage sites in Italy and 45 contracts for bottlingand storage with third party facilities. Eni’s LPG salesnetwork is organized over six sale areas with 3 direct salesoffices, 21 agencies and 24 concessionaires. Products are soldalso to over 150,000 customers owning small tanks, while the salenetwork of LPG bottles includes over 11,000 outlets. In the pastfew years LPG pipelines were developed and over 13,000 customersare served through direct links with 95 storage facilities.

Outside Italy Eni is also present in Ecuador with a 36.4%market share in 2005.

> 
*Lubricants*

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

In Italy Eni is a market leader in lubricants with themanufacturing of base oils and with a range of products includingover 650 different blends. Eni masters internationalstate-of-the-art know-how for the formulation of products forvehicles (engine oil, special fluids and transmission oils) andindustries (lubricants for hydraulic systems, industrialmachinery and metal processing). Base oils are manufacturedprimarily at Eni’s refinery in Livorno. Eni owns twofacilities for the production of additives and solvents. In 2005,retail and wholesale sales in Italy amounted to 133,000 tonneswith a 23.9% market share. Eni also sold approximately 5,000tonnes of special products (white oils, transformer oil andanti-freeze fluids).

Outside Italy sales amounted to approximately 139,000 tonnes,of these about 50% were registered in Europe (mainly Germany, theNetherlands and Spain).

> 
*Oxygenates*

Eni, through its subsidiary Ecofuel (Eni’s interest100%), sells about 2 million tonnes/y of oxygenates mainly MTBE(9% of world demand) and methanol. About 67% of products aremanufactured in Eni’s plants in Ravenna, Venezuela (in jointventure with Pequiven) and Saudi Arabia (in joint venture withSabic), while the remaining 33% is bought from third parties. InVenezuela Eni plans to convert its MTBE plants to the manufactureof isoethane, due to the 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, basicand intermediate products, chlorine derivatives, polystyrene,elastomers and polyethylene. Its major production sites arelocated in Italy and Western Europe.

In 2005 sales of petrochemical products (5,376,000 tonnes)were up 189,000 tonnes, or 3.6% from 2004, reflecting primarilyhigher sales of intermediates (up 13%), olefins (up 8.8%) andaromatics (up 6%) related to positive demand, higher productavailability and the fact that intermediate sales, in particularacetone and phenol, declined in the first quarter of 2004following a standstill due to an accident at the Porto Torresdock. These increases were offset in part by a decline in: (i)elastomers (down 4.5%) related mainly to the standstill of thepolychloroprene rubber plant in Champagnier, France; (ii) styrene(down 2.6%) related to standstills and shutdowns; and (iii)polyethylenes (down 2.3%) due to weak demand for LDPE and LLDPE.

At December 31, 2005, Eni’s sales network covered 17countries, with Italy accounting for 51% of sales, the rest ofEurope for 44% and the rest of the world for 5% (54%, 40% and 6%,respectively in 2004).

Production (7,282,000 tonnes) was up 164,000 tonnes from 2004,or 2.3%, in particular in basic petrochemicals. Nominalproduction capacity declined 1.8% from 2004 due mainly torevisions of the nominal capacity of the Gela cracker and theshutdown of the DMC and ABS plants in Ravenna. The average plantutilization rate calculated on nominal capacity was up 3percentage points from 75.2 to 78.4 due mainly to fewermaintenance standstills.

About 35.8% of total production was directed to Eni’s ownproduction cycle (36.7% in 2004). Oil-based feedstocks suppliedby Eni’s Refining & Marketing segment covered 23% ofrequirements (22% in 2004).

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

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

|   | **2001** |   | **2002******(1) |   | **2003******(1) |   | **2004** |   | **2005** |
|--------|----------|--------|-----------------|--------|-----------------|--------|----------|--------|----------|
|   |          |   |                 |   |                 |   |          |   |          |

|   | **(thousand        tonnes)** |
|--------|------------------------------|

| Basic        petrochemicals         |   | 6,119  |   |   | 4,304  |   |   | 4,013  |   |   | 4,236  |   |   | 4,450  |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Styrene and elastomers              |   | 1,537  |   |   | 1,538  |   |   | 1,635  |   |   | 1,606  |   |   | 1,523  |   |
| Polyethylene                        |   | 84     |   |   | 1,274  |   |   | 1,259  |   |   | 1,276  |   |   | 1,309  |   |
| Polyurethane                        |   | 91     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
|                                |   | 7,831  |   |   | 7,116  |   |   | 6,907  |   |   | 7,118  |   |   | 7,282  |   |
|                                |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
| Internal        consumption         |   | (3,185 | )      |   | (2,607 | )      |   | (2,651 | )      |   | (2,616 | )      |   | (2,606 | )      |
| Purchases and change in inventories |   | 588    |   |   | 984    |   |   | 1,010  |   |   | 685    |   |   | 700    |   |
|                                |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |
| Total products                      |   | 5,233  |   |   | 5,493  |   |   | 5,266  |   |   | 5,187  |   |   | 5,376  |   |
|                                |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |

----

|   |   |                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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,** |
|--------|-----------------------------|
|   |                             |

|   | **2001** |   | **2002******(1) |   | **2003******(1) |   | **2004** |   | **2005** |
|--------|----------|--------|-----------------|--------|-----------------|--------|----------|--------|----------|
|   |          |   |                 |   |                 |   |          |   |          |

|   | **(thousand        tonnes)** |
|--------|------------------------------|

| Basic        petrochemicals |   | 3,928 |   | 2,894  |   | 2,704  |   | 2,766  |   | 3,022  |
|-----------------------------|--------|-------|--------|--------|--------|--------|--------|--------|--------|--------|
| Styrene and elastomers      |   | 1,138 |   | 1,151  |   | 1,171  |   | 1,038  |   | 1,003  |
| Polyethylene                |   | 84    |   | 1,448  |   | 1,391  |   | 1,383  |   | 1,351  |
| Polyurethane                |   | 83    |   |   |   |   |   |   |   |   |
|                        |   |       |   |        |   |        |   |        |   |        |
| Total sales                 |   | 5,233 |   | 5,493  |   | 5,266  |   | 5,187  |   | 5,376  |
|                        |   |       |   |        |   |        |   |        |   |        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 (3,022,000 tonnes) increased by256,000 tonnes from 2004, up 9.3%, due to increases registered inall basic chemicals businesses.

In olefins (up 8.8%) sales of ethylene (up 10.7%), propylene(up 5.8%) and butadiene (up 33.6%) increased due to high demandfrom the Far East. In aromatics (up 6%) sales of the mostremunerative products (paraxylene up 13.5% and metaxylene up35.1%) increased supported by a particularly lively market. Inintermediates (up 13%) phenol sales increased 16.7% and acetonesales increased 11.1% related to a positive trend in demand andthe fact that in the first quarter of 2004 sales declined due toa standstill for an accident at the Porto Torres dock.

Basic petrochemical production (4,450,000 tonnes) increased by214,000 tonnes from 2004 (up 5.1%) due to increases registered inall businesses (olefins up 3.8%, aromatics up 8.4%, intermediatesup 7%).

Increased olefin production derived mainly from the Brindisi(up 19.9%), Dunkirk (up 12%) and Priolo (up 8.1%) crackers.Declines concerned Gela (down 26.7%) where only one line wasactive and Porto Marghera (down 13.2%) due to a plannedmaintenance standstill.

> 
*Styrene and elastomers*

Styrene sales (581,000 tonnes) decreased by 16,000 tonnes from2004, down 2.6%, due mainly to lower ABS/SAN availability (down23.6%) related to the shutdown of the Ravenna plant in April 2005and lower availability of products due to technical accidentscaused by power cutoffs at the Mantova plant in the last quarterof 2005. This decline was offset in part by the 2.8% increase inexpandable polystyrene sales pushed by the strong increase indemand especially in Eastern Europe, in particular for increasedconsumption in the segment of thermal insulation and industrialpackaging.

Elastomer sales (422,000 tonnes) decreased by 19,000 tonnesfrom 2004, down 4.5%, due mainly to the standstill of theChampagnier plant (polychloroprene rubbers) and the decline inSBR (down 12.7%) and TPR (down 2.5%) rubber due to a decline indemand related to the crisis in the shoe manufacturing industry.These declines were offset in part by an increase in sales of EPRrubber (up 19.6%) and latex (up 7.5%), due to lively demand.

Production of styrene (1,048,000 tonnes) declined by 70,000tonnes from 2004, due mainly to plant shutdowns and standstills.

Elastomers production (475,000 tonnes) decreased by 13,000tonnes or 2.5%, due to plant standstills and a declining demandfor SBR rubber (down 4.8%) and BR (down 4.2%), while demand forEPR rubber (up 13.7%) and latex (up 11%) increased in line withthe increase in demand.

> 
*Polyethylene*

Sales of polyethylene (1,351,000 tonnes) decreased by 32,000tonnes from 2004, down 2.3%, due to a decline in demand for allproducts, in particular LDPE (down 3.4%) and LLDPE (down 1.9%),also due increasing competition from imported products.

Production (1,309,000 tonnes) increased by 33,000 tonnes or2.6%, due mainly to increases in LLDPE (up 8%), due to theflexibility at the Brindisi plant that produced mainly LLDPE inits high pressure line, while HDPE production declined (down 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 and LNG.

Eni, through its subsidiary Snamprogetti (100% Eni), isengaged in engineering and contracting in the area of plants forhydrocarbon production, treatment and transport, for theliquefaction and treatment of natural gas, for the conversion ofheavy residues from conventional and non conventional crudes, forthe chemical industry, for power generation, infrastructure andenvironmental protection.

Orders acquired in 2005 amounted to euro 8,188 million.Approximately 89% of new orders acquired were represented by workto be performed outside Italy, and 11% by work originated by Enicompanies. Order backlog was euro 9,964 million at December 31,2005 (euro 8,521 million at December 31, 2004). Projects to becarried out outside Italy represented 88% of the total orderbacklog, while orders from Eni companies amounted to 7% of thetotal.

On February 24, 2006, Saipem agreed to purchase the entireshare capital of Snamprogetti owned by Eni SpA. The transactionwas closed on March 27, 2006. The integration of the companieswill boost their role in the development of Eni’s oil &gas core business.

| **Orders        acquired and order backlog** |   |   |     |   |     |   |     |
|----------------------------------------------|--------|--------|----------|--------|----------|--------|----------|
|                                         |   |   |          |   |          |   |          |
|                                         |   |   | **2003** |   | **2004** |   | **2005** |
|                                         |   |   |          |   |          |   |          |

| **Orders        acquired**             |   | (million euro) |   | **5,876** |   | **5,784** |   | **8,188** |
|----------------------------------------|--------|----------------|--------|-----------|--------|-----------|--------|-----------|
| Oilfield Services Construction         |   |           |   | 4,298     |   | 4,387     |   | 4,735     |
| Engineering                            |   |           |   | 1,578     |   | 1,397     |   | 3,453     |
| Originated by Eni companies            |   | (%)            |   | 11        |   | 14        |   | 11        |
| To be        carried out outside Italy |   | (%)            |   | 91        |   | 90        |   | 89        |
| **Order backlog**                      |   | (million euro) |   | **9,405** |   | **8,521** |   | **9,964** |
| Oilfield        Services Construction  |   |           |   | 5,225     |   | 5,306     |   | 5,513     |
| Engineering                            |   |           |   | 4,180     |   | 3,215     |   | 4,451     |
| Originated        by Eni companies     |   | (%)            |   | 10        |   | 8         |   | 7         |
| To be carried out outside Italy        |   | (%)            |   | 81        |   | 84        |   | 88        |

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

> 
***Oilfield Services and Construction***

Saipem intends to consolidate its competitive positioning inthe segment of large offshore projects for the development ofhydrocarbon fields and the construction of large exportinfrastructure by leveraging on its technological and operationalskills, engineering and project management capabilities andability to operate in complex environments. Leveraging on theseassets, Saipem plans to address key success factors of the marketrepresented by the ability to evaluate risks in the biddingphase, technological innovation, ability to manage efficientlythe execution of projects by delocalizing support activities tolow cost areas and enhancing local contents by employing localresources and creating decentralized logistical bases.

Saipem intends to develop its presence and enter the strategicsegments of monetization of natural gas (GTL, LNG) and upgradingof heavy crudes by developing the required skills and resourcesmainly in the engineering and project management phases. It alsoplans to expand in the leased FPSO business and in floating LNGtreatment systems for liquefaction and regasification of LNG.

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 2005 in oilfield servicesand construction were:

In the Offshore construction area: in **West Africa**: twoturnkey contracts were awarded: (i) the first one for TotalUpstream Nigeria for the installation and operation ofunderwater, umbilical and riser pipelines; and the constructionof an unloading terminal, a mooring system for the FPSO vesseland the laying of a pipeline. Works will be carried out by theSaibos FDS and Saipem 3000 vessels; and (ii) the second one forEsso Exploration Angola Ltd for the engineering, procurement,construction and installation of subsea lines for the Marimbafield development in Block 15; in **Indonesia**: two turnkeycontracts for BP Berau Ltd for the construction of two platformsand the related underwater pipelines linking the Tangguh fieldwith the gas liquefaction plant onshore; and in **Thailand:**a turn key contract for Thai Oil Public Company Ltd for theconstruction of unloading facilities to supply oil to a refineryin Sri Racha in the Gulf of Siam. Works will be performed in2007, and the installation will be carried out by Castoro 8vessel.

In the Leased FPSO area a contract for Petrobas for theconversion of an oil tanker into the new Vitoria FPSO vessel witha production capacity of 100,000 BBL/d and a storage capacity of1,600,000 BBL for the development of the Golfinho 2 fieldoffshore Brazil at a depth of 1,400 meters.

In the Offshore drilling area two contracts were acquired. Thefirst one for Total Exploration and Production Angola, involvingthe deep water drillship Saipem 10000 for activities to beperformed on the Rosa field for two years plus the option of afurther two years. The second one for Burrullus Gas Companyinvolves the renewal of contract for the semi-submersibleScarabeo 6 for three months in Egypt.

In the Liquefied Natural Gas area two contracts were awarded:(i) the first one, in association with Technip and Zachry, forthe engineering and procurement of tanks for an LNGregassification terminal on the Quintana island in Texas; and(ii) the second one, in consortium with the Mexican companyGutsa, for the construction of infrastructure for the mooring anddry-docking of tankers at the Costa Azul in Mexico.

In the Onshore construction area two turnkey contracts wereacquired: (i) the first one for Saudi Aramco to convert theexisting East-West pipeline from oil to gas transport. Itincludes also fabrication, construction, installation andcommissioning of new sections of East-West line and relatedfacilities. Works will be performed in early 2008; and (ii) thesecond one for Sonatrach-Sonelgaz for the engineering,procurement and construction of a gas-fired power station. 

In the Onshore drilling a contract for the North Caspian Seaconsortium for drilling activities in Block D of the Kashaganfield utilizing two drillings rigs owned by the client.Activities will be performed for five years.

 

> 
*Business areas*

OFFSHORE CONSTRUCTIONSaipem is able to execute large projects for the development ofoffshore hydrocarbon fields by integrating its technical andoperational skills, supported by a technologically advanced fleetand the ability to operate in complex environments, withengineering and project management capabilities acquired on themarket (among which Bouygues Offshore, Moss Maritime,Petromarine, Idpe). The services that Saipem can currentlyprovide to its customers can cover the main market segments suchas: (i) floating production units (FPU); (ii) underwaterdevelopments; (iii) fixed platforms; and (iv) pipelines.Management expects the demand for these services to increase inparticular in the FPU and underwater development areas, due tothe increased share of deep water development projects. Key areasare West Africa, Asia Pacific, and Latin America. 

Saipem operates in the area of deep offshore hydrocarbon fielddevelopment by means of the construction and installation ofFPUs. Among FPUs, FPSO vessels offer the main interesting marketprospects due to their storage capacity, which allows to developfields remote from transport 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 underwater development inthe deep offshore, which includes laying of small diameter pipes,umbilical lines, risers and other sub sea structures thanks tothe design ability of its engineering structures and theinstallation capacity of its vessels. Saipem is also engaged inthe segment of design, procurement and installation of fixedplatforms, in particular in the segment of ultra heavy lifting,thanks to the technical features of its vessels. Saipem is ableto execute the laying of large diameter long distance subseapipelines and transport infrastructure both in conventional anddeep offshore. 

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 Saibos FDS for the development ofunderwater fields in dynamic positioning, provided with craneslifting up to 600 tonnes and a system for j-lay pipe laying to adepth of 2,000 meters; (iii) the Castoro 6 semi-submersiblevessel, capable of laying pipes in waters up to 1,000 metersdeep; (iv) the Saipem 3000 multifunction vessel for thedevelopment of hydrocarbon fields, derived from thetransformation of the Maxita that can lay rigid and flexiblepipes and is provided with cranes capable of lifting over 2,000tonnes; and (v) the Semac semisubmersible vessel used for largediameter underwater pipe laying. The fleet includes also remotelyoperated vehicles (ROV), highly sophisticated and advancedunderwater robots capable of performing complex interventions indeep waters.

OFFSHORE DRILLINGSaipem provides offshore drilling services to oil companiesmainly in key areas such as West Africa, the North Sea and theMediterranean Sea, it operates in the most complex segments ofdeep and ultra deep offshore. Management expects demand foroffshore drilling services to increase steeply in the short tomedium-term according to the exploration plans announced by themajor oil companies. Management expects unit tariffs to besupported by a shortage of supply. West Africa is confirmed asone of the most attractive areas. Saipem can seize these marketopportunities by leveraging on the technical features of itsequipment. Its offshore drilling fleet consists of 10 vesselsproperly equipped for its primary operations and some drillingplants installed on board of fixed offshore platforms. One of itsmost important offshore drilling vessels is the Saipem 10000,designed to explore and develop hydrocarbon reservoirs operatingin excess of 3,000 meters water depth in full dynamicpositioning. The ship has a storage capacity of 140,000 BBL andcan maintain a steady operating position without anchor mooringsby means of 6 computerized azimuth thrusters, which offset andcorrect the effect of wind, waves and current in real time.Capital expenditure for building this ship amounted to about $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/SALE FPSOSaipem provides to oil companies services for the development ofoffshore hydrocarbon fields by leasing its FPSO vessels.Following acquisitions carried out in recent years (in particularMoss Maritime and Bouygues Offshore), Saipem significantlystrengthened its design skills. The leasing of an FPSO representsan alternative to direct expenditure for oil companies. WestAfrica and Latin America are the markets with the highestexpected growth rates due to the number of development projectsannounced or started-up by oil companies. Saipem’s mainvessels are: (i) FPSO Firenze, a tanker ship which, after itsconversion into a floating production and storage vessel, hasbeen installed in Eni’s Aquila field, in the Adriatic Sea,where it operates at a depth of 850 meters; and (ii) FPSOMystras that has been installed since January 2004 in the Okonoand Okpoho oil fields operated by Eni with a 100% interest in thedeep offshore of Nigeria. Saipem intends to expand its marketshare in this business and plans to upgrade its offer by adoptingthe new generic FPSO vessels, designed and equipped in directcooperation with the client in order to identify standardfeatures that make the vessel easily employable in more than onedevelopment project according to the client’s portfolio offields. In this light, Saipem is building its new Vitoria unitthat will be operating on the Golfinho 2 field in the offshore ofBrazil.

ONSHORE CONSTRUCTIONSaipem operates in the construction of plants for hydrocarbonproduction (separation, stabilization, collection ofhydrocarbons, pumping stations, water injection) and treatment(removal and recovery of sulphur dioxide and carbon dioxide,fractioning of gaseous liquids, recovery of condensates) and inthe installation of large onshore transport systems (pipelines,compression stations, terminals). The demand for this kind ofservices from the oil industry is expected to increase in themedium-term, in particular long distance pipelines represent oneof the favorite systems for linking production areas with theirend markets, despite the increasing competition from othertransport modes (LNG, GTL). The main operation areas are Africaand the Middle East. Saipem also boasts a consolidated presencein remote areas such as the Caspian Sea and Far East Russia,leveraging on its ability in operating in hostile environments,managing complex projects and enhancing local content, inaddition to providing on land services complementing offshoreactivities (key factor in projects in areas such as the CaspianSea). Saipem intends to consolidate its competitive positioningin the strategic segment of monetization of natural gas (GTL,LNG) and upgrading of heavy crudes by upgrading and acquiring theskills and resources necessary in the engineering and projectmanagement phases, which are key factors in this segmentcharacterized by large EPC contracts. The acquisition ofSnamprogetti is a key step in this direction.

ONSHORE DRILLINGSaipem operates in this area as main contractor for the majorinternational oil companies performing its activity mainly inSaudi Arabia, North Africa and Peru, where it can leverage on itsknowledge of markets and integration with other business areas.Saipem also boasts a long standing presence in remote areas (suchas the Caspian Sea) based on its operating skills and ability tooperate in hostile environments. Onshore drilling is conductedthrough 23 drilling platforms and 15 workover plants that candrill to 10,000-meter depths in high pressure and hightemperature environments.

LNGSaipem operates in the LNG segment following its purchase ofBouygues Offshore and Moss Maritime which contributed theirexperience in the LNG chain, complementary to the onshore andoffshore transport of natural gas. The markets offering thehighest potential are Asia, Europe and the Americas. Servicesprovided by Saipem include: (i) the onshore segment which,according to management, shows interesting growth prospects,where Saipem is engaged in the design and construction ofregasification terminals, storage tanks and in the design of gastanker ships. Saipem also intends to acquire skills and criticalmass in liquefaction; and (ii) the offshore segment, thatincludes FSRU (Floating Storage Regasification Units) and FNLG(Floating Liquefaction plants for Natural Gas) integrated systemswhich, according to management, show interesting growth prospectsin the medium-term due to their lower environmental impact andgreater flexibility as compared to other systems. Saipem intendsto develop its presence in this segment.

MAINTENANCE, MODIFICATION & OPERATIONSaipem is also present in the MMO business which complements thecompany’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 consolidate its competitivepositioning in the market of high complexity onshore projects,mainly in the strategic segments of oil and gas, natural gasmonetization (GTL, LNG) and ethylene. In order to attain thisobjective, Snamprogetti intends to focus on the role of the maincontractor, leveraging on its skills in terms of projectmanagement capabilities, a wide and integrated array of servicesprovided and availability and continuing development ofproprietary technologies.

Snamprogetti intends to expand the supply of qualifiedservices in the phases of front end loading of projects(feasibility studies, conceptual, basic and front end engineeringand project management) mainly to major clients and as a supportto Eni’s investment plans.

It plans also to intensify actions for improving operationalefficiency and flexibility also through the rationalization ofits operating structure, full utilization rates of low costengineering and fabrication centers, the optimization ofprocurement, the adoption of the most stringent internationalbest practices in terms of working tools and methods and thehiring of highly qualified resources.

Snamprogetti intends to continue enhancing its proprietaryportfolio of technologies by means of support activities to thedevelopment on an industrial scale of technologies in strategicareas, such as the conversion of heavy crudes and high pressuretransmission of natural gas, and the development of know-how inthe field of the manufacture of high quality fuels and in thearea of natural gas monetization (GTL, syngas, methanol, ammonia,urea).

In 2005, the engineering order backlog increased by euro 1,236million due in particular to the recovery ongoing in referencemarkets, in particular the following contracts were awarded: (i)an EPIC contract for Abu Dhabi Gas Industries (GASCO) for theconstruction of a single line plant with a treatment capacity of24,400 tonnes/y of LNG at the Ruwais complex in the United ArabEmirates. Works include also the construction of storagefacilities, new port infrastructure and the provision ofancillary services; (ii) the Escravos GTL project in Nigeria, injoint venture with U.S. company KBR for Chevron for theconstruction of a 34,000 BBL/d plant for the production of dieselfuel, naphtha and LPG; and (iii) the Hawiyah GTC project in SaudiArabia for Saudi Aramco for the construction of a natural gastreatment and compression plant with a capacity of 31,000 BBL/d.

> 
*Business areas*

PLANTS*Oil & Gas* Snamprogetti is engaged in the execution ofcomplex and technologically advanced projects in the area ofplants for hydrocarbon production, natural gas treatment andmonetization (LNG; recovery and fractioning of natural gasliquids). Based on the capital expenditure plans announced by oilcompanies, Snamprogetti expects a 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 by means of acquiring and developing needed competencein particular in the business of liquefaction. Significantcapital expenditures for expanding liquefaction andregasification capacity of about 130 million tonnes/y of LNG(equivalent to 180 BCM/y) are expected in the next four years.

*Refining* Snamprogetti is engaged in the segment ofconventional plants (grass root refineries and refining units)and in the segment of plants for the hydroconversion andhydrotreatment of heavy residues and distillates. Snamprogettiintends to seize the growth opportunities of the business ofplants for heavy residue conversion and production of cleanfuels. Growth in this business is supported by the wideravailability of heavy crudes and by the increasingly stringentenvironmental requirements on emissions established worldwide. AtEni’s Taranto refinery the first demonstration plant with1,200 BBL/d capacity based on the Eni Slurry Technology isnearing completion. This technology has a high strategic valueand aims at meeting the increasing demand for upgrading of heavycrudes and non conventional crudes (tar sands) and for conversionof 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). Snamprogetti plans to grow inthe strategic segment of conversion of natural gas to liquids(GTL) for the manufacture of high value added products (LPG,diesel fuel and virgin naphtha); in this segment, where syngas isa critical element, Snamprogetti owns a proprietary technologythrough its subsidiary Haldor Topsøe. Snamprogetti holds a soundposition 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 world scale ethylene in particular in areas where feedstockshave a low price (especially the Middle East). Snamprogettiintends to seize this opportunity leveraging on its skills.

*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 PIPELINESSnamprogetti is engaged in the design and construction ofpipelines for the transport of hydrocarbons, collection networksand upstream plants (construction of primary separation plants,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 monetization of reserveslocated in remote areas (see: "Innovative Technologies"below).

INFRASTRUCTURESnamprogetti is active in the field of design and construction ofgreat infrastructure in Italy. In particular it is working at thecompletion of the high speed/high capacity train tracks fromMilan to Bologna.

AQUATER - ENVIRONMENTAL ACTIVITIESSnamprogetti, 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 DUESnamprogetti holds interests in the CEPAV Uno (50.36%) and CEPAVDue (52%) consortia that in 1991 signed two contracts with TAVSpA for 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 of the contract. In 2005, the consortium CEPAV Unorequested a time extension for the completion of works and anadditional payment amounting to approximately euro 800 million.CEPAV Uno and TAV failed to solve this dispute amicably, and onApril 27, 2006, CEPAV Uno notified TAV of a request forarbitration, as provided under the terms of the contract.

At the end of 2005, CEPAV Uno Consortium had completed workscorresponding to 71% of the total contractual price in line withthe contractual obligations.

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 byan Italian governmental authority (CIPE).

The final project was due to be examined by TAV for finalapproval. CEPAV Due started an arbitration procedure against TAVfor the recognition of damage related to TAV’s belatedcompletion of its tasks. A final decision is expected late in2006.

 

##### Table of Contents

**Other Activities**

Eni’s other activities are organized as follows:

| • |   | the "Other        Activities" aggregate of subsidiaries, including        Syndial SpA (former EniChem), which manages certain        decommissioning and reclamation activities relating to        certain shut down industrial sites of Eni, and certain        other Eni subsidiaries (such as, among others, Sieco,        Tecnomare, EniTecnologie, Eni Corporate University and        AGI) engaged in diversified activities (mainly services        to Eni business segments, such as real estate services,        general purposes services, corporate research, training);        and                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the "Corporate and        financial companies", including Eni Corporate and        certain of Eni’s subsidiaries engaged in treasury        services, Eni Corporate is the department of parent        company Eni SpA performing Group strategic planning,        human resources management, finance, administration,        information technology, legal affairs, international        affairs and corporate research and development functions.        Through Enifin SpA, Società Finanziamenti        Idrocarburi-Sofid SpA and Eni International BV, Eni        carries out lending, factoring, leasing and insurance        activities, principally on an intercompany basis. |

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

> 
***Seasonality***

*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.*

 

##### Table of Contents

**Research and Development**

In technological research and innovation activities Eni plansto implement a capital expenditure programme in the 2006-2009four year plan in order to develop such technologies thatmanagement believes may ensure competitive advantages in thelong-term and promote sustainable growth. Eni plans to continuedeveloping existing programmes on clean fuels, sulphur andgreenhouse gas management as well as projects such as theupgrading of heavy crudes (EST), high pressure gas transmission(TAP) and Gas to Liquids (GTL).

In 2005, Eni’s costs incurred for research anddevelopment amounted to euro 204 million, of these 32% wereincurred by Eni’s research department, 25% by theExploration & Production segment, 24% by the Petrochemicalsegment and 13% by the Refining & Marketing segment. AtDecember 31, 2005, a total of 1,420 persons were employed inresearch and development activities. In 2004, Eni’s costsincurred for research and development amounted to euro 257million, of which 39% were incurred by Eni’s researchdepartment, 21% by the Exploration & Production segment, 21%by the Petrochemical segment and 12% by the Refining &Marketing segment. At December 31, 2004, approximately 1,470persons were employed in research and development activities(1,400 at December 31, 2003).

In the next four years Eni plans to invest approximately euro1 billion, balancing resources between 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 the greenhouseeffect, through the capture and geological sequestration ofcarbon dioxide.

Follows a description of Eni’s key research anddevelopment projects.

INNOVATIVE TECHNOLOGIES FOR SUBSOIL SURVEYIn 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.

In the area of seismic imaging, the further developments ofthe proprietary "3D Common Reflection Surface (CRS)Stack" technology found various industrial applications withmuch higher efficiency than conventional techniques. New depthimaging techniques based on proprietary algorithms can generatedepth images with such high resolution that they allow a veryprecise physical characterization of reservoirs. A new 3Dresistivity modeling interpretive technique has been developedfor the petrophysical measurement of wells (electrical logs),especially suited for the identification of complexmineralization situations, such as thin strata of sand and clay.Initial field applications proved that this new approachcontributes to the production of more accurate estimates ofreserves in place.

DRILLING OF "ADVANCED WELLS"Eni developed and applied at industrial level a series ofinnovative technologies that allow to drill highly complex wellswith greater 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 use of products formud and cement and the resulting waste by about 30-40%.

Wells obtained with this technique are high quality and lowrisk. The technique basically consists in reducing to a minimumthe tolerance between the diameter of wells and their liningcolumns while keeping the production casing unchanged. Theapplication underway in Val d’Agri is a record lean drillingin highly deviated wells (a 13"3/8 casing in a 14"3/4hole with inclination up to 60°).

INNOVATIVE TECHNOLOGIES FOR THE TREATMENT OF LIQUIDSIn 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 SULFURThe Research & Development project for the optimal managementof reserves with high content of hydrogen sulfide and sulfurstarted in 2003 is continuing. The project aimed at developinginnovative technologies and/or advanced processes able to managethe disposal and possible exploitation of high amounts of sourgas and 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.

In 2006 the integrated research program called H2Sand sulphur management in Exploration & Production operationswill be completed. The program was aimed at identifyinginnovative solutions for the treatment of very sour gas. Inparticular significant progress was achieved in an innovativetechnology for H2S bulk removal and in a new systemfor the massive storage of sulphur.

ENI SLURRY TECHNOLOGYEST is a process of catalytic hydroconversion in the slurry phasethat allows to convert asphaltenes (the hard fraction of heavycrudes) totally, thus reducing to zero the production of solidand fluid residues usually deriving from the refining of nonconventional oil.

It is a flexible technology that satisfies the needs ofupstream and downstream oil and can be adapted to various kindsof feedstocks to be converted, to different capacities andplants. Among its products are naphtha, kerosene, diesel fuel.

The development of this technology was started at thebeginning of the 80s and the decision to test it industriallymade possible in 2001 the building of a commercial demonstrationplant with a 1,200 BBL/d capacity at Eni’s Taranto refinerycompleted in 2005. It is currently being run for reaching thevalidation of the technology.

This will provide Eni with an important competitive lever fora more economic use of the full barrel of crude with lowerenvironmental impact.

NATURAL GAS TRANSPORT – THE TAP PROJECTAmong the reliable technologies for making the transmission viapipeline of relevant amounts of natural gas from production areasto consuming markets economically viable (gas to market), the TAP(high pressure transport) project will contribute to developingthe most advanced long distance, high capacity, high pressure andhigh grade solutions with relevant targets related to:

| (i)   |   | distances over 3,000        kilometers;                            |
|-------|--------|--------------------------------------------------------------------|
| (ii)  |   | natural gas volumes to be        transported of about 20-30 BCM/y; |
| (iii) |   | pressure equal to or higher        than 15 Mpa; and                |
| (iv)  |   | use of high and very high        grade steel (e.g. X100).          |

The TAP technology is expected to allow a decrease in theconsumption of natural gas used in compressor stations from 7.5%to 3% of transported volumes.

The project was started in 2002 with a wide range of design,engineering and construction activities and in 2005 twoinfrastructures for the validation of its assumptions werecompleted.

The first one is a 10-kilometer long pilot segment in X 80steel with 48" diameter from Enna to Montalbano integratedin the Snam Rete Gas network that allowed to test and validatethe industrial application of the concepts.

The second infrastructure consists of two pilot pipes, with a48-inch diameter in high resistance X100 steel installed inPerdasdefogu in Sardinia. It was started up in September 2005under pressures of 140 bar. Testing is expected to last 20 monthsand will simulate the actual behavior of an industrialinfrastructure for a period equivalent to 20 years.

In 2006 management believes that the first technology manualand FEED developed for a hypothetical trunkline in X100 steelwith a 48" diameter linking Central Asia to Europe (for alength of 3,500 kilometers) will be available. A furtherdevelopment of this project will be the construction andoperation of a commercial line in X100 steel a few-kilometerlong.

CONVERSION OF GAS TO LIQUIDS – GTL PROJECTThis is a key technology for the use of natural gas on a largescale for the production of high quality motor fuels, inparticular diesel fuel and therefore it receives specialattention by all majors due to its primary strategic value.

Eni’s R&D activities in 2005 led to the preparationof the first basic design package for an industrial unit.

In 2006 Eni will continue its development activity at theSannazzaro pilot plant consolidating the Fischer-Tropschsynthesis and optimizing its integration in the first two phasesin order to define the optimal size of the GTL module along withits basic design package.

INNOVATIVE FUELS: CLEAN DIESEL FUEL PROGRAMIn its effort to improve the quality of its fuels, in 2002 Enistarted to sell new virtually sulphur free (less than 10 ppm)products (first BluDiesel and since 2004 BluSuper) anticipatingtheir compliance with EU regulations mandatory beginning in 2009.

With a longer term objective Eni started a clean diesel fuelprogram that aims at identifying the optimal formula for a dieselfuel with high performance and low particulate emissions using asbenchmark GTL Fischer-Tropsch gasoil.

ENVIRONMENTAL PROTECTIONIn the area of environmental protection, with the cooperation ofpartners from industries and academia, Eni is developingtechnologies for reducing the environmental impact of offshoreand onshore E&P and refining operations.

In this area the following projects are worth mentioning:

| • |   | *GHG Program* The        integrated Green House Gases (GHG) research program aims        at verifying the industrial feasibility of the geological        sequestration of carbon dioxide in depleted fields and        salty aquifers.                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | *The Early Warning        Monitoring System (EWMS) project,* for real time        recording of the physical and chemical profiles of        Eni’s productive activities and of their        environmental context through a single computerized        platform. |
| • |   | *The Hydrogen Project*        aiming at developing a portfolio of technologies for        producing hydrogen at competitive costs, also in medium        to small sized plants.                                                                                       |

 

##### 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***

Eni’s operations, products and services are subject tonumerous EU, national, regional and local environmental laws andregulations, including legislation that implements internationalconventions or protocols. In particular, these laws andregulations require that an environmental impact assessment isperformed for new operations, restrict the types, quantities andconcentration of various substances that can be released into theenvironment, limit or prohibit activities on certain protectedareas, and impose criminal or civil liabilities for pollutionresulting from oil, natural gas, refining and petrochemicaloperations. These laws and regulations also restrict emissionsand discharges to surface and subsurface water resulting from theoperations and set the rules for the generation, handling,transportation, storage, disposal and treatment of wastematerials.

Environmental laws and regulations have a substantial impacton Eni’s operations. Some risks of environmental costs andliabilities are 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 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 of industrial sites; (ii) the results of theongoing surveys and the other possible effects of statementsrequired by Decree No. 471/1999 of the Ministry of Environmentconcerning the remediation of contaminated sites; (iii) thepossible effect of new environmental legislation and rules, suchas: (a) the decree of the Ministry of Environment No. 367published on January 8, 2004, that regards the fixing of newquality standards for aquatic environment and dangeroussubstances and Legislative Decree No. 59/2005 concerning theintegrated environmental authorization (IPPC), (b) theapplication of European directive 2004/35/EC concerningenvironmental responsibility for prevention and reclamation ofenvironmental damage, referred to in paragraph 439 of the singleArticle of Law No. 266/2005 (budget law for 2006), and (c) alegislative decree to be issued in implementation of Law No. 308of December 15, 2004 that delegated to the Government therestructuring of regulations concerning waste disposal andreclamation of polluted areas, protection of waters frompollution and management of water resources, payment ofenvironmental damage, procedures for the evaluation ofenvironmental impact and for the strategic environmental impactas well as protection from emission into the atmosphere within 18months. The Decree n. 152/2006 was approved by the Council ofMinisters on February 10, 2006 has been in force since April 29,and it is now under examination by the new Government. The decreealso implements European directive 2000/60/EC that established aEuropean action framework for the protection of waters; (iv) theeffect 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.

A brief description of major environmental laws impacting onEni’s activity follows.

*Decree No. 471/1999* Management of waste, toxic waste,packaging and packaging waste is regulated by Legislative DecreeNo. 22 of February 5, 1997 which refers to three EuropeanDirectives (91/156/CEE, 91/689/CEE and 94/62/CE) and providesincentives to clean technologies and recycling and reuse ofwaste. This decree prohibits the uncontrolled disposal of wasteunderground and in the water and obliges polluting entities toremediate polluted areas. Whenever it is not possible to identifyone person or entity responsible for existing pollution, theowner of the polluted area is expected to pay for itsremediation. This decree became operational with Decree No.471/1999 of the Ministry of the Environment, which also defined:(i) limits for the contamination of soils and underground waters;(ii) general guidelines for remediation and environmentalrecovery of polluted areas; and (iii) criteria for theidentification of polluted areas of national interest. For thestorage of toxic waste, the decree favors techniques avoidingtransport of waste and their on-site treatment. Whoever causes,willfully or accidentally, pollution of an area or actual dangerof pollution is expected to react within 48 hours according tothe procedure set by the decree. At present Eni is not yet ableto evaluate the possible future consequences deriving from thecompletion of on-going surveys and other possible effects of theapplication of Decree No. 471/1999 of the Ministry ofEnvironment; however there can be no assurance there will not bea material adverse impact on Eni’s results of operations andfinancial position from the application of that decree. Law388/2000 changed the regulations concerning the remediation ofpolluted sites, easing the discipline of crimes related to eventsprior to Legislative Decree No. 22/1997 and imposing theremediation of sites where industrial activity is ongoing.However, the remediation is to be carried out provided that itdoes not involve a significant disruption in operations;remediation costs can be amortized in ten years.

The new Decree No. 152/2006, concerning the overall revisionof previous environmental laws, supercedes Decree 471/1999 and,in particular, it envisages that risk assessment be performed inorder to define the extent of the required remediation. At thisearly stage it is not possible to assess the impact of the newlaw on Eni’s activities, but it is expected that, ingeneral, the introduction of risk assessment could reduce theextent of the remediation projects.

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 reached by2008. All discharges require preventive authorization, to berenewed every four years, and must lie below the thresholds setby Regions. The Decree No. 152/2006 has also renovated theprevious water legislation, by aligning it to the lessrestrictive EU water directive. To date Eni cannot evaluate thepossible impact of the application of the new law. However, therecan be no assurance that there will not be a material adverseimpact on Eni’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 - IntegratedPollution Prevention and Control), envisages that industrialinstallations will apply for an integrated authorizationconcerning emissions, wastes and water discharges. The calendarfor the request of the integrated authorization has recently beendefined. Many of Eni’s plants – refineries, chemicalplants, power stations – will have to apply for theauthorization by the year end. All the Eni installations aregetting ready to request the IPPC authorization, which will havea five year duration, in general, and eight 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 of the EU had to communicate their national valuesof emissions into the atmosphere, wastes produced and managedand, finally, discharges into water of some compounds specifiedin the annexes of the directive relative to EPER (EuropeanPollutant Emission Register). The Directive applies to severalEni plants, so the Eni divisions and/or companies which own theseplants have reported their data to the authority in charge ofpreparing the Italian national communication.

On January 2006, EU Regulation No. 166 was issued concerningthe Pollutant Releases and Transfers Register (PRTR), which arean extensions of the previous EPER registers and deals with allthe emissions and transfers of 91 pollutants to air, water andsoil. PRTR registers will be operational in the year 2009, withrespect to 2007 emissions. To comply with the obligations Eni isconsidering the use of a group-wide Environmental InformationSystem. 

For a description of the impact of Law No. 316 of December 30,2004 (Emission trading) on Eni’s business, see below in"Implementation of the Kyoto Protocol".

> 
***HSE Activity for the year***

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. In2005 business units continued implementing this management systemalong with an audit program aiming at checking its functioning inEni’s business segments and at identifying any measures forits improvement. 

In 2005, Eni’s business units continued to obtaincertification of their management systems and operating unitsaccording to the most stringent international standards. As ofDecember 31, 2005, the total number of certifications obtainedwas 155 (133 in 2004), of which 82 certifications met ISO 14001standard.

*Environment* In 2005, Eni incurred a total expenditureof euro 1,066 million for the protection of environment, up 33%from 2004. Current environmental expenditure amounted to euro 690million and related mainly to the intense program of siteremediation started in the past few years. Capitalizedenvironmental expenditure amounted to euro 375 million andrelated mainly to water management and soil and subsoilprotection.

*Safety* Eni is strongly committed to adopting apreventive approach to safety in order to reduce the occurrenceof accidents and their consequences. Operations are managed witha special focus on the safety of workers, contractors and localcommunities. In line with international best practice, safety,prevention and work hygiene include:

| (i)   |   | identification of dangers,        evaluation and reduction of risks related to the        deployment of work activities;                                  |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | development and        implementation of monitoring measures; and                                                                                         |
| (iii) |   | investigation and analysis        of accidents and near misses in order to learn from them        and increase the ability to prevent and mitigate risks. |

In 2005, expenditure for safety on the workplace amounted toeuro 391 million, 57% of which were for current expenditure withthe remaining part being capitalized. In 2005, the injuryfrequency rate measured as the number of injuries per millionhours worked by Eni’s employees was approximately 3.17,declining from the 2004 level of 4.47.

Health Activities for the protection of health aim atimproving general work conditions and are developed according tothree main principles: (i) protection of employees’ health;(ii) prevention of accidents and professional diseases; and (iii)promotion of healthier behaviors and life styles in workplaces.

In 2005 approximately euro 40 million was invested in theprotection of health.

In Italy, health surveillance is performed in each operatingunit through a network of health centers and by means of medicalexaminations, controls and monitoring campaigns for the majorphysical, chemical and biological risk agents. The health ofemployees outside Italy is protected likewise, in many casesintegrating the typical activities of medicine on the workplaceand first aid with the activities dedicated to primary healthcare extended also to family members and in many cases also tolocal communities.

Eni has a network of 339 own health care centers located inits main operating areas, of these 241 centers are outside Italyand are managed by local staff (322 doctors and 384 nurses). Aset of international agreements with the best local andinternational health centers ensures efficient service and timelyreactions to emergencies.

In 2005 Eni boosted its E-medicine program aimed at increasingthe quality of health care provided to employees and to healthoperators in Italy and outside Italy, that integratescomputerized technologies and advanced telecommunication systems.The program includes three projects:

| (i)   |   | health card, on line access        to health data of employees by means of an electronic        card provided first to groups of employees outside Italy,        that will be progressively extended to all employees;                                                                                                                                                                |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | telemedicine, a project        oriented mainly to health care outside Italy, but open        also to Italian industrial sites, based on contacts with        highly qualified health centers worldwide and capable of        providing real time consultation. This project is        operating in Congo and Nigeria and in 2005 has been        extended to four sites in Libya; and |
| (iii) |   | e-learning, this project        provides access to continuous training programs in the        field of health to Eni’s health operators in Italy        and outside Italy by means of remote learning devices.                                                                                                                                                                   |

In Italy, Eni started a program of prevention, both throughinformation campaigns and by means of screening procedures anddirect actions accessed on a voluntary basis. The areas concernedare:

| (i)   |   | prevention of cancer;                             |
|-------|--------|---------------------------------------------------|
| (ii)  |   | prevention of cardiovascular        diseases; and |
| (iii) |   | prevention of certain        infective diseases.  |

Outside Italy, Eni promoted specific information campaigns forthe protection of its employees, their families and localcommunities, such as those for the prevention of malaria (inNigeria and Azerbaijan) and the prevention of HIV transmission(in Nigeria and Congo).

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

On February 16, 2005 the Kyoto Protocol entered into force andwith it the commitments of the Annex I Parties which haveratified the protocol, including the EU and Italy. According toLaw No. 120/2002, Italy committed itself to reduce GHG emissionsby 6.5% in the period 2008-2012 as compared to 1990 values.Reductions can be achieved both through internal measures andthrough a series of instruments supplementary to internalmeasures. These are the so-called flexible mechanisms, whichallow an enterprise to carry out projects in developing countries(CDM - Clean Development Mechanism) and in industrial countrieswith transition economies (JI - Joint Implementation) in order toobtain emissions credits and to purchase Assigned Amount Unitsfrom other Annex I countries, that have a surplus of these Kyotounits (IET - International Emission Trading).

Italy, as an EU Member State, is participating in the EUEmission Trading Scheme, which established, on January 1, 2005the largest carbon market in the world.

The National Action Plan for the reduction of greenhouse gasemissions 2003-2010, sets out the allowances assigned to eachsector and installation. Eni has cooperated with the authoritiesresponsible for the preparation of the National Allocation Planand it is also active in the utilization of the Kyoto FlexibleMechanisms. In fact, due to its presence in 70 countries, Eni isan elective partner for carrying out CDM and JI projects thuscontributing to the Italian program of greenhouse gas reduction.In December 2003 during the Conference of Parties to the KyotoProtocol – COP9 – Eni and the Ministry of theEnvironment signed a Voluntary Agreement for using flexiblemechanisms, promoting CDM and JI and contributing to thesustainable development of host countries.

*Law No. 316 of December 30, 2004* which converts LawDecree No. 237/2004 has implemented European directive 2003/87/ECwhich establishes a system for emission trading targeted toindustrial installations with high carbon dioxide emissions. FromJanuary 1, 2005, this European emission trading scheme has beenin force and on this matter on February 24, 2006 the Ministry ofthe Environment published a decree assigning the EU allowancesfor the 2005-2007 period to each industrial installation includedin the scheme. In the first period of commitment, emissions notcovered by corresponding allowances are subject to a fineamounting to euro 40/tonne of carbon dioxide. All companies areexpected to identify and carry out projects for emissionreduction. Eni participate to the ETS scheme with 61 plants inItaly and two outside Italy, which collectively represent about athird of all greenhouse gas emissions generated by Eni’splants worldwide. Eni was assigned, for the existinginstallations, allowances equal to 65.2 million tonnes of carbondioxide (of which 22.4 for 2005, 21.4 for 2006 and 21.4 for2007). New EU allowances are expected for new entrants,especially in power generation. In 2005, emissions of carbondioxide from Eni’s plants were lower than permits entitled.

In order to play an active role in the ETS Eni:

| (i)   |   | prepared a methodological        and organizational protocol for the accounting of        greenhouse gas emissions;                                               |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | implemented a database for a        precise evaluation of emissions;                                                                                              |
| (iii) |   | evaluated the compliance of        existing monitoring and reporting systems in plants in        order to identify improvement requirements; and                  |
| (iv)  |   | defined a system for        balancing emissions from individual plants and business        units in order to guarantee the payback of emission        rights due. |

Eni is also upgrading its ongoing program for the reduction ofenergy consumption and related CO2 emissions.

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 Clean DevelopmentMechanism and JI will provide emission credits and facilitate theachievement of the Italian reduction target, as set by the KyotoProtocol. Eni already carried out Zero Gas Flaring projects inNigeria and Congo while others are underway. In 2004 Eni preparedthe documentation required for the Kwale-Okpai combined cyclepower station in Nigeria to qualify as a Clean DevelopmentMechanism project, the power station utilizes the associated gasformerly flared. Moreover, Eni endorsed the Global Gas FlaringReduction Initiative of the World Bank in order to fight for theelimination of obstacles to the completion of gas flaringreduction projects.

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 general strategy for a sustainablemanagement of greenhouse gases, Eni continued its programs forthe development of natural gas in Italy and outside Italy bymeans of technologically advanced projects such as the BlueStream gas pipeline from Russia to Turkey and the Greenstreampipeline from Libya to Sicily. Increased gas availability inItaly will lead to a further expansion of the gas-powerintegration through high efficiency combined cycles with muchlower carbon dioxide emissions than coal 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.

##### Table of Contents

**Regulation of Eni's Businesses**

> 
***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.*

> 
***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 natural gas; (iv) the establishment of a systemfor the updating of natural gas retail prices; and (v) theestablishment of a royalty reduction program. Law No. 481 ofNovember 14, 1995 (the "Authority Law"), provided forthe 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 the European Directive on Natural Gas 98/30/CE intoItalian legislation, 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 the threeyear 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 one tenyear 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).

> 
*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 concessionsare required to provide storage capacity for domestic production,for strategic use and for modulation to eligible users withoutdiscriminations, where technically and economically viable;(v) modulation storage costs are charged to shippers whichhave to provide modulation services adequate to the requirementsof final customers; (vi) storage tariffs criteria are determinedby the Authority for Electricity and Gas in order to ensure aproper return on capital employed, taking into account thetypical risk inherent in upstream activities, as well as volumesstored for ensuring peak supplies and provides incentives tocapital expenditure 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("Stogit"), which holds ten storage concessions.

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.

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.

On March 3, 2006, the Authority for Electricity and Gas withDecision No. 50/2006 published the criteria for determiningstorage tariffs for the second regulated period. This decisionchanges the regulation in force in the first regulated period,introducing maximum allowed revenues affecting the capacitycomponent (space and flow) and confirming the price cap mechanismfor the commodity component. It also establishes a singlenational tariff. The decision confirms the mechanisms for theevaluation of net capital employed already defined for the firstregulated period; the return on capital employed is reduced from8.33% to 7.1% (pre-tax). Based on the new tariff regime andkeeping into account that all the capacity available in 2006 isconsidered in the calculation of tariffs, revenues expected inthe thermal year from April 1, 2006 to March 31, 2007 amount toabout euro 280 million, decreasing 20% from the previous thermalyear. The decision contains also incentives to capitalexpenditure for the development of storage by recognizing anadditional rate of return of 4% on the basic rate for 8 years forcapital expenditure increasing capacity and for 16 years for thedevelopment of new storage sites. Decision No. 56 of March 16,2006 approved Stogit’s tariff proposals for 2006-2007thermal year.

With Decision No. 119/2005, the Authority for Electricity andGas regulates ways for the supply of modulation, mineral andstrategic storage services on part of storage companies, as wellas the service for the operating balancing of transport companiesand provides a basic scheme for the preparation ofcompanies’ storage code.

By February 1 of each year, the storage company is to publishon its internet site: (i) its plant operating and maintenanceprogram for the following thermal year (the thermal year forstorage starts on April 1 and ends on March 31 of the followingyear); (ii) its upgrading and divestment plan as authorized bythe Ministry of Productive Activities; and (iii) storage capacityavailable for each of the services provided.

As concerns the modulation and mineral storage services, inits storage code the company defines a program for the injectionphase and the offtake phase, indicating the optimization criteriaand flexibility margins provided to users. The offtake phasetakes place between November 1 and March 31, the injection phasebetween April 1 and October 31. The volumes of gas offtaken bythe user cannot be higher than the volumes injected or thevolumes the customer is entitled to.

The capacity destined to mineral and strategic storage isdetermined by the Ministry for Productive Activities. As concernsstrategic storage, the company makes available the volumes ofnatural gas in storage it owned resulting from its closingbalance at December 31, 2001. For any additional volumes that cancontribute to the reaching of the thresholds set by the Ministry,the price is suggested by the storage company and set with a bidprocedure. The user can request only storage capacity and injectown natural gas volumes.

Storage capacity is assigned by the storage company forperiods no longer than a thermal year by March 1, of each year.The first requests to be met are those for strategic storage andfor the operating balancing of the system. The residual capacityavailable and the maximum daily offtake capacity is assignedaccording to the following order of priority to: (i) holders ofproduction concessions requesting mineral storage services; (ii)entities deploying natural gas sale activities who are obliged toprovide modulation of their supply to their customers accordingto Article 18, paragraphs 2 and 3 of Legislative Decree 164/2000,for maximum volumes corresponding to a seasonal demand peak withaverage temperatures, on the terms and conditions established bya procedure to be issued by the Authority for Electricity andGas; (iii) to the entities mentioned in (ii) above only for thoseadditional maximum volumes related to a seasonal demand peak incase of certain low temperatures measured on a 20 year period,under the terms and conditions of the procedure mentioned in (ii)above; and (iv) the entities requesting access for servicesdifferent from the ones mentioned above. A procedure to be issuedby the Authority for Electricity and Gas will establish thecriteria for assigning capacity when the requests mentioned in(iv) above exceed availability.

During the storage thermal year, the company makes newassignations when new capacity becomes available. Users areallowed to sell to each other volumes of gas injected or capacityassigned. Users are requested to transmit to the storage companyone week in advance of the next, programs for injection orofftake, within the limit of assigned capacity, confirming eachday the bookings for the following day.

The Decision No. 50/2006 also regulates the charges forbalancing and replenishing storage for the first regulatedperiod, while for calculating the tariffs related to balancingand replenishing in the second regulated period the Authority isexpected to publish a new decision.

If the user offtakes a peak daily amount higher than theassigned amount, without replenishing by purchasing, the storagecompany applies, for each month to the maximum difference betweenpeak daily capacity actually used and peak daily capacityentitled, a variable charge depending on the volumes of gas instorage on the day of the offtake and the number of days ofexceeding use.

If the volumes input to storage are higher than the capacityassigned and the user does not purchase additional capacity orsell excess natural gas volumes within 15 days from receivinginformation on its position, the storage company will: (i) applyto the maximum exceeding volume in a month a variable balancingcharge depending on the month of injection; and (ii) sell, onbehalf of the user that has not yet done it, the volume of gasinjected exceeding the assigned capacity in the day or days ofthe thermal year of storage in which working gas reached itsmaximum amount, if the transport company reduced the volumesplanned by users of transport at one or more interconnectionpoints at the border and the same transport users also holdstorage capacity.

If the volumes of gas offtaken by a user are higher than thoseheld in storage and the user fails to replenish by means of apurchase, charges are applied that relate to replenishment ofofftake from strategic storage, which include: (i) in case ofofftakes allowed by the Ministry of Productive Activities, thereplenishment of the first volumes input to storage right afterthe offtake and the payment by the user of a charge applied tothe maximum accumulated volume of offtaken gas, net of an incomeproportional to volumes replenished, as determined by theAuthority, as well as the payment of balancing charges withoutpenalty; and (ii) in case of non authorized offtake, the incomerecognized to the user for replenishment is reduced by a fixedamount. Proceeds from the replenishment of strategic reserves aresubdivided proportionally among users in charge of strategicstorage services, except for the proceeds from the replenishmentof gas offtaken without authorization that are proportionallydistributed to all users. Proceeds to the storage company fromthe application of balancing charges are proportionallydistributed to users.

With Decision No. 21 of January 31, 2006, the Authority forElectricity and Gas increased these charges by different amountswith respect to authorized and unauthorized offtakes. On thebasis of these provisions, Eni may incur material charges forstorage services in case of unauthorized offtakes from thestrategic reserve. Eni appealed against this decision.

With Decision No. 266/2005 the Authority for electricity andgas started an inquiry leading to a possible administrativesanction (fine under Law No. 481/1995) alleging thatStogit’s behavior does not conform with the disciplinecontained in Decision No. 119/2005 concerning access to andprovision of storage services.

*On the use of storage capacity conferred in 2004/2005 and2005/2006* With Decision No. 37 of February 23, 2006, theAuthority for Electricity and Gas started an inquiry on a fewnatural gas selling companies, among which Eni, with reference tothe use of storage capacity in years 2004-2005 and 2005-2006. Forthe 2004-2005 thermal year and for the period from October 1,2005 to December 31, 2005 the Authority for Electricity and Gasdeemed improper the use of modulation storage capacity. In factthe Authority for Electricity and Gas judged offtakes to behigher than the volumes considered necessary to satisfy therequirements for which the storage company was awarded prioritygiven the weather of the period.

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, 2005 Eni held approximately 180 BCF of strategicreserves of natural gas (180 BCF at year end 2004).

> 
***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 and free to choose their supplier of naturalgas); (ii) from January 1, 2003 to December 31, 2010 no singleoperator is allowed to hold a market share higher than 50% ofdomestic sales to final customers. In addition, no singleoperator is allowed to supply more than 75% of all natural gasvolumes introduced in the domestic transmission network by 2002,decreasing by 2 percentage points per year until it reaches 61%.Compliance with these ceilings is verified annually by comparingthe allowed average percentage on a three year basis for volumesinput or sold to the average percentage obtained by each operatorin the same three year period. Allowed percentages are calculatednet of losses (in the case of sales) and volumes of natural gasconsumed in own operations. In accordance with Article 19,paragraph 4 of Legislative Decree No. 164/2000 the volumes ofnatural gas consumed in own operations by a company or itssubsidiaries are excluded from the calculation of ceilings forsales to end customers and for volumes input into the Italiannetwork to be sold in Italy; (iii) imports from the EuropeanUnion are free, while natural gas imported from outside theEuropean Union is subject to an authorization of the Ministry ofProductive Activities. Subjects importing from countries outsidethe EU must secure a certain availability of strategic storage.Such constraints 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 have 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, has to be carriedout by 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 2005 closes the second three year regulatedperiod for natural gas volumes input in the domestic transmissionnetwork (for which the allowed average percentage is 71% ofdomestic consumption of natural gas) and the first three yearregulated period for sales volumes (for which the allowed averagepercentage is 50% of gas sales). Eni’s presence on theItalian market complied with said limit.

> 
*Law No. 239 of August 23, 2004 on the restructuring of    the energy 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | 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 safety 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) canceling 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. |

*Law Decree No. 239/2003*Law Decree No. 239/2003,converted with amendments into Law No. 290/2003, prohibitscompanies operating in the natural gas and electricity industriesto hold stakes higher than 20% in the share capital of companiesowning and managing national networks for the transmission ofnatural gas and electricity from July 1, 2007. Law No. 266/2005(budget law for 2006) extended this deadline from July 1, 2007 toDecember 31, 2008. At December 31, 2005 Eni held a 50.05%interest in Snam Rete Gas. Following this provision, Eni willhave to sell part of its stake in Snam Rete Gas – until itreaches the 20% maximum interest allowed within the end of 2008.

On March 23, 2006 a Law Decree of the President of the Councilof Ministers defined criteria and modes for the divestment of theinterest held by Eni in Snam Rete Gas SpA, introducing thespecial powers of the Ministry of Economy and Finance providedfor by the regulations on the divestment of interests held by theItalian Government ("golden share") in the by-laws ofthis company.

*Natural gas emergency procedure* On December 12, 2005,the Minister of Productive Activities updated the emergencyprocedure to cope with a natural gas shortage in the event ofunfavorable climatic events. In particular the new establishedprocedure set the following sequence of activities:

| • |   | an increase of gas        availability (maximization of natural gas importation);                    |
|--------|--------|------------------------------------------------------------------------------------------------------|
| • |   | activation of the        interruption of customers with interruptible contracts;                     |
| • |   | interruption of supplies to        "dual-fuel" plants;                                     |
| • |   | further actions to reduce        natural gas consumption of "dual-fuel" plants;        and |
| • |   | further initiatives to        reduce natural gas consumption.                                        |

In order to manage the natural gas emergency during the2005-2006 winter opened on December 19, 2005, the followingprovisions were adopted:

| • |   | Resolution No. 10/2006: the        Authority introduced an auction mechanism to activate an        interruption temporary system of the gas natural supply;                                                 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Ministerial Decree of        January 24, 2006: the Ministry of Productive Activities        reduced emissions limits to the power generation plant up        till March 31, in favor of the use of oil; and |
| • |   | Ministerial Decree of        January 25, 2006: the Ministry of Productive Activities        reduced from 1 to 28 of February the allowed limits of        temperature in the residential buildings.         |

The Ministry of Productive Activities declared the end of theemergency procedure on March 22, 2006.

> 
*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) under Law No. 481/1995(establishing the Authority for Electricity and Gas) andLegislative Decree No. 164/2000. See below for a discussion ofnatural gas prices of sales of natural gas to residential andcommercial customers which were not eligible customers untilDecember 31, 2002.

The Decree of the President of the Council of Ministers ofOctober 31, 2002 conferred to the Authority for Electricity andGas the powers to: (i) define, calculate and update and gasselling prices also after the opening up of markets set atJanuary 1, 2003 for customers who were not-eligible customersuntil December 31, 2002; (ii) define methods for updating sellingprices with reference to variable costs that minimize the impactof inflation; and (iii) define criteria for allocating thecosts deriving from social support measures, in order to reducethe aggregate net cost of interventions as much as possible andto ensure neutrality in the application of selling prices to thevarious groups of users. Consistently with this decree, theAuthority for Electricity and Gas: (i) with Decision No. 195 ofNovember 29, 2002 changed the methods for periodically updatingselling prices for natural gas in connection with changes ininternational prices of crude oil and refined products. Suchchanges concern the schedules update process (from every twomonths to every three), and the duration of the reference periodfor the calculation of changes in average international prices ascompared to the application quarter (from the preceding sixmonths to the preceding nine months). The invariance threshold,beyond which tariffs are updated, remained at 5%; and (ii) withDecision No. 207 of December 12, 2002, it decided that companiesselling natural gas through local networks have to maintain theconditions applied to non-eligible customers until December 31,2002 until the customer accepts a new contract offer. Inaddition, the Authority for Electricity and Gas decided thatthese companies can propose their own new contract offers and thetariffs determined according to the criteria established by theAuthority for Electricity and Gas, adequately advertising thembefore March 31, 2003 (such offers must be published on thecompanies web page, on at least one newspaper of generalcirculation and on the Official Gazette of their region orautonomous province).

With Decision No. 248 of December 29, 2004, the Authority forElectricity and Gas 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 0.26 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 obliges Italiansuppliers to wholesalers to renegotiate supply contracts in lightof the price revision introduced by same decision in supplycontracts between wholesalers and end users. This decision alsostates that the Authority may review these clauses in the lightof import contracts. Eni provided the Authority with the terms ofits import contracts that may lead the Authority to reconsiderits decision, as Eni is one of the largest importers to Italy.

In May-October 2005 the Regional Administrative Court ofLombardy, based on claims of Eni and other operators, annulledDecision No. 248/2004. In March 2006, the Council of Stateannulled the decision of the Regional Administrative Court ofLombardy in the case of a single operator and, at the same time,postponed to the plenary meeting of the Council of State the caseof an association of natural gas wholesalers and local sellingcompanies, taking into account a possible procedural flaw.Furthermore, the Council of State postponed its decision on theappeal proposed by the Authority against the decision of theRegional Administrative Court of Lombardy in favor of Eni afterthe decision of the plenary meeting of the Council of State onsaid procedural issues (expected to occur late in 2006).

In December 2005 the Authority for Electricity and Gasimplemented Decision No. 248 for the first quarter 2006 throughDecision No. 298/2005. The Regional Administrative Court ofLombardia initially suspended Decision No. 298/2005 based onclaims of Eni and other operators. Then the same Court cancelledthe suspension it had initially granted. Therefore Decision No.298/2005 is now fully effective. On March 28, 2006, the Authorityfor Electricity and Gas issued Decision No. 63/2006 which updatestariffs for the April-June 2006 quarter, in application ofDecision No. 248/2004. Eni appealed also this decision for thereasons stated above.

Eni’s management expects a negative outcome of thismatter. In fact Eni accrued a material provision in its 2005Consolidated Financial Statements in order to reflect the risksassociated with this matter. In 2006 management expectsEni’s results of operation to be adversely impacted by amaterial amount in light of the high Brent crude oil prices, inthe event Decision 248/2004 is implemented in its original form.Actually Eni’s results of operations for the first quarter2006 were negatively affected by this matter. See "Item 3– Risk Factors" and "Item 5 – Results ofOperations and Recent Developments".

With Decision No. 65/2006, the Authority started aconsultation with operators to redefine mechanisms for theupdating of the raw material component in natural gas prices tohouseholds and established provisions concerning partialadjustments for final customers related to differences betweenDecision No. 248/2004 and the previous Decision No. 195/2002.Consistently with the appeal against Decision No. 248/2004, Eniappealed also against Decision No. 65/2006 with the RegionalAdministrative Court of Lombardia. The Authority, in theconsultation document published on May 17, 2006, proposed thefollowings: (i) while confirming a quarterly basis mechanism forthe updating of the raw material component in natural gas priceformulas, with a five percentage points of invariance thresholdas provided for by Decision No. 195/2002, a monthly updatingmechanism is proposed for the recognition of purchase costs borneby operators with an half percentage point invariance threshold;(ii) the establishment of a compensatory fund which willredistribute among operators the differences between natural gasprices recognized to end customers and the raw material costsincurred by operators; and (iii) the fixation of a range of$35-60 per barrel of Brent crude oil to which selling companiesapply the 75% cap, limiting the ability to pass increases in thepurchase cost onto final customers. Beyond $60, increases in thepurchase cost are proposed to be transferred to end customerswith a 90-95% cap for a maximum two year transition period. Inaddition the Authority confirmed the obligation of suppliers towholesalers to renegotiate supply contracts taking account of thenew price mechanism introduced by Decision No. 248/2004.Management expects the proposed changes to partially mitigate theimpact of Decision No. 248/2004, as they do not enable Eni tofully recover the purchase cost of natural gas in selling prices.

*Inquiry of the Authority for Electricity and Gas on importpurchase prices*With Decision No. 107/2005 the Authority forElectricity and Gas started a formal inquiry under Law No.481/1995 against Eni and other gas importers alleging theirfailure to comply with the Authority information requirementscontained in its Decision No. 188/2004 of October 27, 2004, bywhich it required natural gas importers, among which Eni, to giveinformation concerning: (i) dates and supplier for each supplycontract for the import of natural gas; (ii) FOB purchase prices;(iii) price updating formulas; and (iv) volumes supplied and FOBpurchase average prices on a monthly basis for each supplyingcontract relating to the period October 2002-September 2004.Under Law 481/1995, the Authority for Electricity and Gas canimpose a fine on Eni. Eni appealed this decision with theRegional Administrative Court of Lombardia that on March 22, 2005cancelled the obligation for Eni to communicate dates andsupplier for each contract and FOB purchase prices. Accordingly,Eni initially gave the Authority for Electricity and Gas onlypart of the information required. On April 6, 2006 a finalhearing was held in front of the Authority Eni confirmed itsposition that it has provided adequate information, but with theintention of full collaboration it provided the data concerningaverage monthly fob prices for the October 2002-September 2004period.

*Inquiry of the Authority for Electricity and Gas onbehaviors of operators selling natural gas to end customers*WithDecision No. 225 of October 28, 2005, the Authority forElectricity and Gas started an inquiry on the behaviors ofcompanies selling natural gas to end customers aimed at acquiringnew customers or re-acquiring customers transferred to othersellers, with particular reference to hurdles posed by companiesto customers wishing to leave one distributor or to the entry ofcompetitors on the market. The inquiry aims at identifying anymeasure the Authority should take in this area and is expected toclose before July 31, 2006.

> 
*Inquiries by the Italian and European Antitrust    Authorities*

*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 9.2BCM of natural gas in the four-thermal year period starting inOctober 1, 2004 through September 30, 2008, corresponding to 2.3BCM for each thermal year, before such natural gas enters thenational transmission network at Tarvisio. With a decision ofJune 24, 2004, the Antitrust Authority judged this proposaladequate to end the effects of the violation of competition ruleshighlighted in the November 21, 2002 decision. With the decisionof October 7, 2004 that closed the above mentioned procedure, theAntitrust Authority acknowledged that Eni had taken propermeasures for executing the decision of November 21, 2002 bysigning gas release contracts. However, it fined Eni euro 4.5million alleging that Eni had complied belatedly with theAntitrust Authority’s indications. On December 6, 2004, Enifiled a claim with the Regional Administrative Court of Lazioagainst this decision requesting the annulment of the fine thatwas however recorded in Eni’s accounts. In May 2005 theRegional Administrative Court repealed this claim. Eni paid thefine imposed on it by the Antitrust Authority. In June 2006, theappeal proposed by Eni before the Council of State against thedecision of the Regional Administrative Court was rejected. Aclaim filed by Eni with the Regional Administrative Court ofLazio against the decision of November 21, 2002 is still pending.

*Inquiry of the Authority on the upgrade of the TTPCPipeline - Appeal to the Regional Administrative Court for Lazio*On February 15, 2006, the Antitrust Authority informed Eni of theclosing of an inquiry started in February 2005 to ascertain analleged abuse of dominant position. The events leading to theopening of the procedure relate to behaviors of Trans TunisianPipeline Co Ltd (TTPC), wholly owned by Eni, concerning itsdecision to consider expired certain ship-or-pay contracts signedon March 31, 2003 by TTPC with four shippers, who had beenassigned new transport capacity on TTPC’s pipeline, due tothe non occurrence of certain suspensive clauses. Therefore TTPCdecided to not proceed to the planned upgrade of the pipeline by2007.

In January 2006 Eni submitted to the Antitrust Authority aproposal containing the actions it intends to perform in order tofavor competition on the Italian natural gas market and mitigatethe effects if its alleged abuse of dominant position, concerningin particular the upgrade of the TTPC pipeline in Tunisia for theimport of natural gas to Italy from Algeria: 3.2 BCM/y from April1, 2008 and further 3.3 BCM/y from October 1, 2008.

With a decision notified on February 15, 2006 the AntitrustAuthority stated that Eni’s behavior through its subsidiaryTTPC represented an abuse of dominant position under Article 82of the European Treaty. It therefore fined Eni. The original fineamounted to euro 390 million and was reduced to euro 290 millionin consideration of Eni’s commitment to perform actionsfavoring competition as mentioned above. Eni appealed againstthis decision with the Regional Administrative Court of Lazio.The hearing is scheduled on July 12, 2006. See above "Gas& Power – Development Projects".

*Eni SpA - GNL Italia SpA* On November 18, 2005 theAntitrust Authority notified Eni and its subsidiary GNL Italiathe opening of an inquiry, in accordance with Article 14 of LawNo. 287/1990, concerning an alleged abuse of dominant position inthe assignment and use of the total continuous regasificationcapacity of the Panigaglia terminal (owned by GNL Italia) inthermal years 2002-2003 and 2003-2004, as evidenced by an inquiryof the Authority for Electricity and Gas which referred Eni tothe Antitrust Authority. In a later communication the company wasinformed that the inquiry has been extended also to thermal year2004-2005 and to Snam Rete Gas which is the parent company of GNLItalia SpA. The inquiry is due to be closed on October 31, 2006.

*Inquiry of the European Commission* On May 5, 2006 theEuropean Commission started an inquiry in order to verify analleged abuse of dominant position on the part of Eni inviolation of Article 82 of the EEC Treaty and Article 54 of theCES Agreement in the activities of international gas transportand wholesale and retail supply of gas. 

According to the European Commission Eni might have adoptedcommercial practices that constitute barriers to access to theItalian market for the wholesale supply of natural gas, inparticular taking account Eni long-term purchase contracts. Inaddition Eni also entered long-term transport contracts whichaward Eni a majority share of transport capacity of the certaininternational gaslines and, as a consequence, Eni might haveprevented others to access infrastructure.

In addition according to the European Commission, Eni mighthave delayed or annulled certain plans for the upgradinginternational transport infrastructure, despite the significantdemand for access by third parties. This behavior would havefavored natural gas commercial supplies downstream of transportactivities thus allowing Eni to keep its dominant position in themarket of wholesale sales.

Lastly, based on information held by the Commission, Eni mighthave subdivided the market with other companies operating in thesupply and/or transport of natural gas, in particular by limitingthe use of rights of access to entry and exit points of gaspipelines, in particular TENP and TAG.

Officials from the European Commission conducted inspectionsat headquarters of Eni and of certain Eni’s subsidiaries andcollected documents.

If the existence of the alleged anti-competitive practices isconfirmed, the European Commission could fine Eni.

> 
*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, for the first regulatory periodmade up of four thermal year (each thermal year begins on October1 of each calendar year and ends on September 30), as providedfor by Decree No. 164/2000. Tariffs are subject to approval bythe same Authority, which ensures their compliance with presetcriteria. This tariff system substituted preceding agreementsbetween Eni and customers of any category. Within the firstquarter of each calendar year, transport companies submit thetariff proposal to the Authority for Electricity and Gas which inturn approves or rejects the proposal 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 was 7.94% (pre-tax), for the first regulatory period.Once established, allowed revenues for the first year are dividedinto two components: (i) capacity revenues equal to 70% ofallowed revenues which are the maximum amount of revenuescollectable from the sale of transport capacity to customers; and(ii) commodity revenues equal to 30% of allowed revenueswhich are the maximum amount of revenues collectable fromtransported volumes. Starting from the second year these twocomponents are adjusted on a yearly basis to take into accountinflation and certain reduction factors (set at 2% and 4.5% forcapacity revenues and commodity revenues, respectively);commodity revenues are also adjusted to transported volumes ofthe current regulatory period. The 2% reduction factor oncapacity revenues provides scope for improving results ofoperations of the transport company if cost reductions exceed theset amount, whereas the 4.5% reduction factor on commodityrevenues provides scope for improving results of operations ofthe transport company if transported volumes grow more than thereduction factor. New capital expenditure in extension andexpansion enable transport companies to increase the capacityrevenue by a stated percentage in the regulatory period followingthe period in which new capital expenditure is incurred. Inaddition, those capital expenditures give rise to a six yearfixed increase in allowed commodity revenues. At the end of thefirst regulatory period, all transport cost components wererecalculated and 50% of higher cost reductions with respect toestablished efficiency improvements were recognized to transportcompanies and 50% were transferred to customers. Once the allowedrevenues are established, transport companies define individualtariffs to clients which are based on a charge for the capacityused at the entry location (border, fields, storage sites) andthe capacity used at interconnection nodes with regional networks(divided into 17 zones) and on a charge for the capacity used atregional level, providing for discounts to those outgoing thenetwork at less than 15 kilometers from the interconnection pointbetween regional and national networks. A further charge(commodity charge) is related to the amounts of gas transportedplus an annual fixed charge varying according to the deliverypoints. This tariff system regulated the four-thermal year periodstarting October 1, 2001 and ending on September 30, 2005.

With the Decision No. 166/2005, the Authority for Electricityand Gas revised the outlined tariff regime for the secondregulatory period (October 1, 2005-September 30, 2008). The newtariff structure confirms the breakdown of the tariff into twocomponents: capacity and commodity in a ratio of 70 to 30 and theentry-exit model for the determination of the capacity componenton the national pipeline network, already present in the previoustariff regime established by Decision No. 120/2001. The major newelements of the new regime are the following: (i) a reduction ofthe rate of return of capital employed in transport activitiesfrom 7.94% to 6.7% (pre-tax); (ii) a new set of incentives fornew capital expenditure. In the previous regime, the return onupgrade and capacity expansion expenditure was 7.47% for one yearonly included in the calculation of the capacity component of thetransport tariff and 4.98% for 6 years in the calculation of thecommodity component. The new tariff structure provides anadditional rate of return depending on the type of expenditure onthe return rate recognized for capital employed: from a minimumof 1% for safety measures that do not increase transportcapacity, applied for 5 years, to a maximum of 3% for expenditurethat increases capacity at entry points into the nationalnetwork, applied for 15 years. The additional return is part ofthe determination of the maximum allowed revenues in thecalculation of the capacity component of the tariff and thereforeis not influenced by changes in volumes transported; (iii) theupdating by means of a price cap mechanism of the allowedrevenues the transport undertaking is entitled to and the annualrecalculation of the portion of allowed revenues relating tocosts incurred for capital expenditure. This price cap mechanismapplies to operating costs and amortization charges (previouslyit applied to all the allowed revenues). The annual rate ofrecovery of productivity was confirmed at 2%; this is used toreduce the effect of changes in the consumer price index on theupdating of the preceding year’s allowed revenues; insteadthe preset annual rate of change of productivity recovery for theupdating of the commodity component of the tariff was reducedfrom 4.5% to 3.5% of; and (iv) confirmation of the tariffreduction for start-ups (construction/upgrade of combined cycleplants for electricity generation) and for off take in low seasonperiods (from May 1, to October 31) already contained inDecisions No. 5/2005 and 6/2005 which updated the previous tariffregime. The companies active in the field of gas transport submittheir tariff proposals to the Authority who grants approval,within the first quarter of each calendar year.

*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 entitlement oftransport capacity, obligations of transporter and customer andthe procedures through which customers can sell capacity to otherusers. Transport capacity at entry points in the national gaslinenetwork (point of interconnection with import gaslines) isassigned on an annual basis and can last up to five thermalyears. Entities eligible to be assigned transport capacity on amulti-year basis are those having multi-year import contractswithin the limit of their daily average contract volumes.Priority criteria envisage that available capacity is assignedfirst to parties in multi-year import contracts containingtake-or-pay clauses signed before August 10, 1998 (date of comingin force of European Directive 98/30/CE). It requests forcapacity in a given thermal year are higher than availablecapacity, a pro-rata mechanism is applied in compliance with theaforementioned priority.

Parties in annual or shorter import contracts and parties inmulti-year import contracts are entitled to annual capacityconferrals corresponding to maximum daily contract volumes andthe difference between maximum daily contract volumes and averagedaily contract volumes, respectively. Available transportcapacity is assigned first to parties in annual import contractsand parties in multi-year import contracts. If requests forcapacity in a given thermal are higher than available capacity, apro-rata mechanism is applied in compliance with theaforementioned priority.

Eni filed a claim against this decision with the RegionalAdministrative Court of Lombardia, that was partially acceptedwith a decision of December 2004. The Authority filed a claimagainst this decision with the Council of State and informed Enion February 19, 2005. This proceeding is still pending.

*New tax criteria for the determination of amortizations forcompanies operating in transport and distribution of natural gas*The criteria for the determination of the annual share ofamortizations of natural gas transport and distribution assetsdeductible in the determination of income taxes have been changedstarting in 2005 onwards by Law Decree No. 203 of September 30,2005, converted into Law No. 248 of December 2, 2005 and Law No.266 of December 23, 2005 (budget law for 2006). Due to thesechanges, the share of amortizations that was previouslycalculated based on rates set by a decree of the Minister ofFinance of December 31, 1988, is now determined by dividing therelevant asset gross book value in accordance with the usefullives determined by the Authority for Electricity and Gas andreducing the amount obtained after tax by 20%. The alignment ofthe fiscal lives of natural gas transport and distribution assetsto their useful lives entails the anticipation of the payment ofincome taxes given the postponement of the deductibility ofamortization without impacting on net profit of companiesinvolved (mainly Snam Rete Gas and Italgas), except for thefinancial charges related to this cash anticipation.

*Regulation (EC) No. 1775/2005* On November 3, 2005Regulation (EC) No. 1775/2005 concerning conditions for accessinginternational natural gas transport networks was published. TheRegulation establishes non discriminatory access rules and willbe effective starting on July 1, 2006. The Regulation will bedirectly applicable in each Member State and national regulatoryauthorities will be responsible for its enactment.

*Preliminary investigation on the management and operationof the Panigaglia LNG regasification terminal* The Authorityfor Electricity and Gas with Decision No. 204 of November 18,2004, started a preliminary investigation on the management andoperation of Eni’s Panigaglia LNG regasification terminaland on LNG supplies to the Italian market in the thermal yearsfrom 2001 to 2004 in order to ascertain any behavior infringingthe rules of equal access and equal conditions and neutrality inproviding the regasification services.

*Adoption of guarantees for free access to LNGregasification services and rules for the regasification code*With Decision No. 167 of August 1, 2005, the Authority forElectricity and Gas published the criteria for access to LNGregasification services. The Decision also defines criteria forthe allocation of regasification capacity. In particular itestablishes that take-or-pay contracts entered into before 1998,as in the case of Eni, are assigned a priority access limited tothe minimum amount of volumes that have been regasified in theperiod starting from thermal year 2001-2002. Eni filed a claimagainst this decision with the Regional Administrative Court ofLombardia.

*Regasification tariffs*Tariffs for both the continuousand spot regasification services are based on treated volumes ofLNG, number of discharges carried out and energy associated tovolumes input in the national transport network. Tariffs for thespot service are 30% lower than those for continuous service.

> 
*Distribution*

Distribution is the activity of delivering natural gas toresidential and commercial customers of urban centers through lowpressure networks. Distribution is considered a public serviceoperated in concession and is regulated on the basis of LawDecree No. 164/2000.

*Distribution tariffs* With Decision No. 237 datedDecember 28, 2000 as amended, the Authority for Electricity andGas determined tariff criteria for natural gas distributionactivity for the first regulated period ending on September 30,2004. Tariffs are determined so that annual revenues from naturalgas distribution activity cover operating costs and theremuneration of capital employed and are adjusted yearlyaccording to the price cap method based on parameters andformulas determined by the Authority for Electricity and Gas.Capital employed is determined by applying a parameter-basedmethod or, alternatively, a method of revalued historical costfor those companies that published audited financial statementsstarting with the fiscal year ended before January 1, 1991 (whichinclude Italgas). With Decision No. 170 of September 29, 2004 theAuthority for Electricity and Gas defined gas distributiontariffs for the second regulated period from October 1, 2004 toSeptember 20, 2008, setting at 7.5% the rate of return on capitalemployed of distribution companies, as compared to the 8.8% rateset for the preceding regulated period. The rate of productivityrecovery – one of the components of the annual adjustmentmechanism of tariffs – was set at 5% of operating expensesand amortization charges (as compared to the 3% rate applied tototal expenses and charges in the preceding regulated period).With Decision No. 122 of June 21, 2005, the Authority integratedand changed Decision No. 170/2004 defining a new determinationmechanism for distribution tariffs that takes account of capitalexpenditure incurred by distributing companies.

*Distribution network code* With Decision No. 138/2004the Authority for Electricity and Gas defined a set of rules toensure free access to the distribution networks and neutrality ofthe distribution service, as well as criteria for the definitionof distribution network codes.

With Decision No. 108/2006 the Authority for Electricity andGas approved the Gas Distribution Master Code which will be usedas a standard contract between distribution companies andshippers (natural gas selling companies). Within three monthsfrom its publication, distribution companies are due to issuetheir own gas distribution code adopting either the GasDistribution Master Code or the scheme provided for by theDecision No. 138/2004.

> 
***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.Management expects no material delays in obtaining relevantconcessions for the upgrading of the Sannazzaro and Tarantorefineries as planned in the medium term.

*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. In 2002the fund received new financings: the decree of the Minister ofProductive Activities of August 7, 2003, implementing Law No. 237of December 12, 2002, defined the amount of euro 0.0003 and euro0.0001 for each liter of automotive fuel (gasoline, diesel fueland LPG) sold in 2002 in the ordinary distribution network to bepaid by authorization holders and service station managers,respectively. The latest payment date was set at December 31,2003; (v) the opening up of the logistics segment by permittingthird party access to unused storage capacity for petroleumproducts; and (vi) measures designed to increase competition onthe market for LPG for residential, industrial and agriculturalusers. With the goal of renewing the Italian distributionnetwork, Law No. 57/2001 provides that the Ministry of ProductiveActivities is to prepare guidelines for the modernization of thenetwork, and the Regions shall follow those guidelines in thepreparation of regional plans. The Decree was issued on October31, 2001 and established the criteria for the closing down ofincompatible stations, the approval of the plan, the renewal ofthe network, the opening up of new stations and the regulationsof the operations of service stations on matters such asautomation, 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. To date, this regulation has had no significant impact onEni’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 basis.

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.

At December 31, 2005 Eni owned 7.2 million tonnes of oilproducts inventories, of which 4.8 million tonnes as"compulsory stocks", 1.0 million tonnes related tooperating inventories in refineries and depots (including 0.2million tonnes of oil products contained in facilities andpipelines), 1.1 million tonnes related to oil products containedin ships and 0.3 million tonnes related to specialty products.

Eni’s compulsory stocks (at December 31, 2005) were heldin term of crude oil (27%), light and medium distillates (44%),fuel oil (22%) and other products (7%) and they were locatedthroughout the Italian territory both in refineries (75%) and instorage sites (25%).

 

##### 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**

Eni SpA is the parent company of the Eni group companies. Asof December 31, 2005, there were 257 fully consolidatedsubsidiaries, 94 subsidiaries accounted for under either theequity method or the cost method and 176 affiliates accounted forunder either the equity method or the cost method. Thesignificant subsidiaries, associated undertakings and jointventures of the Eni Group controlled directly or indirectly byEni at December 31, 2005 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    |
| Lasmo Sanga Sanga Ltd                                                                                             | Bermuda                             | 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*                                                                                        |                                |   |
| AgipFuel SpA                                                                                                      | Italy                               | 100    |
| Ecofuel SpA                                                                                                       | Italy                               | 100    |
| Eni Portugal Investment SpA                                                                                       | Italy                               | 100    |
| Agip Deutschland GmbH                                                                                             | Germany                             | 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 4A. UNRESOLVED STAFF COMMENTS**

None.

 

##### Table of Contents

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

*The information in this item should be read together withthe Key Information presented in Item 3 and the ConsolidatedFinancial Statements and related Notes thereto included in Item18.*

**Executive Summary**

Eni recorded a net profit of euro 8.8 billion in 2005, anincrease of 24.5% over 2004. Operating profit in 2005 amounted toeuro 16.8 billion, up 35.7% from 2004 reflecting volume growthand performance improvements in Eni’s main businessescombined with a favorable trading environment characterized bystrong gains both in crude oil prices and in refining margins.

On the basis of the results achieved, Eni’s managementproposed at the Annual General Shareholder Meeting a dividend ofeuro 1.1 per share, of which euro 0.45 was already paid as aninterim dividend in October 2005. This dividend is 22% higherthan in 2004 (euro 0.90 per share) and was approved by the AnnualGeneral Shareholder Meeting on May 25, 2006.

In Exploration & Production, Eni continued to build on itsestablished position in some of the world’s fastest-growingproducing nations of oil and natural gas. Eni’s dailyproduction of oil and natural gas available for sale increased by6.7% over 2004 to 1,693 KBOE. Net proved reserves of oil andnatural gas were 6,837 mmBOE at year end 2005 (55% crude andcondensates), down 381 mmBOE from 2004 due principally to anadverse entitlement impact in certain production sharingagreements and buy-back contracts as a result of higher oilprices which reduced Eni’s entitlement to volumes of oil andnatural gas to recover costs incurred by Eni for the developmentof certain oil fields. The reserve replacement ratio was 40%. Thereserves life index at year end 2005 was 10.8 years (12.1 yearsat December 31, 2004).

Eni increased its interest in the Kashagan project(Kazakhstan) from 16.67% to 18.52%. Management believes Kashaganto be a very important project for the future growth ofEni’s production of oil and natural gas. The development ofthe project, of which Eni is the sole operator, is on track, with40% of work completed, and management plans to achieve first oilproduction by end-2008. Management is currently reviewing theplanned $29 billion capital expenditure for the development ofthis large field in order to take account of changing marketconditions.

Eni added to its exploration portfolio with the acquisition ofassets in areas such as Libya, Nigeria and Angola whereEni’s presence is already established, and in new basinssuch as Alaska and India.

In Gas & Power, Eni continued to leverage on its assetsconsisting of access to infrastructure, availability of gas– both from owned facilities and from long term purchasecontracts – and large customer base, to increase natural gassales in European gas markets.

Overall gas sales in 2005 totalled 91.15 BCM, up 8.8% from2004. This growth has been driven by European gas sales and bylarger volumes sold in Italy:

| • |   | gas sales across Europe        (31.29 BCM) rose 11.2% as compared to 2004, driven also        by the build up of the Greenstream project; and                                                                                |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Italian gas sales (58.01        BCM, including own consumption) increased by 8% from        2004, mainly driven by gas consumption in our power        business, and gas sales in South America were stable at 2        BCM. |

Electricity sales (22.8 TWh) increased by 64% in volume termsfrom 2004 as a result of the start-up of two power units at theMantova power plant and the first unit of the Brindisi plant, aswell as full commercial operation at the Ravenna and FerreraErbognone plants.

In Refining & Marketing, Eni is seeking to increase returnfrom assets by upgrading its refining system, increasingintegration with Exploration & Production activities andstrengthening its competitive position in marketing.

In 2005, Eni completed the construction of the Sannazzarogasification plant and the disposal of its wholly-ownedsubsidiary Italiana Petroli which operates in the retail marketin Italy. Overall retail sales in Europe under the Agip brand in2005 amounted to 16 billion liters, of which 11.3 billion literswere in Italy. Retail sales increased 0.6% from 2004 reflectinghigher sales in certain markets of Central Europe and in Spain.

In Engineering & Construction, Saipem was awardedimportant contracts in complex environments such as Kashagan inKazakhstan and Sakhalin in Russia. Snamprogetti significantlyincreased its backlog, closing 2005 with strong financialresults.

Capital expenditure totalled 7.4 billion in 2005, in line with2004; 91% of capital expenditure was carried out in oil and gasactivities. The principal projects for the year were:

| • |   | development of oil and        natural gas reserves (euro 3.95 billion), mainly in        Kazakhstan, Libya, Angola, Egypt and Italy, as well as        exploration (euro 656 million) and the acquisition of        proved and unproved property reserves (euro 301 million,        of which euro 161 million was for the acquisition of an        additional 1.85% share in the consortium developing        Kashagan); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | expansion and improvements        of the natural gas transportation and distribution        network in Italy (euro 825 million);                                                                                                                                                                                                                                                                                         |
| • |   | ongoing power generation        construction programme (euro 239 million); and                                                                                                                                                                                                                                                                                                                                           |
| • |   | upgrading of our Italian        refining and logistics system to enhance flexibility and        increase the yields of light products and middle        distillates, including completion of the heavy residue        gasification plant at the Sannazzaro refinery and        improvement of the retail distribution network both in        Italy and in the rest of Europe (euro 656 million).                         |

 

> 
***Margin***10

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***

|   |   | **2003** |   | **2004** |   | **2005** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| Average price of Brent dated crude oil (1)                |   | 28.84 |   | 38.22 |   | 54.38 |
|-----------------------------------------------------------|--------|-------|--------|-------|--------|-------|
| Average        price in euro of Brent dated crude oil (2) |   | 25.50 |   | 30.72 |   | 43.71 |
| Average EUR/USD exchange rate (3)                         |   | 1.131 |   | 1.244 |   | 1.244 |
| Average        European refining margin (4)               |   | 2.65  |   | 4.35  |   | 5.78  |
| EURIBOR – three month euro rate % (3)                |   | 2.3   |   | 2.1   |   | 2.2   |

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

----

|   |   |                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | In U.S.        dollars per barrel. Source: Platt’s Oilgram.                                                                                       |
| (2)    |   | Source:        Eni’s calculations.                                                                                                                |
| (3)    |   | Source:        European Central Bank.                                                                                                                  |
| (4)    |   | In U.S.        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 2005 with prices of Brent crude oilincreasing by approximately 42% compared to 2004. Natural gasdemand in Italy increased by approximately seven percentagepoints over 2004 driven by strong growth in the electricitygeneration. Natural gas margins in Italy decreased in 2005 ascompared to 2004 due to competitive pressure in the domesticnatural gas market, offset in part by favorable trends in pricesof certain refined products to which natural gas sale andpurchase prices are contractually indexed resulting in a higherincrease of selling prices as compared to supply costs whencomparing 2005 to 2004. In 2005, refining margins increasedsharply due to strong demand for refined products, especially inAsia, a shortage of fuels meeting required Europeanspecifications due to lags in the upgrading certain refineriesand imbalances in the availability of products in different areasof the world. Petrochemical product margins declined in 2005 ascompared to 2004, essentially due to the higher cost of oil-basedfeedstocks not being completely reflected in to selling prices.

> 
***Key consolidated financial data***

| (million        euro) |   |   |       |   | **2004** |   | **2005** |
|-----------------------|--------|--------|--------------------------------|--------|----------|--------|----------|
|                  |   |   |                           |   |          |   |          |

| Net sales from operations                                                                                  |   |             |   | 57,545 |   | 73,728 |
|------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------|--------|--------|
| Operating        profit                                                                                    |   |             |   | 12,399 |   | 16,827 |
| Net profit                                                                                                 |   |             |   | 7,059  |   | 8,788  |
| Net cash        provided by operating activities                                                           |   |             |   | 12,500 |   | 14,936 |
| Capital expenditure                                                                                        |   |             |   | 7,499  |   | 7,414  |
| Investments                                                                                                |   |             |   | 316    |   | 146    |
| Shareholders’ equity including minority        interest                                               |   |             |   | 35,540 |   | 39,217 |
| Net        borrowings (1)                                                                                  |   |             |   | 10,443 |   | 10,475 |
| Net profit per share                                                                                       |   | (euro per share) |   | 1.87   |   | 2.34   |
| Dividend        per share                                                                                  |   | (euro per share) |   | 0.90   |   | 1.10   |
| Net borrowings to total shareholders’        equity ratio including minority interests (leverage) (1) |   |             |   | 0.36   |   | 0.33   |

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

----

|   |   |                                                                                                                                                                                                                                                                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | 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. |

> 
***The adoption of IFRS***

The Consolidated Financial Statements of Eni have beenprepared in accordance with IFRS issued by the InternationalAccounting Standards Board (IASB) and adopted by the EuropeanCommission following the procedure contained in Article 6 of theEC Regulation No. 1606/2002 of the European Parliament andCouncil of July 19, 2002. The IFRS adopted by Eni differ incertain limited respects from the IFRS sanctioned by the IASB.Until December 31, 2004, Eni prepared its Consolidated FinancialStatements and other interim financial information (includingquarterly and semi-annual data) in accordance with Italian GAAP.IFRS require adopting companies to restate only one year of pastfinancial statements. Pursuant to SEC Release 33-8567,"First-time Application of International Financial ReportingStandards", Eni is not required to include in this annualreport financial statements for any earlier periods. Accordinglythis annual report includes financial information prepared inaccordance with IFRS as of and for the two years ended December31, 2004 and 2005. For hydrocarbon exploration and production,accounting policies generally applied by the oil industry havebeen adopted, with particular reference to amortization accordingto the Unit-Of-Production (UOP) method, buy-back contracts andProduction Sharing Agreements. The Consolidated FinancialStatements have been prepared by applying the cost method exceptfor items that under IFRS must be recognized at fair value asdescribed in the Notes to the Consolidated Financial Statementsunder the heading "Evaluation Criteria".

The general principle that should be applied on first-timeadoption of IFRS is that standards in force at the transitiondate (January 1, 2004) should be applied retrospectively.However, IFRS 1 "First-time Adoption of InternationalFinancial Reporting Standards" (IFRS 1) contains a number ofexemptions that companies are permitted to apply. Eni has takenthe following main exemptions:

| • |   | no retroactive restatement        of business combinations that occurred before January 1,        2004. As a result of this exemption, goodwill was not        restated to take into account amortization charges        recorded in previous periods before the adoption of IFRS;        and                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the election of January 1,        2005 as the transition date for the first application of        IAS 32 and IAS 39, related to the evaluation of financial        instruments, including derivatives. As permitted under        IFRS 1, Eni has not restated comparative information. In        the Consolidated Financial Statements for the year ended        December 31, 2005 the impact of recording certain        derivative financial instruments at fair value, as is        required by IAS 39, was a euro 386 million charge in the        profit and loss account. For further information see        "Consolidated Financial Statements – Effects of        the adoption of IFRS and Evaluation Criteria". |

The IFRS under which Eni’s Consolidated FinancialStatements have been prepared differ in certain limited respectsfrom the IFRS adopted by the IASB, the effect of such differenceson the Consolidated Financial Statements is not material.

 

##### Table of Contents

**Critical Accounting Estimates**

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. Keyareas where estimates are applied include the determination ofoil and gas proved reserves and proved developed reserves,accounting for exploratory drilling costs under U.S. GAAP,impairment of fixed assets, intangible assets and goodwill, assetretirement obligations, business combinations, recognition ofenvironmental liabilities and recognition of revenues in theoilfield services construction and engineering businesses. Actualresults may differ from these estimates given the uncertaintysurrounding the assumptions and conditions upon which theestimates 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 future results.

> 
***Oil and Gas Activities***

Engineering estimates of the Company’s oil and gasreserves are inherently uncertain. 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. Although there areauthoritative guidelines regarding the engineering criteria thathave to be met before estimated oil and gas reserves can bedesignated as "proved", the accuracy of any reserveestimate is a function of the quality of available data andengineering and geological interpretation and judgment.

Reserves in a field will only be categorized as proved whenall the criteria for attribution of proved status have been met,including an internally imposed requirement for project sanctionthat occurs when a final investment decision is made. At thepoint of sanction, all booked reserves will be categorized asproved undeveloped. Volumes will subsequently be recategorizedfrom proved undeveloped to proved developed as a consequence ofdevelopment activity. The first proved developed bookings willoccur at the point of first oil or gas production. Majordevelopment projects typically take one to four years from thetime of initial booking to the start of production. Adjustmentsmay be made to booked reserves due to production, reservoirperformance, commercial factors, acquisition and divestmentactivity and additional reservoir development activity.

Eni reassesses its estimate of proved reserves on an annualbasis. The estimated proved reserves of oil and natural gas maybe subject to future revision and upward and downward revisionmay be made to the initial booking of reserves due to production,reservoir performance, commercial factors, acquisition anddivestment activity and additional reservoir developmentactivity. In particular, changes in oil and natural gas pricescould impact the amount of Eni’s proved reserves as regardsthe initial estimate and, in the case of Production SharingAgreements and buy-back contracts, the share of production andreserves Eni is entitled to. Accordingly, the estimated reservescould be materially different from the quantities of oil andnatural gas that ultimately will be recovered.

Oil and natural gas reserves have a direct impact on certainamounts reported in the financial statements. Estimated provedreserves are used in determining depreciation and depletionexpenses and impairment expense. Depreciation rates on oil andgas assets using the UOP basis are determined from the ratiobetween the amount of hydrocarbons extracted in the year andproved developed reserves existing at the year end increased bythe amounts extracted during the year. Assuming all othervariables are held constant, an increase in estimated provedreserves decreases depreciation, depletion and amortizationexpense. On the contrary, a decrease in estimated proved reservesincreases depreciation, depletion and amortization expense. Also,estimated proved reserves are used to calculate future cash flowsfrom oil and gas properties, which serve as an indicator indetermining whether a property impairment is to be carried out ornot. The larger the volumes of estimated reserves, the lesslikely the property is impaired. See "Item 3 – RiskFactors – Uncertainties in Estimates of Oil and Natural GasReserves".

> 
***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 Accounting 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 hasfound a sufficient quantity of reserves to justify completion asa producing 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.Determination of whether an exploratory well should remaincapitalized after completion of drilling requires a high degreeof judgment on the part of management in assessing whether theCompany is making sufficient progress assessing the reserves andthe economic and operating viability of a given project. Thecompany evaluates the progress made on the basis of regularproject reviews which take account of the following factors: (i)costs are being incurred to assess the reserves and theirpotential 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. As ofDecember 31, 2005, an amount of euro 403 million remaincapitalized relating to approximately 30 exploratory wells forwhich drilling activities have been completed for more than oneyear, of this capitalized amount euro 59 million (or 8 wells)relates to projects progressing towards completion of developmentactivities, and the remaining euro 344 million (or 22 wells)relates to projects for which additional exploratory activity isunderway or firmly planned. See Note 35 to the ConsolidatedFinancial Statements.

> 
***Impairment of Assets***

Eni assesses its fixed assets and intangible assets, includinggoodwill, for possible impairment if there are events or changesin circumstances that indicate the carrying values of the assetsare not recoverable. Such indicators include changes in theGroup’s business plans, changes in commodity prices leadingto unprofitable performance and, for oil and gas properties,significant downward revisions of estimated proved reservequantities. Determination as to whether and how much an asset isimpaired involves management estimates on highly uncertainmatters such as future commodity prices, the effects of inflationand technology improvements on operating expenses, productionprofiles and the outlook for global or regional marketsupply-and-demand conditions for crude oil, natural gas,commodity chemicals and refined products.

Technically, the amount of an impairment charge is determinedby comparing the book value of an asset with its recoverableamount. The recoverable amount is the greater of fair value netof disposal costs and value in use. The estimated value in use isusually based on the present values of expected future cash flowsusing assumptions commensurate with the risks involved in theasset group. The expected future cash flows used for impairmentreviews are based on judgmental assessments of future productionvolumes, prices and costs, considering available information atthe date of review and are discounted by using a rate related tothe activity involved.

For oil and natural gas properties, the expected future cashflows are estimated based on developed and non-developed provedreserves including, among other elements, production taxes andthe costs to be incurred for the reserves yet to be developed.The estimated future level of production is based on assumptionsabout future commodity prices, lifting and development costs,field decline rates, market demand and supply, economicregulatory climates and other factors.

Under both IFRS and U.S. GAAP, goodwill is not amortized but,like indefinitive lived intangible assets, is tested forimpairment at least annually. Under IFRS the assessment ofgoodwill impairment is based on the determination of the fairvalue of each cash generating units to which goodwill can beattributed on a reasonable and consistent basis. A cashgenerating unit is a group of assets that generates cash inflowsthat are largely independent of the cash inflows from othergroups of assets. If the fair value of a cash generating unit islower than the carrying amount, goodwill attributed to that cashgenerating unit is impaired up to that difference, if thecarrying amount of goodwill is less than the amount ofimpairment, assets of the generating unit are impaired on apro-rata basis for the residual difference.

> 
***Asset Retirement Obligations***

Obligations related to the removal of tangible equipment andto the restoration of land or seabeds require significantestimates in calculating the amount of the obligation anddetermining the amount required to be recorded in theConsolidated Financial Statements. Estimating the future assetremoval costs is difficult and requires management to makeestimates and judgments because most of the removal obligationsare many years into the future and contracts and regulations areoften unclear as to what constitutes removal. Asset removaltechnologies and costs are constantly changing, as well aspolitical, environmental, safety and public relationsconsiderations. The subjectivity of these estimates is alsoincreased by the accounting method used that requires entities torecord the fair value of a liability for an asset retirementobligations in the period when it is incurred (typically at thetime the asset is installed at the productions location). Whenliabilities are initially recorded, the related fixed assets areincreased by an equal corresponding amount. The liabilities areincreased with the passage of time (interest accretion) and anychange of the estimates following the modification of the futurecash flows and the discount rate adopted. The recognized assetretirement obligations are based upon future retirement costestimates 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 Combinations***

Accounting for the acquisition of a business requires theallocation of the purchase price to the various assets andliabilities of the acquired business at fair value. Any positiveresidual difference is recognized as "Goodwill".Negative residual differences are charged against profit and lossaccount. Management uses all available information to make thesefair value determinations and, for major business acquisitions,typically engages an outside appraisal firm to assist in the fairvalue determination of the acquired long-lived assets.

> 
***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. Environmental costs are recognized when it becomesprobable that a liability has been incurred and the amount can bereasonably 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 effect onEni’s consolidated results of operations and financialposition as a result of such laws and regulations, there can beno assurance that there will not be a material adverse impact onEni’s consolidated results of operations and financialposition due to: (i) the possibility of as yet unknowncontamination; (ii) the results of the on-going surveys andthe other possible effects of statements required by Decree No.471/1999 of the Ministry of Environment concerning theremediation of contaminated sites; (iii) the possible effectof future environmental legislation and rules, like the DecreeNo. 367 of the Ministry of Environment, published on January 8,2004, that introduces new quality standards for aquaticenvironment and dangerous substances and those that may derivefrom the legislative decree that the Italian Government will haveto enact in order to implement Directive 2000/60/EC creating aframework for joint European action in the area of water; (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.

> 
***Employees post-retirement benefits***

Employees benefits (such as pension payments, life insurancepayments, medical assistance after retirement, etc.) areevaluated with reference to uncertain events and based uponactuarial assumptions including among others discount rates,expected rates of return on any plan assets, expected rates ofsalary increases, medical cost trend rates, estimated retirementdates, mortality rates. These assumptions are reviewed annuallyand may change from year to year impacting future results ofoperations. 

The significant assumptions used to account for pensions andother post-retirement benefits are determined as follows:

| • |   | discount and inflation rates        reflect the rates at which the benefits could be        effectively settled, taking into account the duration o f        the obligation. Indications used in selecting the        discount rate include rates of annuity contracts and        rates of return on high-quality fixed-income investments        (such as government bonds). The inflation rates reflect        market conditions observed country by country; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | salary increase assumptions        (when relevant) are determined by each entity. They        reflect an estimate of the actual future salary levels of        the individual employees involved, including future        changes attributed to general price levels (consistent        with inflation rate assumptions), productivity,        seniority, promotion and other factors;                                                                          |
| • |   | healthcare cost trend        assumptions (when relevant) reflect an estimate of the        actual future changes in the cost of the healthcare        related benefits provided to the plan participants and        are based on past and current healthcare cost trends        including healthcare inflation, changes in healthcare        utilization, and changes in health status of the        participants;                                              |
| • |   | demographic assumptions such        as mortality, disability and turnover reflect the best        estimate of these future events for the individual        employees involved, based principally on available        actuarial data; and                                                                                                                                                                                                                       |
| • |   | determination of expected        rates of return on assets is made through compound        averaging. For each plan, there are taken into account        the distribution of investments among bonds, equities and        cash and the expected rates of return on bonds, equities        and cash. A weighted-average rate is then calculated.                                                                                                                 |

Differences between projected and actual costs and between theprojected return and the actual return on plan assets routinelyoccur and are called actuarial gains and losses. 

The unrecognized actuarial losses of pension benefits as atDecember 31, 2005 were euro 144 million compared to euro 41million in 2004. The euro 103 million increase from 2004reflected primarily changes in assumptions used to account forpensions and other post-retirement benefits mainly related to thedecrease in discount rates (4.0% in 2005 compared with 4.5% in2004). Pension accounting principles require that such actuariallosses be deferred and amortized over future periods. Eni appliesthe corridor method to amortize its actuarial losses and gains.This method amortizes the net cumulative actuarial gains andlosses that exceed 10% of the greater of (i) the present value ofthe defined benefit obligation and (ii) the fair value of planassets, over the average expected remaining working lives of theemployees participating in the plan.

In 2005, Eni recognized a charge of euro 126 million (euro 118million in 2004) in the profit and loss account in connectionwith its obligations for employee post-retirement benefits.

See Note 20 of the Consolidated Financial Statements forfurther information about employees post-retirement benefits.

> 
***Contingencies***

In addition to accruing the estimated costs for assetretirement obligation and environmental liabilities, Eni accruesfor all contingencies that are both probable and estimable. Theseother contingencies are primarily related to employee benefits,litigation and tax issues. Determining appropriate amounts foraccrual is a complex estimation process that includes subjectivejudgments.

> 
***Revenue recognition in the Oilfield Services,    Construction and Engineering segment***

Revenue recognition in the Oilfield Services, Construction andEngineering business segment is based on the stage of completionof a contract as measured on the cost-to-cost basis applied tocontractual revenues. Use of the stage of completion methodrequires estimates of future gross profit on a contract bycontract basis. The future gross profit represents the profitremaining after deducing costs attributable to the contract fromrevenues provided for in the contract. The estimate of futuregross profit is based on a complex estimation process, thatincludes identification of risks related to the geographicalregion, market condition in that region and any assessment thatit is necessary to estimate with sufficient precision the totalfuture costs as well as the expected timetable. Variation in thescope of the work, are included in the total amount of revenueswhen it is probable that the customer will approve the variationand claims deriving for additional costs are included in thetotal amount of revenues when it is probable that they willresult in additional revenue.

 

##### Table of Contents

**Results of Operations**

> 
***Profit and loss Account for Two Years ended December    31, 2005***

The table below sets forth a summary of Eni’s profit andloss account for the periods indicated. All line items includedin the table below are derived from the Consolidated FinancialStatements prepared in accordance with IFRS.

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Net sales        from operations                 |   | 57,545    |   |   | 73,728    |   |
|--------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Other income and revenues (1)                    |   | 1,377     |   |   | 798       |   |
|                                             |   |           |        |   |           |        |
| Total        revenues                            |   | 58,922    |   |   | 74,526    |   |
| Operating expenses                               |   | (41,592   | )      |   | (51,918   | )      |
| Depreciation,        amortization and writedowns |   | (4,931    | )      |   | (5,781    | )      |
| Operating profit                                 |   | 12,399    |   |   | 16,827    |   |
|                                             |   |           |        |   |           |        |
| Net        financial expense                     |   | (156      | )      |   | (366      | )      |
| Net income from investments                      |   | 820       |   |   | 914       |   |
|                                             |   |           |        |   |           |        |
| Profit        before income taxes                |   | 13,063    |   |   | 17,375    |   |
| Income taxes                                     |   | (5,522    | )      |   | (8,128    | )      |
|                                             |   |           |        |   |           |   |
| **Net profit**                                   |   | **7,541** |   |   | **9,247** |   |
| Pertaining to:                                   |   |      |   |   |      |   |
| - Eni                                            |   | 7,059     |   |   | 8,788     |   |
| - minority interest                              |   | 482       |   |   | 459       |   |
|                                             |   |           |        |   |           |        |

----

|   |   |                                                                                                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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. |

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

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

| Operating expenses                               |   | 72.3% |   | 70.4% |
|--------------------------------------------------|--------|-------|--------|-------|
| Depreciation,        amortization and writedowns |   | 8.6%  |   | 7.8%  |
| Operating profit                                 |   | 21.5% |   | 22.8% |

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

*2005 compared to 2004*Net profit pertaining to Eni in2005 was euro 8,788 million with a euro 1,729 million increaseover 2004 (up 24.5%) reflecting primarily an increase inoperating profit (up euro 4,428 million) recorded particularly inthe Exploration & Production segment, in respect to higheroil and natural gas prices in dollars (Brent up 42.3%) and highersales volumes of oil and natural gas (up 38.3 mmBOE, or 6.7%).These positives were offset in part by higher environmentalprovisions (euro 532 million), a provision to the risk reserveconcerning the fine imposed on February 15, 2006 by the AntitrustAuthority and the estimated impact of the application of DecisionNo. 248/2004 of the Authority for Electricity and Gas affectingnatural gas prices to residential customers and wholesalers (euro225 million) in force from January 1, 2005 and the recording in2004 of net gains on the sale of assets by the Exploration& Production segment (euro 320 million).

The effect of the increase in operating profit on net profitwas offset in part by higher income taxes (up euro 2,606million).

> 
***Discontinued operations***

Discontinued operations under both IFRS and U.S. GAAP in 2005and 2004 were immaterial.

> 
***Analysis of the line items of the profit and loss    account:***

*Revenue recognition*

Revenues from sales of products and services rendered arerecognized upon transfer of risks and advantages associated withthe property or upon settlement of the transaction. Inparticular, revenues are recognized:

| • |   | for crude oil, generally        upon shipment;                                                                                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | for natural gas, when the        natural gas is delivered to the customer;                                                                                                                             |
| • |   | for petroleum products sold        to retail distribution networks, generally upon delivery        to the service stations, whereas all other sales are        generally recognized upon shipment; and |
| • |   | for petrochemical products        and other products, generally upon shipment.                                                                                                                         |

Revenues are recognized upon shipment when, at that date, therisks of loss are transferred to the acquirer.

Revenues from the sale of crude oil and natural gas producedin properties in which Eni has an interest together with otherproducers are recognized on the basis of Eni’s workinginterest in those properties (entitlement method). Differencesbetween Eni’s net working interest volume and actualproduction volumes are recognized at current prices atperiod-end.

Income related to partially rendered services is recognizedwith respect to the accrued revenues, if it is possible toreasonably determine the state of completion and there are norelevant uncertainties concerning the amounts and the existenceof the revenue and related costs; otherwise it is recognizedwithin the limits of the recoverable costs incurred.

The revenues accrued in the period related to constructioncontracts are recognized on the basis of contractual revenues byreference to the stage of completion of a contract measured onthe cost-to-cost basis. Additional revenues, deriving from achange in the scope of the work, are included in the total amountof revenues when it is probable that the customer will approvethe variation and the relevant amount; claims deriving forinstance from additional costs incurred for reasons attributableto the client are included in the total amount of revenues whenit is probable that the counterpart will accept them.

Revenues are stated net of returns, discounts, rebates andbonuses, as well as directly related taxation. Exchanges of goodsand services with similar nature and value do not give rise torevenues and costs as they do not represent sale transactions.

> 
***a) Total Revenues***

*Net sales from operations*

Eni’s total revenues were euro 74,526 and euro 58,922million in 2005 and 2004, respectively. Total revenues consist ofnet sales from operations and other income and revenues.Eni’s net sales from operations amounted to euro 73,728 andeuro 57,545 million in 2005 and 2004, respectively, and its otherincome and revenues totalled euro 798 and euro 1,377,respectively, in these periods.

The table below sets forth, for the periods indicated, the netsales from operations generated by each of Eni’s businesssegments including intersegment sales, together with consolidatednet sales from operations.

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Exploration & Production                   |   | 15,346     |   |   | 22,477     |   |
|------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Gas &        Power                         |   | 17,302     |   |   | 22,969     |   |
| Refining & Marketing                       |   | 26,089     |   |   | 33,732     |   |
| Petrochemicals                                 |   | 5,331      |   |   | 6,255      |   |
| Oilfield Services Construction and Engineering |   | 5,696      |   |   | 5,733      |   |
| Other        activities                        |   | 1,279      |   |   | 1,358      |   |
| Corporate and financial companies              |   | 851        |   |   | 977        |   |
| Consolidation        adjustment (1)            |   | (14,349    | )      |   | (19,773    | )      |
|                                           |   | **57,545** |   |   | **73,728** |   |

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

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | 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 31 to the Consolidated Financial Statements for        a breakdown of intersegment sales by segment for the two        reported years. |

*2005 compared to 2004* Eni’s net sales fromoperations for 2005 totalled euro 73,728 million, with anincrease of euro 16,183 million over 2004, up 28.1%, dueprincipally to higher oil prices (denominated in dollars), higherrefined product and petrochemical prices and higher volumes soldin Eni’s main operating segments.

Revenues generated by the Exploration & Production segment(euro 22,477 million) increased by euro 7,131 million in 2005, up46.5%, due principally to higher oil prices realized (oil up41.3%, natural gas up 15.6%) combined with increased hydrocarbonproduction volumes sold (38.3 mmBOE, or 6.7%).

Revenues generated by the Gas & Power segment (euro 22,969million) increased by euro 5,667 million in 2005, up 32.8%, dueprincipally to higher natural gas prices and the increase ofvolumes sold of natural gas (4.29 BCM, or 5.9%), and electricity(up 8.92 terawatthours, or 64.4%).

Revenues generated by the Refining & Marketing segment(euro 33,732 million) increased by euro 7,643 million in 2005, up29.3%, principally due to higher international prices for oil andrefined products, the effects of which were offset in part bylower volumes sold on Italian retail and wholesale markets (down1.1 million tonnes), the effect of the sale of LPG and refinedproduct distribution activities in Brazil in August 2004 andlower trading activities (down 1.3 million tonnes).

Revenues generated by the Petrochemical segment (euro 6,255million) increased by euro 924 million in 2005, up 17.3%, duemainly to a 12% increase in the average selling prices ofproducts and a 3.6% increase in sales volumes.

Revenues from the Oilfield Services, Construction andEngineering segment (euro 5,773 million) increased by euro 37million in 2005, up 0.6%, reflecting mainly higher utilizationrates of vessels and drilling rigs and a higher volume of ordersfulfilled.

Revenues of Corporate and financial companies (euro 977million) increased by euro 126 million in 2005, up 14.8%, whichessentially consists of invoices for services provided to othergroup segments. In 2005, Corporate started supplying certaincentral services amounting to euro 76 million to a mergedsubsidiary, Italgas Più belonging to the Gas & Powersegment. Other increases in revenues were essentially related toIT services (euro 27 million) and general services such asactivities related to real estate rentals and maintenance, fleetof cars, company’s aircrafts, and other activities (euro 21million).

> 
*Other income and revenues*

*2005 compared to 2004* Other income and revenues (euro798 million) declined by euro 579 million in 2005, down 42%, duemainly to lower gains on asset divestment in relation to the factthat in 2004 gains on the sale of mineral assets were recorded bythe Exploration & Production segment for euro 373 million,and the fact that starting in 2005 derivative contracts oncommodities were accounted for under IFRS No. 32 and 39, underwhich gains or losses on derivative financial contracts used tomanage exposure to fluctuations in commodity prices are accountedfor as financial income.

> 
***b) Operating Expenses***

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

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Purchases, services and other    |   | 38,347 |   | 48,567 |
|----------------------------------|--------|--------|--------|--------|
| Payroll        and related costs |   | 3,245  |   | 3,351  |
|                             |   |        |   |        |
| Operating expenses               |   | 41,592 |   | 51,918 |

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

*2005 compared to 2004* Operating expenses (euro 51,918million) increased by euro 10,326 million in 2005 compared to2004, up 24.8%, due mainly to: (i) higher prices for oil-basedand petrochemical feedstocks and for natural gas; (ii) higherenvironmental provisions (euro 532 million), recorded inparticular in the Other activities and the Refining& Marketing segment in connection with reclamation andremediation activities of certain industrial plants related tobusinesses exited by Eni in past years and environmentalliabilities relating to refineries and the distribution networkin Italy; (iii) an increase in provisions relating to the fineimposed on February 15, 2006 by the Antitrust Authority and theestimated impact of the application of Decision No. 248/2004 ofthe Authority for Electricity and Gas from January 1, 2005 (euro515 million); (iv) a euro 87 million increase in insurancecharges deriving from the extra premium due for 2005 and for thenext five years (assuming normal accident rates) related to theparticipation of Eni in Oil Insurance Ltd. These higher insurancecharges reflect the exceptionally high rate of accidents in thetwo year period 2004-2005; and (v) increases in provisionsrelating to certain legal proceedings and contractual obligations(euro 58 million). These increases were partially offset by thesale of activities in Brazil in August 2004.

Payroll and related costs (euro 3,351 million) were up euro106 million in 2005, or 3.3%, reflecting primarily an increase inunit labor cost in Italy, offset in part by a decline in theaverage number of employees in Italy and the effect of the saleof refined product distribution activities in Brazil.

> 
***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,** |
|--------|-----------------------------|
|   |                             |

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Exploration        & Production (1)               |   | 3,047  |   |   | 3,944 |   |
|-------------------------------------------------------|--------|--------|--------|--------|-------|--------|
| Gas & Power                                       |   | 637    |   |   | 684   |   |
| Refining        & Marketing                       |   | 465    |   |   | 462   |   |
| Petrochemicals                                        |   | 114    |   |   | 118   |   |
| Oilfield        Services Construction and Engineering |   | 184    |   |   | 176   |   |
| Other activities                                      |   | 45     |   |   | 31    |   |
| Corporate        and financial companies              |   | 106    |   |   | 98    |   |
| Unrealized profit in inventory (2)                    |   |   |   |   | (4    | )      |
|                                                  |   |        |        |   |       |        |
| Total of        depreciation and amortization         |   | 4,598  |   |   | 5,509 |   |
| Writedowns                                            |   | 333    |   |   | 272   |   |
|                                                  |   |        |        |   |       |        |
| Depreciation, amortization and writedowns             |   | 4,931  |   |   | 5,781 |   |

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

----

|   |   |                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Exploration        expenditures of euro 618 and 564 million are included in        these amounts relative to the years 2005 and 2004,        respectively. |
| (2)    |   | Unrealized profit in inventory        concerned intersegment sales of goods and services.                                                                  |

*2005 compared to 2004* Depreciation, amortization andwritedown charges (euro 5,781 million) increased by euro 850million in 2005 compared to 2004, up 17.2%. Depreciation andamortization charges (euro 5,509 million) were up euro 911million, or 19.8%, from 2004 to 2005 mainly in the Exploration& Production segment (up euro 897 million) reflectingprimarily: (i) higher development costs for new fields andincreased costs incurred to maintain production levels in certainmature fields; (ii) the impact on amortization charges of therevision of previous estimates of asset retirement and removalcosts relating to certain fields located in the UK, Norway,Kazakhstan; (iii) the impact of oil prices on amortization inPSAs and buy-back contracts; (iv) higher production; and (v)higher exploration costs (up euro 50 million). In the Gas &Power segment amortization charges increased by euro 47 milliondue to the coming on stream of the Greenstream gasline and newpower generation capacity.

Writedowns (euro 272 million) concerned mainly Exploration& Production (euro 156 million), Other activities (euro 75million) and Petrochemical (euro 29 million) segments.

> 
***d) Operating Profit by Segment***

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

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Exploration        & Production                   |   | 8,185  |   |   | 12,574 |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Gas & Power                                       |   | 3,428  |   |   | 3,321  |   |
| Refining        & Marketing                       |   | 1,081  |   |   | 1,857  |   |
| Petrochemicals                                        |   | 320    |   |   | 202    |   |
| Oilfield        Services Construction and Engineering |   | 203    |   |   | 307    |   |
| Other activities                                      |   | (395   | )      |   | (902   | )      |
| Corporate        and financial companies              |   | (363   | )      |   | (391   | )      |
| Unrealized profit in inventory                        |   | (59    | )      |   | (141   | )      |
|                                                  |   |        |        |   |        |        |
| Operating profit                                      |   | 12,399 |   |   | 16,827 |   |

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

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

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

| Exploration & Production                   |   | 53.3% |   | 55.9% |
|------------------------------------------------|--------|-------|--------|-------|
| Gas &        Power                         |   | 19.8% |   | 14.5% |
| Refining & Marketing                       |   | 4.1%  |   | 5.5%  |
| Petrochemicals                                 |   | 6.0%  |   | 3.2%  |
| Oilfield Services Construction and Engineering |   | 3.6%  |   | 5.4%  |

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

***Exploration & Production*** Operating profit in2005 amounted to euro 12,574 million, a euro 4,389 millionincrease compared to 2004, up 53.65%, due to: (i) higher oil andgas prices (oil prices up 41.3% in dollars, natural gas prices up15.6% in dollars); (ii) higher production volumes sold (up 38.3mmBOE, or 6.7%); and (iii) lower asset impairment charges (euro40 million). These positive factors were offset in part by: (i)higher operating costs and amortization charges; (ii) net gainson divestments recorded in 2004 (euro 320 million); and (iii)higher insurance charges.

***Gas & Power*** Operating profit in 2005amounted to euro 3,321 million, a euro 107 million decreasecompared to 2004, down 3.1%, due mainly to: (i) a provisionincrease relating to the fine imposed on February 15, 2006 by theAntitrust Authority (euro 290 million) and the estimated impactof the application of Decision No. 248/2004 of the Authority forElectricity and Gas from January 1, 2005 affecting natural gasprices to residential customer and wholesalers (euro 225million); (ii) weaker realized margins on natural gas salesrelated to competitive pressure offset in part by favorabletrends in prices of certain refined products to which natural gassale and purchase prices are contractually indexed resulting in ahigher increase of selling prices as compared to supply costswhen comparing 2005 to 2004; and (iii) other provision increases(euro 46 million). These negative factors were offset in part by:(i) increased natural gas sales volumes (up 6.13 BCMincluding own consumption, or 8%) and higher natural gas volumesdistributed; (ii) a higher operating profit in natural gastransport activities outside Italy; and (iii) a higheroperating profit of power generation activities which almostdoubled to euro 138 million in 2005, up euro 77 million,reflecting primarily an increase in sold production ofelectricity (8.92 terawatthours, up 64.4%), offset in part by adecline in realized margins related to unfavorable trends inprices of certain refined products to which electricity sellingprices and purchase prices of fuels (in particular natural gas)are contractually indexed resulting in a higher increase ofsupply costs as compared to selling prices when comparing 2005 to2004.

***Refining & Marketing*** Operating profit in2005 amounted to euro 1,857 million, a euro 777 million increasecompared to 2004, up 71.9%, due essentially to: (i) an inventoryholding gain of euro 671 million resulting from the evaluation ofinventories under the weighted-average cost method of inventoryaccounting in connection with rising international prices of oiland refined products. Inventory holding gains or losses representthe difference between the cost of sales calculated using theaverage cost of supplies incurred during the period and the costof sales calculated using the weighted-average method. During2005 the cost of sales as determined under the weighted-averagemethod was euro 1,064 million lower than a cost of sales assuminga cost based on the current cost of supplies in 2005 (euro 393million lower in 2004); (ii) higher realized margins in refining(the margin on Brent was up 1.43 dollars/barrel, or 32.9%)combined with higher volumes processed and an improvement in themix of refined products obtained, the effect of which was offsetin part by the impact of the standstill of the Gela refinery inthe first part of 2005 owing to the damage caused by a seastormin December 2004; (iii) higher operating profit in distributionactivities in Italy; and (iv) an increase in operating results ofrefining and marketing activities in the rest of Europe relatedto a favorable trend of the trading environment for refining andto increased retailing sales in particular in Germany, Spain andthe Czech Republic, due to the purchase/construction of servicestations. These positive factors were offset in part by a euro185 million increase in operating expenses related in particularto higher environmental provisions and higher insurance costs andthe effect of the sale of Agip do Brasil (euro 28 million) inAugust 2004.

***Petrochemicals*** Operating profit in 2005 amountedto euro 202 million, a euro 118 million decrease compared to2004, down 36.9%, due mainly to: (i) higher operating expenses(euro 92 million) recorded in connection with the restructuringof the Champagnier plant in view of its shutdown, provisions forlitigation and higher insurance costs; and (ii) lower productmargins in basic petrochemicals reflecting higher oil-basedfeedstock purchase costs not fully recovered in selling prices,partly offset by higher margins in elastomers and polyethylene.These negative factors were offset in part by higher salesvolumes (up 3.6%) and lower operating costs related to efficiencyactions.

***Oilfield Services Construction and Engineering***Operating profit in 2005 amounted to euro 307 million, a euro 104million increase compared to 2004, up 51.2%. The oilfieldservices and construction business reported an operating profitof euro 306 million, up euro 37 million, or 13.8%, achieved inthe following areas: (i) offshore construction area, reflectinghigher profitability of certain projects completed in NorthAfrica; (ii) onshore drilling area, reflecting higher activitylevels; and (iii) offshore drilling area, reflecting tariffincreases for the submersible platform Scarabeo 6, higherutilization of the submersible platform Scarabeo 4 and of thejack-up Perro Negro 5. Such gains were partially offset by highercosts on projects in progress in the LNG area and the fact thatfor 2004 the Leased FPSO area recorded income relatingessentially to a contract for the recovery of oil spilled fromthe Prestige tanker not recorded in 2005.

The engineering business reported an operating profit of euro1 million, an increase of euro 67 million over 2004, arising fromthe higher profitability of certain contracts in addition to theshare of earnings from certain projects acquired in early 2005.

***Other activities*** These activities includeresults of operations of Syndial, which manages certaindecommissioning and reclamation activities relating to certainshut down industrial sites of Eni, and other Eni subsidiaries(such as, among others, Sieco, Tecnomare, EniTecnologie, EniCorporate University and AGI) engaged in diversified activities(mainly services to Eni business segments). The Other activitiesreported an operating loss of euro 902 million for 2005, higherby euro 507 million, or 128% compared to the loss in 2004, dueessentially to a euro 504 million increase in Syndial’soperating loss relating to: (i) higher provisions forenvironmental liabilities of euro 328 million reflectingprimarily to the clean up of the Porto Marghera site and thesettlement agreed with certain Italian authorities for theenvironmental damages and remediation of the same site, thereclamation of areas belonging to the Mantova plant and thedismantling of inactive plants and tanks in the Porto Torressite; (ii) provisions for contractual risks (euro 71 million)essentially related to the inability to fulfill certaincontractual obligations in connection with product supply andlitigations (euro 40 million); and (iii) higher asset impairments(up euro 56 million from euro 19 million to euro 75 million);impairments in 2005 related in particular to the Scarlino andPorto Torres plants, up euro 44 million and euro 19 million,respectively.

***Corporate and financial companies*** Theseactivities include results of operation of the headquarter of theparent company Eni SpA and of Eni’s subsidiaries engaged intreasury services. These activities reported an operating loss ofeuro 391 million for 2005, down euro 28 million, or 7.7% from2004, due essentially to an increase in IT costs, up euro 48million, arising from higher activity levels, and institutionalcommunication costs, up euro 7 million. These negative factorswere partly offset by lower environmental provisions.

> 
***e) Net Financial Expense***

The table below sets forth a breakdown of Eni’s netfinancial expense for the periods indicated:

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Exchange gain (loss), net                                   |   |   |   |   | 169    |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Interest        and other financial income                  |   | 2      |   |   | 74     |   |
| Income from securities                                      |   | 31     |   |   | 36     |   |
| Interest        and other financial expense                 |   | (254   | )      |   | (309   | )      |
| Accretion of asset retirement obligation                    |   | (109   | )      |   | (109   | )      |
| Income        (expense) on derivative financial instruments |   | 34     |   |   | (386   | )      |
| (Increase)/decrease in risk reserve provision               |   | (62    | )      |   |   |   |
| less:                                                       |   |        |        |   |        |        |
| Interest capitalized                                        |   | 202    |   |   | 159    |   |
|                                                        |   |        |        |   |        |        |
|                                                        |   | (156   | )      |   | (366   | )      |

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

*2005 compared to 2004* Net financial expense (euro 366million) was up euro 210 million from 2004, or 135%, due tocharges pertaining to changes in the fair value of derivativefinancial contracts and to higher interest rate charges on dollarloans (relating to an increase in LIBOR of 2 percentage points),the effects of which were offset in part by a decrease in averagenet borrowings11 and the fact thatin 2004 a euro 62 million increase in the risk reserve provisionwas recorded in connection with assignment of a financingreceivable to the acquirer of a divested affiliate of Eni whichis expected to be unable to repay such receivable on the basis ofmanagement estimates.

> 
***f) Net Income from Investments***

*2005 compared to 2004* In 2005 net income frominvestment was euro 914 million and concerned primarily:(i) Eni’s share of income of affiliates accounted forunder the equity method (euro 737 million), in particularaffiliates in the Gas & Power (euro 358 million) and Refining& Marketing (euro 221 million) segments; (ii) gains ondisposal (euro 179 million) relating in particular to the sale of100% of IP (euro 132 million) and a 2.33% stake in Nuovo PignoneHolding SpA (euro 24 million); and (iii) dividends received byaffiliates accounted for under the cost method (euro 33 million).

The euro 94 million increase in net income from investmentswas due essentially to improved results of operations ofaffiliates in the Gas & Power segment, in particular GalpEnergia SGPS SA (Eni’s interest 33.34%), Unión Fenosa GasSA (Eni’s interest 50%) and Blue Stream Pipeline Co BV(Eni’s interest 50%) as well as the fact that in 2004 a euro41 million impairment was recorded in connection with thedivestment of Eni’s 35% interest in Albacom. These increaseswere offset in part by lower gains on disposal (euro 257 million)related to the fact that in 2004 the gain on the sale of 9.054%of the share capital of Snam Rete Gas, 100% of Agip do Brasil SAand other minor assets were recorded for a total of euro 437million, as compared to the euro 179 million gain recorded in2005.

> 
***g) Taxes***

*2005 compared to 2004* Income taxes were euro 8,128million, up euro 2,606 million from 2004, or 47.2%, and reflectedprimarily higher income before taxes (euro 4,312 million). TheGroup’s effective tax rate increased 4.5 percentage pointsto 46.8% (42.3% in 2004). There were three factors behind thisincrease. First, the higher share of profit before income taxesearned by subsidiaries in the Exploration & Productionsegment operating in countries where the statutory tax rate ishigher than the Group tax rate. Second, profit for the year wasadversely impacted by higher non-deductible charges pertaining toincreases in risk reserve provision, relating mainly to a fineimposed by the Italian Antitrust Authority. The third factor wasa lower share of non-taxable income pertaining in particular tolower gains on disposals of shareholdings in consolidatedsubsidiaries and of investments recorded under the item "NetIncome from Investments" (see above).

> 
***h) Minority Interest***

*2005 compared to 2004* Minority interests was euro 459million and concerned primarily Eni’s interest in Snam ReteGas SpA (euro 321 million) and Saipem SpA (euro 115 million).

 

##### Table of Contents

**Liquidity and Capital Resources**

The table below sets forth the principal components ofEni’s change in cash and cash equivalent for the periodsindicated.

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Net profit                                                                                                          |   | 7,541      |   |   | 9,247      |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| *Adjustments        to reconcile to cash generated from operating profit        before changes in working capital:* |   |       |   |   |       |   |
| • Amortization and depreciation and other        non-monetary items                                            |   | 5,092      |   |   | 6,518      |   |
| • Net        gains on disposals of assets                                                                      |   | (793       | )      |   | (220       | )      |
| • Dividends, interest, and income taxes and        other changes                                               |   | 5,740      |   |   | 8,471      |   |
|                                                                                                                |   |            |        |   |            |        |
| Net cash generated from operating profit before        changes in working capital                                   |   | 17,580     |   |   | 24,016     |   |
| Changes in        working capital related to operations                                                             |   | (909       | )      |   | (2,422     | )      |
| Dividends received, taxes paid, interest (paid)        received during the year                                     |   | (4,171     | )      |   | (6,658     | )      |
|                                                                                                                |   |            |        |   |            |        |
| **Net        cash provided by operating activities**                                                                |   | **12,500** |   |   | **14,936** |   |
| Capital expenditure                                                                                                 |   | (7,499     | )      |   | (7,414     | )      |
| Investments        (1)                                                                                              |   | (316       | )      |   | (127       | )      |
| Disposals                                                                                                           |   | 1,547      |   |   | 542        |   |
| Other cash        flow related to capital expenditure, investments and        divestments                           |   | 308        |   |   | 184        |   |
| Changes in short and long-term financial debt                                                                       |   | (3,743     | )      |   | (540       | )      |
| Dividends        paid and changes in minority interests and reserves                                                |   | (3,175     | )      |   | (7,284     | )      |
| Effect of change in consolidation scope and        exchange differences                                             |   | (55        | )      |   | 33         |   |
|                                                                                                                |   |            |        |   |            |        |
| **Change in cash and cash equivalent for the        year**                                                          |   | **(433**   | **)**  |   | **330**    |   |
|                                                                                                                |   |            |        |   |            |        |
| Cash and        cash equivalent at the beginning of the year                                                        |   | 1,436      |   |   | 1,003      |   |
| Cash and cash equivalent at year end                                                                                |   | 1,003      |   |   | 1,333      |   |

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

----

|   |   |                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------|
| (1)    |   | This item        refers mainly to the acquisition of equity of other        companies. |

 

The table below sets forth the principal components ofEni’s change in net borrowings (2) for theperiods indicated.

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| **Net cash provided by operating activities**                                      |   | **12,500** |   |   | **14,936** |   |
|------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Capital        expenditure                                                         |   | (7,499     | )      |   | (7,414     | )      |
| Investments                                                                        |   | (316       | )      |   | (127       | )      |
| Disposals                                                                          |   | 1,547      |   |   | 542        |   |
| Other cash flow related to capital expenditure,        investments and divestments |   | 97         |   |   | 293        |   |
| Net        borrowings (2) of acquired companies                                    |   |       |   |   | (19        | )      |
| Net borrowings (2) of divested        companies                                    |   | 190        |   |   | 21         |   |
| Exchange        differences on net borrowings and other changes                    |   | (64        | )      |   | (980       | )      |
| Dividends paid and changes in minority interests        and reserves               |   | (3,175     | )      |   | (7,284     | )      |
|                                                                               |   |            |        |   |            |        |
| **Change in net borrowings**(2)                                                    |   | **3,280**  |   |   | **(32**    | **)**  |
|                                                                               |   |            |        |   |            |        |
| Net        borrowings (2) at the beginning of the year                             |   | 7,163      |   |   | 10,443     |   |
| Net borrowings (2) at year end                                                     |   | 10,443     |   |   | 10,475     |   |

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

----

|   |   |                                                                                                                                                                                                                                                                |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 Profit before    Changes in Working Capital***

Cash generated from operating profit before changes in workingcapital totalled euro 24,016 million in 2005 and euro 17,580million in 2004. The euro 6,436 million increase from 2004reflected primarily increased results of operations.

In 2005, net profit has been adjusted to take into accountamortization and depreciation and other non-monetary items (euro6,518 million), which concerned primarily depreciation andamortization of tangible and intangible assets (euro 5,509million), impairments of fixed assets and investments (euro 272million) primarily resulting from the impairment of proved andunproved property in the Exploration & Production segment(euro 156 million) and a euro 63 million impairment charge in theOther Activities segment related to certain shutdown plants andto the Porto Torres petrochemical complex, and income taxes andinterest expense (euro 8,471 million).

In 2004 net profit has been adjusted to take into accountamortization and depreciation and other non-monetary items (euro5,092 million), which concerned primarily depreciation andamortization of tangible and intangible assets (euro 4,598million), impairments of fixed assets and investments (euro 333million) related in particular to the impairment of proved andunproved property in the Exploration & Production segment(euro 287 million), and income taxes and interest expense (euro5,740 million).

> 
***b) Changes in Working Capital Related to Operations***

Net working capital related to operations was euro 2,422million in 2005 and euro 909 million in 2004.

In 2005, the increase in net working capital (euro 2,422million) was mainly due to a euro 3,576 million increase in tradeaccounts receivable due essentially to the impact of increasedinternational oil and refined product prices, growth in salesvolumes of oil and natural gas and currency translation effects.This increase related in particular to the Gas & Power (upeuro 1,671 million), Refining & Marketing (up euro 1,010million) and the Exploration & Production (up euro 806million) segments. This increase was partly offset by an increasein the euro value of trade accounts payable (euro 2,333 million)resulting from the same reasons as the increase in trade accountsreceivable.

> 
***c) Dividends received, taxes paid, interest (paid)    received during the year***

Dividends, interest and taxes paid (which is net of amountsreceived) totalled euro 6,658 million in 2005 and euro 4,171million in 2004 and concerned primarily the payment of incometaxes (euro 6,619 million in 2005 and euro 4,199 million in2004).

> 
***d) Capital Expenditure and Investing Activities***

Capital expenditure totalled euro 7,414 million in 2005 andeuro 7,499 million in 2004. In 2005, 91% of capital expenditurerelated to the Exploration & Production (euro 4,964 million),Gas & Power (euro 1,152 million) and Refining & Marketing(euro 656 million) segments. In 2004, 93% of capital expenditurerelated to the Exploration & Production (euro 4,853 million),Gas & Power (euro 1,451 million) and Refining & Marketing(euro 693 million) segments. For a discussion of capitalexpenditure by business segment and a description of changes fromone year to another see below "Capital Expenditure bySegment".

Investments (including net borrowings acquired) totalled euro146 million in 2005 and 316 million in 2004.

> 
***e) Disposals***

Disposals (including net debt discharged) totalled euro 563million in 2005 and euro 1,730 million in 2004.

In 2005, disposals (euro 563 million, including net borrowing)concerned primarily: (i) the Gas & Power segment, related tothe divestment of Eni’s majority interest (67.05%) inSocietà Azionaria per la Condotta di Acque Potabili (euro 85million) and 100% of the share capital of in Acquedotto VesuvianoSpA (euro 20 million); and (ii) the Refining & Marketingsegment related to the divestment of 100% of the share capital ofIP (euro 190 million) and 28% of the share capital of ErgRaffinerie Mediterranee Srl (euro 97 million).

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 thedisposal of other assets (euro 26 million); (ii) the Exploration& Production segment (euro 492 million) related in particularto the program of rationalization of mineral assets (euro 459million) and disposal of other minor assets (euro 33 million);(iii) the Refining & Marketing segment (euro 412 million)related to the divestment of the 100% interest in Agip do BrasilSA, a company active in distribution and marketing of refinedproducts and LPG (euro 365 million), the sale of service stations(euro 16 million) and disposal of other minor assets (euro 31million); (iv) the Other Activities and Corporate and financialcompanies segments (euro 101 million) related to the sale of thewaste disposal business in Ravenna (euro 49 million), the sale ofa 2.33% stake in Nuovo Pignone Holding SpA (euro 28 million) anddisposal of other minor assets (euro 24 million); and (v) thePetrochemical segment (euro 41 million) related in particular tothe sale of the elastomer Baytown plant (euro 31 million) anddisposal of other minor assets (euro 10 million).

> 
***f) Dividends Paid and Changes in Minority Interests    and Reserves***

In 2005, dividends paid and changes in minority interests andreserves (euro 7,278 million) related mainly to the dividenddistribution for fiscal year 2004 of euro 3,384 million12 and the payment of an interimdividend of euro 1,686 million13carried out by Eni SpA, the payment of dividends by Snam Rete GasSpA (euro 1,171 million of which euro 976 million was paid as anextraordinary dividend) and other consolidated subsidiaries (euro9 million) and the buy-back program (euro 1,034 million).

In 2004, dividends paid and changes in minority interest andreserves (euro 3,175 million) related mainly to the payment ofdividends for fiscal year 2003 by Eni SpA for a total amount ofeuro 2,828 million14 and otherconsolidated subsidiaries (euro 248 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 IFRS less: cash,cash equivalents and certain very liquid investments not relatedto operations including, among others, non-operating financingreceivables 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’s capital structure and of howEni’s operating assets are financed. In addition, managementutilizes the ratio of net borrowings to total shareholders’equity including minority interest (leverage) to evaluateEni’s financial structure, to analyze whether the ratiobetween finance debt and shareholders’ equity is wellbalanced according to industry standards and to trackmanagement’s short-term and medium-term targets. Managementconstantly monitors trends in net borrowings and trends inleverage in order to optimize the use of internally-generatedfunds vs. funds from third parties. The measure calculated inaccordance with IFRS that is most directly comparable to netborrowings is total debt (short-term and long-term debt). Themost directly comparable measure, derived from IFRS reportedamounts, to leverage is the ratio of total debt toshareholders’ equity (including minority interest).Eni’s presentation and calculation of net borrowings andleverage may not be comparable to that of other 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,** |
|--------|-----------------------------|
|   |                             |

|   | **2004** |   | **2005** |
|--------|----------|--------|----------|
|   |          |   |          |

|   | **Short-term** |   | **Long-term** |   | **Total** |   | **Short-term** |   | **Long-term** |   | **Total** |
|--------|----------------|--------|---------------|--------|-----------|--------|----------------|--------|---------------|--------|-----------|
|   |                |   |               |   |           |   |                |   |               |   |           |

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

| **Total debt (short-term and long-term debt)** |   | **5,077** |   |   | **7,607** |   |   | **12,684** |   |   | **5,345** |   |   | **7,653** |   |   | **12,998** |   |
|------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Cash and        cash equivalent                |   | (1,003    | )      |   |      |   |   | (1,003     | )      |   | (1,333    | )      |   |      |   |   | (1,333     | )      |
| Securities not related to operations           |   | (792      | )      |   | (1        | )      |   | (793       | )      |   | (903      | )      |   | (28       | )      |   | (931       | )      |
| Non        operating financing receivables     |   | (11       | )      |   | (240      | )      |   | (251       | )      |   | (12       | )      |   | (247      | )      |   | (259       | )      |
| Other, net                                     |   | (194      | )      |   |      |   |   | (194       | )      |   |      |   |   |      |   |   |       |   |
|                                           |   |           |        |   |           |        |   |            |        |   |           |        |   |           |        |   |            |        |
| **Net Borrowings**                             |   | **3,077** |   |   | **7,366** |   |   | **10,443** |   |   | **3,097** |   |   | **7,378** |   |   | **10,475** |   |

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

 

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

| Shareholders’        equity including minority interests as per Eni’s        Consolidated Financial Statements prepared in accordance        with IFRS (million euro)      |   | **35,540** |   |   | **39,217** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| *Ratio of total debt to total        shareholders’ equity including minority interests*                                                                                         |   | *0.36*     |   |   | *0.33*     |   |
| *Less:        ratio of cash, cash equivalent and certain liquid        investments not related to operations to total        shareholders’ equity including minority interests* |   | *(0.07*    | *)*    |   | *(0.06*    | *)*    |
| *Ratio of net borrowing to total        shareholders’ equity including minority interests        (leverage)*                                                                    |   | *0.29*     |   |   | *0.27*     |   |

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

In 2005, net borrowings amounted to euro 10,475 million, aeuro 32 million increase over 2004. Total debt of euro 12,998million consisted of euro 5,345 million short-term debt(including the portion of long-term debt due within twelve monthsequal to euro 733 million) and euro 7,653 million of long-termdebt.

Total debt included bonds for euro 5,339 million (includingaccrued interest and discount). Bonds maturing in the next 18months amounted to euro 436 million (including accrued interestand discount). Bonds issued in 2005 amounted to euro 441 million(including accrued interest and discount). Total debt wasdenominated in the following currencies: euro (72%), U.S. dollar(16%), pound sterling (8%) and 4% in other currencies.

In 2004, net borrowings amounted to euro 10,443 million. Totaldebt amounted to euro 12,684 million, of which euro 5,077 millionof short-term debt (including the portion of long-term debt duewithin twelve months for euro 927 million) and euro 7,607 millionof long-term debt. Bonds amounted to euro 5,331 million. Totaldebt was denominated in the following currencies: euro (63%),U.S. dollar (24%), pound sterling (10%) and 3% in othercurrencies.

> 
***Short-term Debt***

As of December 31, 2005, short-term debt of euro 4,612 million(excluding the portion of long-term debt due within twelvemonths) increased by euro 462 million over 2004. The weightedaverage interest rate of Eni’s short-term debt was 2.5% and2.8% for the years ended December 31, 2004 and 2005,respectively.

As of December 31, 2005, Eni maintained committed anduncommitted unused lines of credit for euro 5,855 and euro 4,783million, respectively (euro 5,304 million and euro 7,771 million,respectively, at December 31, 2004). These agreements provide forinterest charges based on prevailing market conditions.Commission fees on unused lines of credit are not significant.

> 
***Long-term Debt***

As of December 31, 2005, long-term debt of euro 8,386 milliondecreased by euro 148 million over 2004.

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). The amount of this financingarrangement subject to said restrictive covenants was euro 1,104million and euro 1,258 million, as of December 31, 2004 and 2005,respectively. In 2005, those covenants primarily concernEni’s financing arrangements (euro 1,235 million, as ofDecember 31, 2005, of which euro 110 million as comprised aportion of long-term debt due within twelve months). Eni was incompliance with said covenants. Also Saipem SpA entered intofinancing arrangements with banks for euro 275 million (euro 300million as of December 31, 2004), that require maintenance ofcertain financial ratios generally based on Saipem’sconsolidated financial condition and results of operations.Saipem was in compliance with said covenants.

As of December 31, 2005, bonds of euro 5,339 million includedbonds issued under the Medium Term Notes Program for a total ofeuro 4,365 million and other bonds for a total of euro 974million.

As of December 31, 2004 bonds of euro 5,331 million includedbonds issued under the Medium Term Notes Program for a total ofeuro 4,296 million and other bonds for a total of euro 1,039million.

The weighted average interest rate on Eni’s long-termdebt (including current maturities) at December 31, 2005 wasapproximately 4.5% (4.2% at December 31, 2004).

> 
***Capital Expenditure by Segment***

The table below sets forth a breakdown, by segment, of capitalexpenditure.

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

|   |       |   | **2004** |   | **2005** |
|--------|--------------------------------|--------|----------|--------|----------|
|   |                           |   |          |   |          |

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

| Exploration & Production                   |   | 4,853     |   | 4,964     |
|------------------------------------------------|--------|-----------|--------|-----------|
| Gas &        Power                         |   | 1,451     |   | 1,152     |
| Refining & Marketing                       |   | 693       |   | 656       |
| Petrochemicals                                 |   | 148       |   | 112       |
| Oilfield Services Construction and Engineering |   | 186       |   | 349       |
| Other        activities                        |   | 49        |   | 69        |
| Corporate and financial companies              |   | 119       |   | 112       |
|                                           |   |           |   |           |
| **Total**                                      |   | **7,499** |   | **7,414** |

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

In 2005, capital expenditure of the Exploration &Production segment amounted to euro 4,964 million, representingan increase of euro 111 million, or 2.3%, from 2004 due primarilyto higher unit development costs in connection with a higher rateof development activity for new fields in complex environmentsand in mature areas, and higher costs of certain productivefactors (e.g. tariffs of drilling rigs). Capital expenditure for2005 concerned mainly development expenditure (euro 3,952million, compared to euro 4,310 million in 2004) directed mainlyoutside Italy (euro 3,541 million), in particular in Kazakhstan,Libya, Angola and Egypt. Development expenditure in Italy (euro411 million) concerned in particular the completion of work forplant and infrastructure in Val d’Agri and sidetrack andinfilling actions in mature areas. Exploration expenditureamounted to euro 656 million (euro 499 million in 2004), of whichabout 96% was directed outside Italy. Outside Italy explorationconcerned in particular the following countries: Norway, Egypt,the United States, Brazil and Indonesia. In Italy explorationconcerned essentially Northern Italy.

Expenditure for the purchase of proved and unproved propertyamounted to euro 301 million and concerned the acquisition of:(i) a further 1.85% stake in the Kashagan project for dollar 200million; (ii) 104 exploration blocks and two fields inpre-development phase in Northern Alaska; (iii) a 40% stake inthe OML 120 and OML 121 concessions under development in theNigerian offshore; and (iv) a 50% interest in WA-313-P and a53.8% interest in WA-280-P permits in Australia. Capitalexpenditure for capital goods amounted to euro 55 million.

In 2004, capital expenditure in the Exploration &Production segment amounted to euro 4,853 million and largelyconcerned development expenditure mainly directed outside Italy(euro 3,991 million): in particular in Libya (the Wafa and BahrEssalam project), Iran (the South Pars project, phases 4 and 5),Angola (fields in Block 15), Kazakhstan, Egypt, Nigeria andNorway. Development expenditure in Italy (euro 378 million)concerned in particular the continuation of the drilling programand work for plant and infrastructure in Val d’Agri andsidetrack and infilling activities in mature areas. About 90% ofexploration expenditure (euro 499 million) was directed outsideItaly. Outside Italy exploration concerned in particular thefollowing countries: Egypt, the United States, Nigeria, Norway,Indonesia and Kazakhstan. In Italy exploration was focusedonshore in Sicily and Central Italy. A further euro 17 million(Eni’s share) was expensed by affiliates for explorationprojects in Saudi Arabia, Russia and Spain.

In 2005, capital expenditure in the Gas & Power segmenttotalled euro 1,152 million and related in particular to:(i) development and improvement of Eni’s transmissionnetwork in Italy (euro 643 million); (ii) the continuation of theconstruction of combined cycle power plants (euro 239 million);(iii) development and improvement of Eni’s distributionnetwork in Italy (euro 182 million); and (iv) development ofEni’s transport network outside Italy (euro 48 million). Ascompared to 2004, capital expenditure declined by euro 299million, down 20.6%, due essentially to the completion of theGreenstream gasline in 2004 and of the power generationdevelopment plan.

In 2004, capital expenditure in the Gas & Power segmenttotalled euro 1,451 million and related mainly to:(i) development and improvement of Eni’s natural gastransportation network in Italy (euro 553 million); (ii) thecontinuation of the construction of combined cycle power plants(euro 451 million) in particular at Brindisi, Ferrara, FerreraErbognone, Mantova and Ravenna; (iii) development and improvementof Eni’s natural gas distribution network in Italy (euro 168million); and (iv) the completion of the Greenstream gasline(euro 159 million) that started operations in October 2004.

In 2005, capital expenditure in the Refining & Marketingsegment amounted to euro 656 million and concerned:(i) refining and logistics (euro 349 million), in particularplant efficiency and flexibility improvement actions includingthe completion of the tar gasification plant at the Sannazzarorefinery; (ii) the upgrade of the distribution network and theconstruction of new service stations in Italy (euro 154 million);and (iii) the upgrade of the distribution network and to a lesserextent the purchase of service stations in the rest of Europe(euro 71 million). As compared to 2004, capital expendituredeclined by euro 37 million, or 5.3%, due essentially to thecompletion of the plant in Sannazzaro.

In 2004, capital expenditure in the Refining & Marketingsegment amounted to euro 693 million 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 therefined product distribution network and the purchase of servicestations in the rest of Europe (euro 69 million).

In 2005, capital expenditure in the Petrochemicals segmentamounted to euro 112 million and concerned in particular actionsfor extraordinary (euro 37 million) and periodical (euro 27million) improvement, actions for environmental protection andfor complying with safety and environmental regulations (euro 25million) and improving the efficiency of plants (euro 23million).

In 2004, capital expenditure in the Petrochemicals segmentamounted to euro 148 million, and concerned in particular actionsfor improving the efficiency of plants (euro 58 million) andactions for environmental protection and for complying withsafety and environmental regulations (euro 41 million).

In 2005, capital expenditure in the Oilfield Services,Construction and Engineering segment amounted to euro 349million, up 87.6% from 2004 and concerned mainly oilfieldservices and construction (euro 346 million), in particular: (i)improvement and upgrade of equipment; (ii) vessels and logisticalsupport means for specific contracts, in particular Kashagan;(iii) upgrade of operating structures in Kazakhstan and WestAfrica; and (iv) the purchase of the Margaux tanker ship and thebeginning of its conversion into an FPSO unit that will operatein Brazil on the Golfinho field.

In 2004, capital expenditure in the Oilfield Services,Construction and Engineering segment amounted to euro 186 millionand concerned mainly: (i) the construction and upgrade oflogistical support means in Kazakhstan, Angola and Nigeria; (ii)the completion 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.

 

##### Table of Contents

**Recent Developments**

The table below sets forth certain indicators of the tradingenvironment for the periods indicated:

|   | **Three months        ended March 31,** |   | **Two months        April-May,** |
|--------|-----------------------------------------|--------|----------------------------------|
|   |                                         |   |                                  |

|   | **2005** |   | **2006** |   | **2005** |   | **2006** |
|--------|----------|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |   |          |

| Average price of Brent dated crude oil (1)            |   | 47.50 |   | 61.75 |   | 50.19 |   | 70.09 |
|-------------------------------------------------------|--------|-------|--------|-------|--------|-------|--------|-------|
| Average        price in euro of Brent dated crude oil |   | 36.23 |   | 51.37 |   | 39.15 |   | 55.98 |
| Average EUR/USD Exchange rate (2)                     |   | 1.311 |   | 1.202 |   | 1.282 |   | 1.252 |
| Average        European refining margin (3)           |   | 4.26  |   | 2.95  |   | 6.92  |   | 5.11  |
| EURIBOR – three month euro rate %                |   | 2.1   |   | 2.6   |   | 2.1   |   | 2.8   |

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

----

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

> 
***Eni’s results of operations for the first quarter    2006***

Net profit for the first quarter of 2006 increased by 21.6%over the first quarter of 2005, reflecting higher operatingprofit (up 25.7%), partially offset by a higher Group effectivetax rate, up 4.1% (from 42.6 to 46.7%). The increase in theeffective tax rate was due principally to a higher share ofprofit before income taxes earned by subsidiaries in theExploration & Production division operating in countrieswhere the statutory tax rate is higher than the average tax ratefor the Group.

Eni’s results benefited from a favorable tradingenvironment with a higher Brent crude oil price (up 30%) and adepreciation of the euro versus the dollar (down 8.3%). Thesepositive factors were partially offset by declining refiningmargins (down 30.8%), lower petrochemical products margins anddeclining selling margins on natural gas as a consequence of thenew regulatory regime established by the Italian Authority forElectricity and Gas. In the subsequent months of April and May,the trend in the euro versus U.S. dollar exchange rate reversedwith the euro appreciating considerably versus the dollar. Shouldthis trend of appreciation continue for the rest of the year,Eni’s results of operation will be adversely impacted ascompared to the first quarter of 2006.

The increase in Eni’s operating profit for the firstquarter 2006 was largely attributable to Exploration& Production division (up 67.6%) due to higher oilprices (oil up 33.4% in dollars, natural gas up 24.4% in dollars)combined with increased production volumes sold (up 7.8%), and tothe favorable impact of the depreciation of the euro versus theU.S. dollar, offset in part by higher operating costs andamortization charges.

These increases were partly offset by lower operating profitin:

| • |   | the Gas & Power division        (down 23%) due primarily to a decrease in natural gas        margins as a consequence of the new regulatory regime        established by the Italian Authority for Electricity and        Gas with Decision No. 248/2004 affecting natural gas        prices to residential customers and wholesalers combined        with higher purchasing costs. See "Item 4 –        Regulation – Gas & Power – Natural gas        prices". On the positive side, sales of natural gas        were up 1.87 BCM, or 7.2%, and electricity production        sold was up 1.44 terawatthours, or 28.9%. Transported        natural gas volumes outside Italy were also higher        reflecting the coming-on-line of volumes transported        through the Greenstream pipeline from Libya; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the Petrochemical division        (down 75.3%) affected by the significantly higher cost of        oil-based feedstocks not completely transferred to        selling prices; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| • |   | the Refining & Marketing        division (down 67%) due primarily to declining refining        margins (margins on Brent were down 1.31 dollars/barrel,        or 30.8%), the effect of longer maintenance outages of        refineries and higher environmental provisions (euro 21        million). These factors were offset in part by the impact        of the appreciation of the dollar over the euro.                                                                                                                                                                                                                                                                                                                                                                                                                               |

Eni’s net sales from operations (revenues) for the firstquarter of 2006 increase by 35.2% from the first quarter of 2005,primarily reflecting higher realized prices and higher salesvolumes in virtually all of Eni’s operating segments. Alsocontributing was the favorable impact of the depreciation of theeuro versus the dollar.

The appreciation of the euro over other currencies, inparticular the U.S. dollar (at March 31, 2006 the EUR/USDexchange rate was up 2.5% over December 31, 2005) resulted indecrease in the book value of net capital employed, in net equityand in net borrowings at 2005 year end.

Net borrowings at March 31, 2006 declined by 39.9% fromDecember 31, 2005, due to cash inflow provided by operatingactivities, and was also influenced by seasonality factors, cashfrom asset divestments and currency translation effects. Theseinflows were offset in part by financial requirements for capitalexpenditure and investments and the repurchase of own shares.

In the first quarter of 2006 hydrocarbon production increasedby approximately 7% as compared to the first quarter of 2005.This increase was driven by organic growth in Libya, Angola andEgypt. Production for the quarter was adversely impacted by: (i)an estimated 29 KBOE/d reduction due to lower entitlements incertain PSAs and buy-back contracts; (ii) field declines inmature areas, mainly in natural gas production in Italy; and(iii) residual hurricane impacts on production in the Gulf ofMexico and outages and disruptions in Nigeria due to socialunrest.

Natural gas sales (included gas consumed by Eni and Eni’sshare of sales of its affiliates) increased by 5.8% as comparedto the first quarter of 2005. Electricity production soldincreased by 28.98% as compared to the first quarter of 2005.

> 
***Cancellation of the Dación oil field contract on    part of the Venezuelan State Oil Company***

With effective date April 1, 2006, the Venezuelan State oilcompany Petróleos de Venezuela SA (PDVSA) unilaterallyterminated the service contract governing activities at theDación oil field where Eni acted as a contractor, holding a 100%working interest. As a consequence, starting on the same day,operations at the Dación oil field are conducted by PDVSA whichreplaced Eni Dación BV, Eni’s wholly-owned subsidiary thathad been operating the field until that date.

Eni believes that it is entitled to a market valuecompensation for the expropriation of the Dación field. On thesebasis, Eni is available to reach an agreement with the Venezuelanauthorities. In case an amicable settlement is not possible, Eniwill take any other action in order to protect its interest inVenezuela. Based on internal and external independent evaluation,Eni is confident that a fair market compensation will not belower than the book value of the Dación related assets.Accordingly, management decided not to impair the book value ofEni’s Dación assets. In 2005 and in the first quarter 2006,the Dación field production rate was about 60 KBBL/d. Managementexpects Eni’s proved reserves of hydrocarbons to be reducedby an amount of approximately 175 mmBBL corresponding toEni’s net proved reserves of the Dación field as ofDecember 31, 2005 as a consequence of the loss of Eni’stitle to the field.

 

##### Table of Contents

**Management Expectations of Operations**

The following are the forecasts for Eni’s key productionand sales metrics in 2006:

| • |   | production of liquids and        natural gas is expected to increase from the 1,693 KBOE/d        level of 2005. Management plans to increase production        mainly in Libya, Angola and Egypt due to full production        from fields that commenced production in the second half        of 2005. These increases will be partly offset by natural        field declines, residual hurricane impacts on production        in the Gulf of Mexico and outages and disruptions in        Nigeria due to social unrest and the impact of the        unilateral cancellation by the Venezuelan national oil        company PDVSA of the service contract for the Dación oil        field effective from April 1, 2006. Despite the adverse        impact of the unforeseen events in Venezuela and Nigeria,        production growth rate for the year is expected to be 3%        assuming an average Brent crude oil price of 54.5 dollars        per barrel in 2006. Management believes this growth rate        to be consistent with Eni’s planned average growth        rate of 4% for its oil and natural gas production in the        four year period 2006-2009; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | sales volumes of natural gas        are expected to increase by approximately 2% from the        91.15 BCM level of 2005. Management plans to increase        natural gas sales volumes mainly in Turkey, Germany and        Spain;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| • |   | sold production of        electricity is expected to increase by approximately 15%        from the 22.77 terawatthours level of 2005. Management        plans to increase sold production of electricity thanks        to the ramp-up of new production capacity at the Brindisi        and Mantova sites; lower production is expected at the        Ravenna and Ferrera Erbognone plants due to planned        maintenance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| • |   | refining throughputs on        Eni’s account are expected to decline slightly from        2005, due mainly to planned maintenance at the        Sannazzaro, Livorno and Taranto refineries. Otherwise        Eni’s refineries are expected to run at full        capacity; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| • |   | retail sales of refined        products on the Agip branded network in Italy are        expected to remain stable at 8.8 million tonnes;        according to management’s plans the impact of the        expected decline in domestic consumption is projected to        be offset by a higher network performance. In the rest of        Europe management plans to increase sales from the 3.7        million tonnes level of 2005 despite the expected        stagnation in consumption; in particular higher sales are        expected in Spain, France and Central Eastern Europe also        due to the construction/acquisition of service stations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

In 2006, capital expenditure is expected to amount to euro 9.7billion, representing a 31% increase from 2005. Approximately 91%of capital expenditure is planned in Eni’s Exploration &Production, Gas & Power and Refining & Marketing businesssegments; the main increases are expected in explorationprojects, the development of oil and natural gas reserves,upgrading of natural gas transport and import infrastructure andupgrading of refineries.

Overall, in the next four year period management plans toinvest approximately euro 35.2 billion in new capitalexpenditure; approximately 69%, 12% and 10% of this new capitalexpenditure is planned to be made in the Exploration &Production, Gas & Power and Refining & Marketingsegments, respectively. Key planned projects are as follows:(i) development of reserves of hydrocarbons in Kazakhstan,Angola, Nigeria, Libya, Italy and Egypt; (ii) exploration inselected areas; (iii) increase of Eni’s import capacity ofnatural gas from Algeria and Russia and upgrading of the Italiannatural gas transport and distribution networks; (iv)interventions aimed at upgrading primary distillation capacityand conversion capacity and the degree of flexibility ofEni’s refining system; and (v) upgrading anddevelopment of Eni’s Italian and European networks ofservice stations for the marketing of petroleum products.

In order to evaluate the profitability of individual capitalexpenditure projects, management uses a long-term reference oilprice of 30 dollars per barrel. The internal rate of return ofeach project is compared to the relevant hurdle rate,differentiated by business segment and country of operation.These hurdle rates are calculated taking into account: (i)Eni’s weighted average cost of capital which isdifferentiated for each business segment; (ii) a countryrisk premium which reflects the riskiness of each country ofoperation in terms of macroeconomic, business and social currentconditions and outlook; and (iii) a premium for the businessrisk.

In the next four year period management plans to pay dividendsin line with the euro 1.1 dividend per share paid to shareholdersfor fiscal year 2005, of which euro 0.45 per share was paid inOctober 2005 as an interim dividend with the balance be paid latein June 2006. Total cash outlay is expected at euro 4.1 billion(including the euro 1.7 billion already paid in October 2005).See "Item 8 – Dividend Policy" for more details onEni’s dividend policy and the uncertainties and constraintsto which it is subject.

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 next two years assuming a levelof 54.5 and 45 dollars per barrel for 2006 and 2007,respectively; then in following years management expects crudeoil prices to stabilize until settling on the long term level of30 dollars per barrel. Management's planned target of an oil andnatural gas production level of 2 mmBOE/d in 2009, implying anaverage growth rate of 4% in the 2006-2009 four year period,assumed a Brent crude oil price of $32 per barrel in 2009, underwhich management has used to estimate entitlements to productionin certain PSAs and buy-back contracts. In the 2006-2009 fouryear period management expects an exchange rate of approximately1.30 U.S. dollars per euro.

Management expects to maintain a stable financial structure.See the paragraph "Financial condition" above, for adiscussion of how Eni’s management assess Eni’sfinancial structure.

> 
*Discussion of certain business trends expected for 2006    and beyond*

Decision No. 248/2004 the Authority for Electricity and Gasestablished, among other things: (i) that an increase in theinternational price of Brent crude oil may only be partiallytransferred on to residential and commercial users of natural gasin case international prices of Brent crude oil exceed the 35dollars per barrel threshold; and (ii) that Italian natural gasimporters – including Eni – must renegotiate supplycontracts to wholesalers in order to take account of thereduction of the price of natural gas sold to residential andcommercial users. A proceeding has commenced between theAuthority for Electricity and Gas and Eni, which appealed thisdecision to an administrative court. Management believes anegative outcome of this matter to be likely. Accordingly, in2006, management expects Eni’s natural gas selling marginsto be adversely impacted by a material amount in light of thehigh Brent crude oil prices.

In addition, Eni is experiencing some pricing pressure in itscore natural gas business in Italy as a consequence of increasingcompetition and the need to comply with the mandatory ceilingsprovided for by the Italian regulatory system by selling naturalgas volumes available under take-or-pay purchase contracts tocertain Italian natural gas importers who resell those volumes onthe Italian natural gas market (see "Item 4 –Regulation of the Italian Natural Gas Market" and "Item3 – Risk Factors").

However, management expects declining natural gas sellingmargins to be offset almost completely by the planned growth innatural gas sales in European markets and in supplies for theproduction of electricity, cost savings deriving from plannedefficiency improvement actions and higher volumes of natural gastransport outside 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 fulfill itscontractual obligations under take-or-pay contracts for thepurchase of natural gas. In addition, management expects naturalgas sales in Italy to decline from the 58 BCM level of 2005 dueto increased competition. Management plans to manage Eni’sgrowing portion of natural gas purchased under take-or-paycontracts which cannot be sold in Italy and to compensate for theexpected decline in natural gas sales in Italy by means of: (i) abetter commercial offer based on the integration of Eni marketingpolicy in natural gas and electricity generation businesses,aiming at customer satisfaction; (ii) increasing sales inEuropean natural gas markets where Eni’s presence isestablished, as a result of supply contracts already signed,expected demand growth and marketing efforts directed to expandEni’s market shares in relevant areas; (iii) developingEni’s presence in recently entered markets; (iv) exploitingthe growing importance of natural gas spot markets (the so calledcontinental hubs for natural gas); and (v) developing thebusiness of LNG.

For a discussion of certain risks relating to the impact ofthe evolution of Italian regulation of the natural gas sector onEni’s take-or-pay contracts see "Item 3 – RiskFactors – Liberalization of the Italian Natural GasMarket".

In 2006, management expects the Group effective tax rate toincrease from the 46.8% level recorded in 2005. The expectedincrease in the Group effective tax rate will be drivenprincipally by the increasing share of profit before income taxeswhich is expected to be earned by subsidiaries in the Exploration& Production division operating in countries where thestatutory tax rate is higher than the average tax rate for theGroup. In addition, a further rise in Eni’s Group effectivetax rate is likely in light of a proposed fiscal reform impactingprofits of corporations in the United Kingdom. See "Item 4– Exploration & Production – North Sea".

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 guarantees, commitments and risks, as described in Note24 to the Consolidated Financial Statements. Eni’s principalfinancial obligations, including commitments under take-or-pay orship-or-pay clauses, are described under "ContractualObligations" below. See the Glossary for a definition oftake-or-pay or ship-or-pay clauses.

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 24 to the Consolidated Financial Statements.

> 
***Contractual Obligations***

The following table summarizes the principal financialobligations which are described in Item 18 – FinancialStatements – Note 14, 18 and 24.

|   | **Total** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **Thereafter** |
|--------|-----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------------|
|   |           |   |          |   |          |   |          |   |          |   |          |   |                |

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

| Long-term Debt                                                                         |   | 8,386      |   | 733       |   | 1,339     |   | 661     |   | 524     |   | 1,370     |   | 3,759     |
|----------------------------------------------------------------------------------------|--------|------------|--------|-----------|--------|-----------|--------|---------|--------|---------|--------|-----------|--------|-----------|
| Short-term        Debt                                                                 |   | 4,612      |   | 4,612     |   |      |   |    |   |    |   |      |   |      |
| **Sub total**                                                                          |   | **12,998** |   | **5,345** |   | **1,339** |   | **661** |   | **524** |   | **1,370** |   | **3,759** |
| Operating        leases relating to real estate rental in Italy                        |   | 663        |   | 89        |   | 91        |   | 88      |   | 83      |   | 70        |   | 242       |
|                                                                                   |   |       |   |      |   |      |   |    |   |    |   |      |   |      |
| Other        Commitments (off balance sheet):                                          |   |       |   |      |   |      |   |    |   |    |   |      |   |      |
|      Take-or-pay                                              |   | 119,444    |   | 11,527    |   | 10,970    |   | 9,559   |   | 8,620   |   | 7,697     |   | 71,071    |
|      Ship-or-pay                                              |   | 6,094      |   | 338       |   | 361       |   | 372     |   | 373     |   | 374       |   | 4,276     |
|      Others                                                   |   | 296        |   | 116       |   | 13        |   | 13      |   | 13      |   | 13        |   | 128       |
|      *of        which:*                                       |   |       |   |      |   |      |   |    |   |    |   |      |   |      |
|      *- Purchase of        investments*                       |   | *103*      |   | *103*     |   |      |   |    |   |    |   |      |   |      |
|      *- Memorandum of        intent relating Val d’Agri* |   | *193*      |   | *13*      |   | *13*      |   | *13*    |   | *13*    |   | *13*      |   | *128*     |

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

"Other commitments" relating to natural gastake-or-pay and ship-or-pay contracts were calculated by applyingthe forecasted prices of energy or services included in the longand medium term market scenarios used by Eni for planningpurposes to minimum take and minimum ship quantities. Managementexpects amounts due under Eni take-or-pay and ship-or-paycontractual obligations in years subsequent to year 2010 will beroughly in line with the average amounts expected to be paid inthe 2006-2010 period. See "Item 4 – Gas & Power– Natural Gas Purchases" and "Item 3 – RiskFactors – Liberalization of the Italian Natural GasMarket" for a discussion of the nature and importance ofEni’s take-or-pay contracts and the related risks from theevolving regulatory environment that could negatively impactEni’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.

> 
***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. Eni’s financial companies follow guidelinesapproved by Eni’s treasury department on the choice ofhighly credit-rated counterparties in their use of financial andcommodity instruments, including derivatives. Eni has notexperienced material nonperformance by any counterparty. As ofDecember 31, 2005, Eni has no significant concentrations ofcredit risk.

> 
***Hedging***

The most important currencies for Eni are the euro and theU.S. dollar. 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 enters into certainderivative financial contracts to hedge existing receivables andpayables, including deposits and borrowings denominated incurrencies other than the currency used in the relevant financialstatements.

Eni enters into various types of derivative financialcontracts (primarily interest rate swaps, forward rate agreementsand interest rate collars) to manage its interest rate risk, tolower its funding costs and diversify its sources of funding andto minimize interest rate exposures arising from mismatchesbetween assets and liabilities.

Eni enters into certain derivative financial contracts andcommodity hedging contracts for the purpose of reducing itsexposure to changes in commodity prices in connection withspecific transactions, including, to a limited extent, tomitigate the effects of petroleum price fluctuations. For anin-depth analysis of market risks exposure and policies used byEni to manage its exposure to market risk see "Item 11– Quantitative and Qualitative Disclosures About MarketRisk".

> 
***Research and Development***

For a description of Eni’s research and developmentoperations in 2005, see "Item 4 – Research andDevelopment".

 

 

##### Table of Contents

**Summary of Significant Differences BetweenItalian GAAP and U.S. GAAP**

Eni’s Consolidated Financial Statements have beenprepared in accordance with IFRS issued by the IASB as adopted bythe EU, which differs in certain respects from U.S. GAAP. Thesignificant differences between IFRS and U.S. GAAP, as applied toEni’s Consolidated Financial Statements, are: A)consolidation policy; B) exploration & production activities;C) asset impairment and subsequent asset write-up; D) deferredtax assets and liabilities; E) intangible assets; and F)accounting for inventory evaluation. See Note 33 to theConsolidated Financial Statements for a more detailed discussionof the significant differences between IFRS and U.S. GAAP thataffect Eni’s Consolidated Financial Statements, and Note 34to the Consolidated Financial Statements for a reconciliation ofnet profit and shareholders’ equity between IFRS and U.S.GAAP.

Consolidated operating profit under U.S. GAAP was euro 15,528million and euro 11,739 million in 2005 and 2004, respectively,compared with consolidated operating profit under IFRS of euro16,827 million and euro 12,399 million for the same years. Thesignificant reconciling items are as follows: (i) Saipem SpA,including its subsidiaries, accounted for under the equity methodfor U.S. GAAP purposes, but fully consolidated under IFRS; 50-50owned joint ventures and other entities in which Eni’sownership equals that of other partners are accounted for underthe equity method accounting for both IFRS and U.S. GAAP; (ii)the capitalization of certain oil and natural gas exploration anddevelopment costs that were fully or differently amortized in thesame period under IFRS; and (iii) the impact of thedifferent accounting method for determining the cost of inventoryon hand (last-in-first-out method of accounting under U.S. GAAPversus average cost method of accounting under IFRS). See Note 34to the Consolidated Financial Statements for a breakdown ofoperating profit by segment under U.S. GAAP for the years 2005and 2004.

Consolidated net profit under U.S. GAAP was euro 7,583 millionand euro 6,401 million in 2005 and 2004, respectively, comparedwith consolidated net profit under IFRS of euro 8,788 million andeuro 7,059 million for the same years. In addition to the effectsdiscussed above, the reconciliation of consolidated net profit toU.S. GAAP was affected in all years presented by the tax effectof reconciling items and the differences in deferred income taxtreatment of distributable reserves.

 

##### Table of Contents

**Item 6. DIRECTORS, SENIOR MANAGEMENT ANDEMPLOYEES**

**Directors and Senior Management**

The Board of Directors of Eni SpA currently in office consistsof nine members. The table below sets forth the names of the ninemembers of the Board of Directors, their positions, the year wheneach was initially appointed as a Director and their ages. ThisBoard 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 |   | 68 |
|--------------------|--------|----------|--------|------|--------|----|
| Paolo Scaroni      |   | CEO      |   | 2005 |   | 60 |
| Alberto Clô   |   | Director |   | 1999 |   | 59 |
| Renzo Costi        |   | Director |   | 1996 |   | 69 |
| Dario Fruscio      |   | Director |   | 2002 |   | 69 |
| Marco Pinto        |   | Director |   | 2005 |   | 44 |
| Marco Reboa        |   | Director |   | 2005 |   | 51 |
| Mario Resca        |   | Director |   | 2002 |   | 61 |
| Pierluigi Scibetta |   | Director |   | 2005 |   | 45 |

 

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 of the parent companyEni SpA and CEO of Eni Group, confirming the powers alreadydelegated to the previous CEO.

On December 14, 2005, the Board of Directors of Eni appointedDomenico Dispenza as General Manager of the Gas & PowerDivision with those powers as defined by the Board from January1, 2006. Mr. Dispenza may be removed by the Board of Directors ofEni without cause. Mr. Dispenza replaced Mr. Sgubini, who reachedthe mandatory retirement age.

The table below sets forth Eni SpA’s, General Manager,the executive officers and the General Managers of Eni’sthree divisions, their positions within Eni, the year they wereappointed to such positions, their total years of service at Eniand their ages. The executive officers of Eni are appointed bythe CEO 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** |
|---------------------|--------|-------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------|--------|---------|
|                     |   |                                                                                           |   |                                                     |   |                                                   |   |         |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Paolo Scaroni       |   | General Manager of Eni                                                                    |   | 2005                                                |   | 1                                                 |   | 60      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Stefano Cao         |   | General Manager for the        Exploration & Production Division                      |   | 2000                                                |   | 30                                                |   | 55      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Domenico Dispenza   |   | General Manager for the        Gas & Power Division                                   |   | 2005                                                |   | 32                                                |   | 60      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Angelo Taraborrelli |   | General Manager for the        Refining & Marketing Division                          |   | 2004                                                |   | 33                                                |   | 58      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Marco Mangiagalli   |   | Chief Financial Officer                                                                   |   | 2006                                                |   | 27                                                |   | 56      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Massimo Mantovani   |   | The Group Senior Vice        President for Legal Affairs                                  |   | 2006                                                |   | 13                                                |   | 43      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Stefano Lucchini    |   | The Group Senior Vice        President         for Public Affairs and Communication       |   | 2005                                                |   | 1                                                 |   | 44      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Leonardo Maugeri    |   | The Group Senior Vice        President         for Strategies and International Relations |   | 2000                                                |   | 11                                                |   | 41      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Amedeo Santucci     |   | The Group Senior Vice        President         for Supply Operations                      |   | 2005                                                |   | 26                                                |   | 61      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Salvatore Sardo     |   | The Group Senior Vice        President        for Human Resources                         |   | 2005                                                |   | 1                                                 |   | 54      |
|                |   |                                                                                      |   |                                                |   |                                              |   |    |
| Roberto Ulissi      |   | The Group Senior Vice        President        for Corporate Affairs and Governance        |   | 2006                                                |   | 0                                                 |   | 44      |

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 and businessrestructuring. From 1966 to 1998 he was Professor of BusinessFinance at the Università Cattolica of Milan. He is a Member ofthe Board of Directors of Fininvest SpA, Mondadori SpA, MerloniTermosanitari SpA and G.D. SpA and general partner of BrafinS.A.P.A. He has been Chairman of Rizzoli-Corriere della Sera SpAand Publitalia SpA.

Paolo Scaroni graduated from the Università Bocconi in Milanand obtained a masters degree in business administration fromColumbia University in New York. After working as consultant withMcKinsey, in 1973 he joined the Saint Gobain Group, where he heldvarious managing positions in Italy and outside Italy, until in1976 he was appointed general manager of the "Vetropiano" division in Paris with the responsibility of managingall of 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, a member of the managingcommittee of Confindustria and chairman of Unindustria Venezia inItaly, while outside Italy is chairman of the Board of Directorsof Alliance UniChem, a member of the Supervisory Board of ABNAMRO, and a member of the Board of Columbia University’sBusiness School.

Alberto Clô is a professor of Industrial Economy at theUniversity of Bologna and was Minister of Industry and Ministerof Foreign Trade ad interim in 1995 and 1996. During the Italianpresidency of the European Union he was chairman of the Councilof Ministers of Industry and Energy of the European Union. In1996 he was awarded the title of Cavaliere di Gran Croce alMerito of the Republic of Italy. He is a Member of the Board ofDirectors of ASM Brescia SpA, De Longhi SpA, Italcementi SpA andSocietà Autostrade SpA. He is also President of the ScientificCommittee of Eni Corporate University.

Renzo Costi is an attorney and consultant. He served as amagistrate 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 a member ofthe Board 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. He is Chairman of ItaliaTurismo SpA and a member of the Board of Sviluppo Italia SpA.

Marco Pinto is a magistrate and notary and has previously heldvarious positions at Regional Administrative Courts and theCouncil of State. He is a professor and dean of the departmentfor economic sciences at the Scuola Superiore dell’economiae delle finanze. Since 1994 he has been a legal counsel and headof the legislative office of the Ministry of Economy and Finance.From December 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 on corporate governance,economic evaluation and financial statements. He is a member ofthe Board of Directors of Seat PG SpA, Interpump SpA, IMMSI SpAand Intesa Private Banking. He is a statutory auditor ofAutogrill 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 a Member of the Board of liquidators of Cirio Del MonteGroup under special management. He is also chairman of the RMCHfoundation for children. In 2002 was awarded the title ofCavaliere del Lavoro. After working for Chase Manhattan bank, hewas appointed director of Biondi Finanziaria (Fiat Group), from1976 to 1991 was a partner at Egon Zehnder, director of LancomeItalia and a director of certain companies of the RCS-Corrieredella Sera Group and Versace Group. He is chairman of FinanziariaSambonet SpA, Kenwood Italia SpA and a founding member of EricSalmon 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 and of the Gestore del Mercato ElettricoSpA. In 2004, he was appointed director of Nucleco SpA. He 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.

Domenico Dispenza is an engineer and joined Snam’s studydepartment in 1974. He served in various managing positions inEni group companies engaged in natural gas activities. In 2004 hewas elected Chairman of Snam Rete Gas SpA and in 2006 he wasappointed General Manager of Eni’s Gas & Power Division.

Angelo Taraborrelli, graduated in law, joined the Eni group in1973 as an expert in analysis evaluation and control ofinvestments in the oil market. After the merger of AgipPetroliwith Eni he was appointed Deputy Chief Operating Officer ofEni’s Refining & Marketing Division for MarketingOperations and on April 14, 2004 he became General Manager ofEni’s Refining & Marketing Division replacing GilbertoCallera who retired.

Marco Mangiagalli worked for the Barclays Group and otherItalian merchant banks before joining the Eni Group in 1979. Heis a member of the Board of Directors of various Eni companies.He is responsible for Eni’s administration, financialreporting and accounting, planning and control, and treasuryoperations.

Stefano Lucchini graduated in economics and joined the studydepartment of Montedison. After a period in the United States,where he was assistant to the Chairman of the Energy and CommerceCommission of the U.S. Congress, he was head of communications atMontedison USA. In 1993 he returned to Italy and was head of theinvestor relations department for the Ferruzzi and MontedisonGroup. He was then Director for external relations at Enel andlater at Confindustria and Banca Intesa. He joined Eni asDirector for communications in 2005. He is also a professor atthe High School for Journalism of the Università Cattolica inMilan.

Massimo Mantovani is an attorney at law and worked as a legalcounsel for international activities before joining Snam’slegal office in 1993. He was responsible for legal affairs atEni’s Gas & Power Division until he was appointedEni’s Senior vice president for legal affairs in 2005,replacing Carlo Grande who retired.

Leonardo Maugeri, after extensive academic experience acquiredin Italy and abroad, joined the Eni Group in 1994, holdingvarious positions mainly as counsel for strategic decisions. Heis a member of the executive council of Censis and of theCommission on international relations at Confindustria.

Amedeo Santucci, graduated in engineering, joined the Group in1979 and served various positions in the areas of maintenance andprocurement. He was Chairman of Eurosolare.

Salvatore Sardo graduated in economics and started his careeras an auditor for Coopers & Lybrand. He later joined TelecomItalia where, after the privatization of the company, he wasresponsible for administration and control. He was Chairman ofPagine Gialle from 1998 to 2001 and returned to Telecom Italia asmanager of the group’s real estate and general services.From 2003 he was procurement and security manager at Enel until2005 when he joined Eni. He replaced Renato Roffi who retired.

Roberto Ulissi is an attorney at law. After some years at theBanca d’Italia as legal counsel he was transferred to theMinistry of Economy and Finance as an expert in legal and bankingmatters for the privatization of state-owned industrialcompanies. He then became Director General of the Ministry, headof the banking and financial markets department. He was appointedSenior Vice President for corporate affairs and governance of Enion May 12, 2006.

> 
***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 |   | 2006                                                           |

 

> 
*External Auditors*

As provided for by Italian law, 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 Shareholders’Meeting approving financial statements for 2003. Eni’sShareholders’ Meeting of May 28, 2004 confirmed theappointment of PricewaterhouseCoopers SpA for a further threeyear period ending with the Shareholders’ Meeting approvingfinancial statements for 2006.

 

##### Table of Contents

**Board Practices**

> 
***Appropriate Conduct***

Due to the diverse circumstances in which Eni operates, theBoard of 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 on 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 requirements of Borsa Italiana SpA, inparticular the "Guidelines for the preparation of the yearlyreport on corporate governance" of February 12, 2003,Eni’s corporate governance system is described below. 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 Italian companies in which management is exclusivelyentrusted to the Board of Directors, which is the central elementof Eni’s corporate governance system. Monitoring functionsare entrusted to the Board of Statutory Auditors and the audit ofthe financial statements is entrusted to the external auditorsappointed by the Shareholders’ Meeting.

The Board of Directors delegated specific powers to theChairman and Managing Director, who are the representatives ofthe company in accordance with 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.

> 
*Competencies*

In its meetings of June 1 and October 11, 2005, in addition toexclusive 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 CEO;                                                                                                                                                                               |
| 4.  |   | to determine – on        proposal of the CEO – 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 Board 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        CEO 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 projects        amounting to over euro 100 million, such capital        expenditure projects deemed to entail strategic impact        and risks for the Group, and 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;        and         |
|   |   | f) |   | purchase and sale agreements for goods        and services not intended as capital expenditure of        amounts exceeding euro 1 billion and of a duration longer        than 20 years;                                                                                                                 |

| 16. |   | to examine and decide any        proposal of the CEO concerning voting and appointment of        members of the Board of Directors and the Board of        Statutory Auditors of major subsidiaries; and |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 17. |   | to formulate all the        proposals of decisions to be presented to the        Shareholders’ Meeting.                                                                                             |

In accordance with Article 27 of Eni’s by-laws, theChairman chairs Shareholders’ Meetings, convenes and chairsBoard of Directors’ meetings and oversees the implementationof decisions made by the Board of Directors.

In accordance with Article 23, paragraph 3 of Eni’sby-laws, the Chairman and the CEO report timely to the Board ofStatutory Auditors, at least quarterly and at each Board meeting,on activities performed by and major transactions of Eni and itssubsidiaries.

In accordance with Article 2391 of the Italian Civil Code,Directors inform other Directors and the Board of StatutoryAuditors of any interest they may have, directly or on behalf ofthird parties, in any transaction of Eni.

> 
*Appointment*

In accordance with Article 17 of Eni’s by-laws, asamended by the Board on April 13, 2005, the Board of Directors ismade up of 3 to 9 members. The Shareholders’ Meetingdetermines the number of Directors within said limits. As perArticle 6, paragraph 2, letter d) of Eni’s by-laws theMinister for Economy and Finance, in agreement with the Ministerof Productive Activities, may appoint one member of the Boardwithout voting right in addition to those appointed by theShareholders’ Meeting. The Minister for Economy and Financechose not to appoint a member at this time.

The appointment of the Board of Directors calls for a listvote. Only shareholders who, alone or with others represent atleast 1% of voting shares at an ordinary meeting have the rightto present lists for the appointment of directors, as well as theBoard of Directors. Each shareholder can present or participatein presenting only one list. Companies controlling a shareholderand joint controlled companies cannot present, nor participate inpresenting other lists, meaning by controlled companies thecompanies described in Article 2359, paragraph 1 of the CivilCode. The lists must be deposited at Eni’s headquarters atleast ten days before the date set for the Shareholders’Meeting on first call (20 days in case of the Board of Directorspresenting a list) and published on national newspapers and mustinclude a resume of each candidate.

On June 1, 2005, Eni’s Board of Directors, in accordancewith the provisions of the Code, evaluated the statementspresented by Board members and established that the Chairman andnon executive Board members Alberto Clô, Renzo Costi, DarioFruscio, Marco Pinto, Marco Reboa, Mario Resca, and PierluigiScibetta are independent as they do not have any economicrelationship with Eni and Eni Group companies, with the CEO andwith the Ministry of Economy and Finance, Eni’s majorshareholder, such as to bias their autonomous judgment nor arethey close relatives of the CEO. Director Marco Pinto is anemployee of the Ministry for Economy and Finance. The CEO of Eniis an employee of Eni and holds the position of General Managerof the parent company Eni SpA.

On March 30, 2006, the Board verified that its members wereindependent on the basis of their own statements and that theypossess the honorability required by articles 147 ter and 147quinquies of Legislative Decree No. 58 of February 24, 1998 andincluded in Law No. 262 of December 28, 2005 ("law for theprotection of savings") and acknowledged that its memberscontinued being independent as verified on June 1, 2005 andpossessing the honorability required by Law.

Eni’s by-laws were amended by Eni’s ExtraordinaryShareholders’ Meeting held on May 25, 2006 in order toreflect the provisions of Law No. 262/2005. Amendments made onthat occasion established that Eni’s Board members must havehonorability and independence requirements as required by thenorms in force for the Statutory Auditors (see below). At leastone Board member, if the Board members are no more than five, orat least three Board members if they are more than five, shallmeet the independence requirement. The Board of Directorsevaluates periodically the independence and the honorability ofits members. If these requirements are not met by a Director and,if the minimum number of independent Board members set by theseby-laws is not met, the Board of Directors removes a Board memberwho does not meet the independence requirement and resolves toappoint a substitute Director. At the date of the Meeting,Eni’s Board was already compliant with the honorability andindependence requirements of its members as prescribed byapplicable laws.

In addition Eni’s by-laws, as amended on May 25, 2006,established that the General Managers appointed by the Board mustpossess the same honorability requirements as the members of theBoard, in order to make the appointment effective. The GeneralManagers not meeting such requirement shall be removed.

Eni’s by-laws do not indicate a specific frequency ofmeetings. In 2005 the Board of Directors met 21 times (18 in2004) for an average length of four hours per meeting. The publicis informed of: (i) the dates of meetings convened for theapproval of interim results; (ii) the dates of generalShareholders’ Meetings; and (iii) the dates when the amountof interim dividends and final dividends are announced andrelated payment dates.

> 
*Functioning*

The Board of Directors defined the rules for the calling ofits meetings; in particular, the Chairman convenes Boardmeetings, and, in concert with the CEO, defines agenda items.Notice is sent by mail, fax or e-mail within five days of themeeting’s date, at least 24 hours in advance in case ofurgency. Eni’s by-laws allow meetings to be held by video orteleconference, provided that all participants can be identifiedand are allowed to participate in real time. The meeting isdeemed held in the location where the 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. During meetings directorscan meet managers of Eni and its subsidiaries in order to obtaininformation on the features and the organization of theirbusinesses.

In 2005 on average 88% of Board members participated in Boardmeetings. On average 85% of independent non executive Boardmembers.

> 
***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, composedexclusively of independent, non-executive Board members, exceptfor Marco Pinto, a member of both committees, and theInternational Oil Committee in which the CEO also participates.

In the meeting of June 1, 2005 membership of the Committeeswas as follows:

*Internal Control Committee:* Marco Reboa (Chairman),Alberto , Renzo Costi, Marco Pinto and Pierluigi Scibetta.

*Compensation Committee:* Mario Resca (Chairman), RenzoCosti, Marco Pinto and Pierluigi Scibetta.

*International Oil Committee:*Alberto Clô (Chairman),Dario Fruscio, Marco Reboa and Paolo Scaroni.

The Code suggests the creation of a "NominatingCommittee" in 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, holds functions of supervision, counsel andproposal in the area of monitoring general management issues.

In its meeting of June 1, 2005, the Board appointed MarcoReboa as chairman of this Committee.

In its meeting of June 29, 2005 the Board approved its newcharter (available on Eni’s internet site) in order tomodify its role in accordance with the Board’s resolution ofMarch 22, 2005 that appointed the Board of Statutory Auditors toperform the functions attributed by the Sarbanes-Oxley Act andSEC rules to audit committees of U.S. issuers, within the limitsset by Italian legislation, from June 1, 2005.

In the course of 2005 the Internal Control Committee convened14 times, with an average participation of 87% of its members,and has accomplished the following: (i) reviewed the auditprograms prepared by Eni SpA’s and Group companies’internal audit functions and their progress; (ii) reviewed andevaluated results of Eni SpA’s and Group companies’internal auditing procedures; (iii) monitored the actions takenand their effects aimed at eliminating the deficienciesidentified by audit reports; (iv) examined the results of auditprocedures applied to the framework agreement between Eni andGazprom/Gazexport of June 16, 2005; (v) 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 2004 financial statements with specificreference to extraordinary transactions and relations amongfunctions entrusted with controlling functions at Eni SpA and itssubsidiaries; (vi) met the partners responsible of Eni’sexternal auditors for an analysis of Eni’s 2005 Half YearReport; (vii) examined the conditions necessary to avail itselfof the exemption from the Sarbanes-Oxley Act and the relevantregulations concerning the Audit Committee; (viii) reviewed thecommittee’s charter; (ix) examined the report presentedby an internal the Watch Structure; (x) examined the reportsprepared in accordance with audit document No. 260 concerning thecommunication of facts and events on auditing activities to thoseresponsible for governance; (xi) monitored the appointment ofadditional functions to Eni’s external auditors andcompanies belonging to the network of the external auditors,expressing its opinion; (xii) reviewed the situation ofappointments conferred in 2004 by Eni and its consolidatedsubsidiaries and affiliates to external auditors registered withConsob and related subjects; (xiii) reviewed the situation ofappointments of external auditors of main group companies, therelevant accounts and the opinions contained in the reports ofexternal auditors of Eni’s Italian subsidiaries; (xiv)examined the organizational structure of the internal auditfunctions with specific focus on operating audits; and (xv)examined the information flows to the Internal Control Committeefrom the various functions of Eni and its subsidiaries as well asfrom external auditors.

> 
*Compensation Committee*

The Compensation Committee, established by the Board ofDirectors in 1996, is entrusted with advising the Board inrelation to the compensation of the Chairman and CEO as well asof the Board Committee members; examining the indications of theCEO and presenting proposals on: (i) equity based incentiveplans; (ii) criteria for the compensation of top managers of theGroup; and (iii) objectives and results evaluation of performanceand incentive plans.

In its meeting of June 29, 2005 the Board approved its newregulation (available on Eni’s internet site) and appointedMario Resca as Chairman.

In 2005, the Compensation Committee met 7 times with anaverage participation of 96% of its members, and accomplished thefollowing: (i) reviewed the objectives of the 2005 GroupIncentive Plan and the performance of 2004; (ii) drafted aproposal to be submitted to the Board of Directors fordetermining the variable part of the remuneration of the Chairmanand CEO based on 2004 performance; (iii) drafted a proposal basedon which the Board of Directors requested the Shareholders’Meeting to authorize it to use treasury shares for servicingstock option and stock grant plans for 2005 (see "Stockcompensation" above); (iv) drafted a proposal submitted tothe Board of Directors concerning compensation related to thetermination of employment of Eni’s former Managing DirectorVittorio Mincato; (v) examined the compensation to be paid toEni’s new CEO Paolo Scaroni, employed by Eni with thefunction of General Manager, in order to draft a proposal tosubmit to the Board of Directors; and (vi) examined thebenchmarks for top management remuneration and reviewed thecriteria of the remuneration policy for Group managers, as wellas the stock option and stock grant plans in order to draft aproposal to submit to the Board of Directors.

> 
*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.

In its meeting of June 1, 2005, the Board approved its newregulation (available on Eni’s internet site) and appointedAlberto Clô as Chairman of the Committee.

In 2005 the International Oil Committee met 3 times with a100% participation of its members. The meetings concerned: (i) aplan of activities aimed at analyzing the trends of the oil andgas industry; (ii) an in-depth analysis of China in terms ofmarket prospects and effects on competition in the oil industry;and (iii) an analysis of the structure and dynamics of oil andgas markets on which to base the energy scenarios for Eni’sstrategic plan.

> 
*Board of Statutory Auditors*

The Board of Statutory Auditors, in accordance with Article149 of Legislative Decree No. 58/1998, monitors: (i) the respectof laws and of Eni’s memorandum of association; (ii) therespect of the principles of proper administration; (iii) theadequacy of the Company’s organizational structure for theparts concerning administration and accounting, internal controlsand administration and accounting systems as well as itsreliability in presenting information properly; and (iv) theadequacy of regulations imposed to subsidiaries according toArticle 114, paragraph 2 of the mentioned decree. The law on theprotection of savings also entrusted the Board of StatutoryAuditors with the monitoring of the proper implementation ofcorporate governance rules envisaged by the codes of conductpublished by the Italian stock exchange and the associations theCompany belongs to and with which the Company has declared itsintention to comply.

The Board of Directors in its meeting of March 22, 2005, inaccordance with SEC Rule 10A-(c)(3) for foreign companies listedon the New York Stock Exchange, selected the Board of StatutoryAuditors to fulfil the role attributed to the audit committee ofa U.S. company under the Sarbanes-Oxley Act and other applicablelaws, within the limits set by the Italian legislation from June1, 2005. On June 15, 2005, the Board of Statutory Auditorsapproved the regulations for carrying out the functionsattributed to the audit committee under U.S. laws. Thisregulation is published on Eni’s internet site. The keyfunctions performed by the Board of Statutory Auditors acting asan audit committee as provided for by SEC rules are as follows:

| • |   | evaluating the proposals        presented by the external auditors for their appointment        and making its recommendation to the Board of Directors        about the proposal for the appointment or the retention        of the external auditor to be submitted to the        Shareholders’ Meeting;                                                                                                                                                                                                                                                                                                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | performing the activities of        oversight of the work of the external auditor engaged for        the audit or performing other audit, review or attest        services;                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| • |   | making recommendations to        the Board of Directors on the resolution of disagreements        between management and the auditor regarding financial        reporting;                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • |   | approving the procedures        for: (a) the receipt, retention, and treatment of        complaints received by the Company regarding accounting,        internal accounting controls, or auditing matters; and        (b) the confidential, anonymous submission by employees        of the Company of concerns regarding questionable        accounting or auditing matters;                                                                                                                                                                                                                                             |
| • |   | approving the procedures for        the pre-approval of admissible non-audit services,        analytically identified, and examine the information on        the execution of the authorized services;                                                                                                                                                                                                                                                                                                                                                                                                                     |
| • |   | evaluating any request to        have recourse to the external auditor engaged for the        audit for admissible non audit services and expresses its        opinion to the Board of Directors;                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | examining the periodical        communications from the external auditor relating to: (a)        all critical accounting policies and practices to be        used; (b) all alternative treatments of financial        information within generally accepted accounting        principles that have been discussed with management        officials of the Company, ramifications of the use of        such alternative disclosures and treatments, and the        treatment preferred by the external auditor; and (c)        other material written communication between the external        auditor and the management; |
| • |   | examining complaints        received by the CEO and the CFO concerning any        significant deficiency in the design or operation of        internal controls which could adversely affect the        Company’s ability to record, process, summarize and        report financial data and any material weakness in        internal controls; and                                                                                                                                                                                                                                                                   |
| • |   | examining complaints        received by the CEO and the CFO concerning any fraud that        involves management or other employees who have a        significant role in the issuer’s internal controls.                                                                                                                                                                                                                                                                                                                                                                                                             |

The Board can engage external advisors or other experts to theextent it determines necessary to carry out its duties. The Boardis provided with the funds it deems necessary for payment ofcompensation to independent advisors or other experts and ofordinary administrative expenses involved by the execution of theBoard’s duties.

The Board of Statutory Auditors comprises five auditors andtwo substitute auditors, appointed by the Shareholders’Meeting for a three year term.

On May 27, 2005, Eni’s Shareholders’ Meetingappointed the following statutory auditors for three years andhowever until the Shareholders’ Meeting approving financialstatements for fiscal year 2007: Paolo Andrea Colombo (Chairman),Filippo Duodo, Edoardo Grisolia, Riccardo Perotta and GiorgioSilva. Francesco Bilotti and Massimo Gentile are alternateauditors. A curriculum of these auditors is published onEni’s internet site. The same Meeting also determined theyearly compensation for the Chairman of the Board of StatutoryAuditors and each Auditor amounting to euro 115,000 and euro80,000, respectively.

Paolo Andrea Colombo, Filippo Duodo, Edoardo Grisolia andFrancesco Bilotti were candidates in the list presented by theMinistry of Economy and Finance; Riccardo Perotta, Giorgio Silvaand Massimo Gentile were candidates in the list presented byinstitutional investors coordinated by Fineco Asset ManagementSpA.

Statutory Auditors are appointed in accordance with Eni’sby-laws with a list vote; at least two auditors and onesubstitute are chosen from minority candidates. Chairman of theBoard is the first candidate of the list that received thehighest number of votes. Auditors are autonomous and independenteven from the shareholders who elected them. The lists ofcandidates include a resume of each candidate and are depositedat the Company’s headquarters at least 10 days before thedate of the Shareholders’ Meeting on first call and arepublished on national newspapers.

Article 28 of Eni’s by-laws, consistent 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 meeting these requirements must be chosen amongthose provided with the level of professionalism described inDecree No. 162/2000. For the purposes of said Decree, the by-lawsdefine as related subjects commercial law, corporate economy andfinance, engineering and geology. Eni’s auditors are allchartered auditors.

Article 28 of Eni’s by-laws also prohibits theappointment as statutory auditor of persons that are statutoryauditors or members of the supervisory board or members of thecontrol committee of at least five companies listed in regulatedmarkets that are not subsidiaries of Eni SpA. At least twoeffective Auditors are empowered to convene theShareholders’ Meetings and at least one effective Auditor isempowered to convene the Board meetings.

Statutory auditors receive in advance of meetings of the Boardof Directors adequate and thorough information on all issuessubject to Board evaluation and resolutions.

Eni’s by-laws allow meetings to be held byteleconference.

In 2005 the Board met 22 times with an average participationof 83% of its members.

In 2005, Eni’s external auditors met with Eni statutoryauditors in order to discuss: (i) critical accounting policiesand practices applied for the purpose of a proper representationof Eni’s results of operations and financial condition; (ii)alternative accounting treatments provided for by generallyaccepted accounting principles concerning material itemsdiscussed with management, including ramifications of the use of,the impact deriving from the application of said alternativedisclosures and treatments and relevant information, as well asthe treatments preferred by external auditors; and (iii) thecontents of any other material written communication betweenexternal auditors, and management.

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.

> 
***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 in 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 theCode.

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 U.S. 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 U.S. domesticcompanies under the NYSE standards and those followed by Eni.

INDEPENDENT DIRECTORS*NYSE Standards* Under NYSE standards listed U.S.companies’ Boards must have a majority of independentdirectors. A director qualifies as independent when the Boardaffirmatively determines that such director does not have amaterial relationship with the listed company (and itssubsidiaries), either directly, or indirectly. In particular, adirector may 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 of the auditor). In addition, a directorcannot 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 taking 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 2005, Eni’s Board of Directors judged that theChairman and its non-executive members comply with theindependence standards, as provided for by the Code. DirectorMarco Pinto is an employee of the Ministry of Economy andFinance.

MEETINGS OF NON EXECUTIVE DIRECTORS*NYSE Standards* Non-executive directors, including thosewho are not independent, must meet at regularly scheduledexecutive sessions without management. In addition, if the groupof non-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 U.S. 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-U.S. private issuers, hasidentified the Board of Statutory Auditors as the body that,starting from June 1, 2005, is performing the functions requiredby the SEC rules and the Sarbanes-Oxley Act to be performed bythe audit committees of non-U.S. companies listed on the NYSE(see paragraph "Board of Statutory Auditors" earlier).Under Section 303A.07 of the NYSE listed Company Manual auditcommittees of U.S. companies have further functions andresponsibilities which are not mandatory for non-U.S. privateissuers and which therefore are not included in the list offunctions shown in the paragraph referenced above.

NOMINATING/CORPORATE GOVERNANCE COMMITTEE*NYSE standards* U.S. 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-U.S. private issuers. The Code allows listed companies tohave within the Board of Directors a committee fordirectors’ nominees proposals, above all when the Board ofDirectors detects difficulties in the shareholders’submission of nominees proposals, as could happen inpublicly-owned companies. Eni has not set up a nominatingcommittee, considering the nature of its shareholding as well asthe circumstance that, under Eni by-laws, directors are appointedby the Shareholders’ Meeting based on lists presented byshareholders or by the Board of Directors.

##### Table of Contents

**Compensation**

Board members’ compensation is determined by theShareholders’ Meeting, while remuneration levels of theChairman and CEO are determined by the Board of Directors, basedon proposals of the Compensation Committee and after consultationwith the Board of Statutory Auditors.

Key element of the compensation of the Chairman, the CEO, theother members of the Board and of Eni’s three GeneralManagers are outlined as follows.

CHAIRMANThe compensation of the Chairman of the Board of Directors hasbeen resolved by Eni’s Shareholders’ Meeting of May 27,2005 and it includes:

| a) |   | a fee of euro 265,000 and        reimbursement of out of pocket expenses; and                                                                                                                                                                                                         |
|----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b) |   | a variable amount up to a        maximum of euro 80,000 to be paid in accordance with        Eni’s positioning among the eight largest        international oil companies for market capitalization in        terms of total return to shareholders in the previous        year. |

With respect to the powers delegated to the Chairman, theBoard of Directors determined further compensation, as follows:

| a) |   | a fee of euro 500,000; and                                                                                                                                                                                                                             |
|----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b) |   | a variable amount dependent        on reaching the objectives identified by the Board of        Directors on proposal of the Compensation Committee. The        target level of such variable amount is 50% of the fixed        amount under a) above. |

Compensation of the Chairman also includes an insuranceagainst death or permanent inability caused by injury or sicknessin the exercise of his duties or under certain othercircumstances as stipulated collectively for all managers ofItalian companies producing goods and services. In particular, aspecific insurance policy has been underwritten which guaranteeseuro 500,000 to survivors with an annual charge for Eni of euro8,000.

In 2005 the Chairman received a total compensation amountingto euro 871,000.

CEOCompensation for Paolo Scaroni has been resolved by the Board ofDirectors of Eni in connection with his position both as ChiefExecutive Officer ("CEO") and as General Manager of EniSpA. He was appointed to both positions on June 1, 2005.

As General Manager of Eni SpA, his terms of employment areregulated by the "Contratto collettivo nazionale di lavoroper i dirigenti di aziende produttrici di beni e servizi"(the Italian national collective contract for managers ofmanufacturing companies), as well as by any internal agreementstipulated by the representatives of managers and Eni SpA. He maybe appointed as board member of Eni’s subsidiaries andaffiliates; compensation as provided for by Article No. 2389 ofthe Italian Civil Code deriving from such appointments is to berepaid to Eni as it is included in his remuneration under sectiona) below.

Compensation includes the following:

| a) |   | a fixed amount of euro        1,430,000, of which a salary of euro 1,000,000 for the        services as General Manager and a fee of euro 430,000 for        the services as CEO. In 2005, the amount received by Mr.        Scaroni was of euro 840,000 relating to the period June        1-December 31;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b) |   | a variable amount dependent        on reaching the objectives identified by the Board of        Directors on proposal of the Compensation Committee. The        maximum of such variable amount is 100% of the fixed        amount under a) above. This incentive will be paid from        2006 onwards;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| c) |   | yearly assignment of grants        to receive Eni stocks for no consideration in the        2006-2008 period, vesting after three years from the        assignment, dependent on reaching the objectives        identified by the Board of Directors on proposal of the        Compensation Committee. The target level of such amount        of stock grant is 50% of the fixed amount under a) above.        This incentive is effective starting from 2006. For        details of Eni stock grant plan, see below;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| d) |   | a yearly assignment of stock        options in the 2005-2007 period for a facial value        corresponding to 11 times the fixed amounts under section        a) above for the 2005-2007 period. Options are assigned        at an exercise price corresponding to the market value at        the date of assignment (average of the market prices of        the preceding month) and can be exercised beginning from        three years after the assignment and within the following        five years. In 2005, a total of 699,000 options were        assigned at an exercise price of euro 22.509. For details        of Eni stock option plan, see below;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| e) |   | severance payment as        regulated by Italian laws, which consists in yearly        accruals to the reserve for employee benefits that will        be paid by the company to the employee when employment        ceases. Each annual accrual corresponds to the yearly        remuneration received as General Manager (fixed and        variable amounts and stock grants assigned) divided by        13.5. These amounts are revaluated yearly at a fixed rate        of 1.5% plus the 75% of the yearly official consumer        price index increase;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| f) |   | as an integration to the        severance payment described above, should the employment        contract of Mr. Scaroni as General Manager of Eni SpA be        terminated upon expiry of the term of his office as CEO or        upon earlier termination of such office, he will be        entitled to receive a lump sum of euro 7 million, which        is also intended as waiver to any obligation related to        advance notice of termination. This integration will not        be paid if the termination of office meets the        requirement of due cause as per Article No. 2119 of the        Italian Civil Code, in case of death and in case of        resignation from office other than as the result of a        reduction in the powers currently attributed to the CEO.        Upon termination of employment Eni will also pay an        amount corresponding to the social security payments and        severance payment accruals as applied to the fixed amount        and to 50% of the variable part of the compensation        received as CEO. To this end Eni accrues a yearly        provision of euro 204,737.93;                                                        |
| g) |   | competition clause: the CEO        agrees not to be engaged, on his own account and        directly, in any business that may be in competition with        the businesses of Eni, as per its by-laws, in Italy,        Europe and North America for a year after termination of        office. In consideration for this agreement, Eni will pay        a fee corresponding to the yearly fixed amounts under a)        section above. As a consequence of any breach of this        clause, the CEO would loose the right to such fee or        should reimburse any amount already paid, and shall pay        to Eni damages in an amount agreed among the parties to        correspond to twice such non-competition fee;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| h) |   | the pension scheme        corresponds to the scheme applied to Eni managers and        provided by INPS (the Italian state social security        entity) to all Italian workers. In addition, the CEO is        included in an additional pension scheme under the form        of an Eni group pension fund agreed collectively by Eni        and Eni managers which provides an integration, in the        form of a lump sum payment or a perpetuity, to the        pension paid by the State. This integration is        proportional to contributions to the fund made by both        the manager and the Company in equal amounts. The        integration is assigned to the manager when eligible for        the payment of the pension from the State, provided that        a minimum time period has elapsed according to the fund        by-laws. An agreement signed on March 20, 2006,        established that the Company’s and the        manager’s payment to this Fund amounts to 3.5% of        the total salary of the CEO as General Manager (i.e., the        aggregate of the fixed amount, the variable amount and        the stock grants up to a maximum of euro 200,000); |
| i) |   | like all other Eni managers,        Mr. Scaroni is entitled to participate in a health        insurance Fund financed by Eni managers and Eni which        provides reimbursement of certain medical expenses on the        basis of rules and parameters as provided for by the        Fund’s by-laws; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| j) |   | insurance against death or        permanent inability caused by injury or disease in the        exercise of his duties or under certain other        circumstances as stipulated collectively for all managers        of Italian manufacturing companies. In particular a        specific insurance policy has been underwritten on behalf        of Mr. Scaroni which guarantees euro 7.5 million to        survivors in case of death, however determined, with an        annual charge for Eni of euro 62,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

MEMBERS OF THE BOARD OF DIRECTORSThe compensation of members of the Board of Directors has beendetermined by Eni’s Shareholders’ Meeting of May 27,2005 and includes:

| a) |   | a fee of euro 115,000 and        reimbursement of out of pocket expenses; and                                                                                                                                                                                                         |
|----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b) |   | a variable amount up to a        maximum of euro 20,000 to be paid in accordance with        Eni’s positioning among the eight largest        international oil companies for market capitalization in        terms of total return to shareholders in the previous        year. |

GENERAL MANAGERSThe terms of employment of the General Managers of Eni’sDivisions are regulated by the "Contratto collettivonazionale di lavoro per i dirigenti di aziende produttrici dibeni e servizi" (the Italian national collective contractfor managers of companies producing goods and services), as wellas by any internal agreement stipulated by the representatives ofmanagers and Eni SpA. The General Managers of Divisions may beappointed as members of the Board of Directors of Enisubsidiaries and affiliates; compensation deriving from suchappointments as provided for by article No. 2389 of the ItalianCivil Code is to be repaid to Eni as it is included in theirremuneration under section a) below.

Their remuneration includes:

| a) |   | a salary, reviewed on July 1        of each year taking into account the consistency of        performance over time as well as certain market        benchmarks;                                                                                                                                                                                                                                                                                                                                                                                                    |
|----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b) |   | a yearly cash incentive of        up to approximately 60% of the salary dependent upon        objectives identified for each business area;                                                                                                                                                                                                                                                                                                                                                                                                                          |
| c) |   | a yearly assignment of        grants to receive Eni stock for no consideration, vesting        after three years from the assignment, dependent upon        achieving the objectives identified by the Board of        Directors based upon the proposal of the Compensation        Committee. The target level of such amount of stock grant        is 35% of the salary. For details of Eni stock option        plan, see below;                                                                                                                                   |
| d) |   | a yearly assignment of stock        options in the 2005-2007 period for a facial value corresponding        to 2 times the salary. Options are assigned at an        exercise price corresponding to the market value at the        date of assignment (average of the market prices of the        preceding month) and can be exercised beginning three        years after the assignment and within the following five        years. Options assigned in 2005 had an exercise price of        euro 22.509. For details of Eni stock option plan, see        below; |
| e) |   | severance payment as        regulated by Italian laws, which consists in yearly        accruals to the reserve for employee benefit that will be        paid by the company to the employee when employment        ceases. Each annual accrual corresponds to the yearly        remuneration received as general manager divided by 13.5.        These amounts are revaluated yearly at the rate of 1.5%        plus the 75% of the official yearly consumer price index        increase;                                                                            |
| f) |   | the pension scheme        corresponds to the scheme applied to Eni managers and        provided by INPS to all Italian workers. In addition, the        General Managers are included in the additional pension        scheme of Eni managers which provides an integration to        the public pension. For further details see section h) of        the description of compensation of the CEO;                                                                                                                                                                   |
| g) |   | like all other Eni managers,        they are entitled to participate in a health insurance        Fund financed by Eni managers and Eni which provides        reimbursement of certain medical expenses on the basis of        rules and parameters as provided for by the Fund’s        by-laws. For further details see section i) of the        description of compensation of the CEO; and                                                                                                                                                                  |
| h) |   | insurance against death or        permanent inability caused by injury or disease in the        exercise of his duties or under certain other        circumstances as stipulated collectively for all managers        of Italian manufacturing companies.                                                                                                                                                                                                                                                                                                            |

With the expection of the CEO as described above, none of theDirectors of Eni has service contracts with the company or any ofits subsidiaries providing for benefits upon termination ofemployment.

Pursuant to Article 78 of Consob Decision No. 11971 of May 14,1999, compensation of Directors and Statutory Auditors of Eni andgeneral managers of Eni’s divisions, who held the positionin 2005 including for a fraction of the year, are reported in thetable below.

Pursuant to Consob decisions:

| • |   | "Compensation in        respect of positions held at Eni SpA" are set by the        Shareholders’ Meeting and the remuneration of the        Chairman and the CEO is determined by the Board of        Directors, in agreement with the Board of Statutory        Auditors, in accordance with Article 2389, paragraph 3 of        the Italian civil code;        |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | "Non cash        benefits" refer to all fringe benefits, including        insurance policies;                                                                                                                                                                                                                                                                          |
| • |   | "Bonuses and other        incentives" includes the variable part of the        Chairman’s compensation and the variable part of the        salary of the CEO and of the general managers of        Eni’s divisions; and                                                                                                                                      |
| • |   | "Other        compensation" include the salary of the previous and        the current managing director and of the general managers        of Eni’s divisions, in addition to compensations due        in respect of positions on the Boards of Statutory        Auditors in Eni’s subsidiaries. Indemnities paid        upon termination are also included. |

The following table containsdetails of compensation of directors, statutory auditors andgeneral managers.

| **Name** |   | **Position** |   | **Term of office** |   | **Expiry date of the        position**(1) |   | **Compensation for service at Eni SpA** |   | **Non-cash benefits** |   | **Bonuses and other incentives**(2) |   | **Other compensations** |   | **Total** |
|----------|--------|--------------|--------|--------------------|--------|-------------------------------------------|--------|-----------------------------------------|--------|-----------------------|--------|-------------------------------------|--------|-------------------------|--------|-----------|
|          |   |              |   |                    |   |                                           |   |                                         |   |                       |   |                                     |   |                         |   |           |

|   |   | **(thousand euro)** |
|--------|--------|---------------------|
|   |   |                     |

| **Board of Directors**             |   |         |   |   |        |   |   |     |   |      |   |   |   |      |   |   |       |   |   |       |
|------------------------------------|--------|--------------|--------|--------|-------------|--------|--------|----------|--------|-----------|--------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|
| Roberto Poli                       |   | Chairman     |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 831       |   | 8      |   | 40        |   |   |       |   |   | 879        |
| Vittorio Mincato                   |   | CEO          |   |   | 01.01-05.27 |   |   |     |   | 230       |   |   |   | 1,386     | (3)    |   | 9,649      | (4)    |   | 11,265     |
| Paolo Scaroni                      |   | CEO          |   |   | 06.01-12.31 | (5)    |   | 05.30.08 |   | 252       |   | 62     |   |      |   |   | 588        |   |   | 902        |
| Mario Giuseppe Cattaneo            |   | Director     |   |   | 01.01-05.27 |   |   |     |   | 57        |   |   |   | 10        |   |   |       |   |   | 67         |
| Alberto Clô                   |   | Director     |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 123       |   |   |   | 10        |   |   |       |   |   | 133        |
| Renzo Costi                        |   | Director     |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 122       |   |   |   | 10        |   |   |       |   |   | 132        |
| Dario Fruscio                      |   | Director     |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 117       |   |   |   | 10        |   |   |       |   |   | 127        |
| Guglielmo Moscato                  |   | Director     |   |   | 01.01-05.27 |   |   |     |   | 59        |   |   |   | 10        |   |   |       |   |   | 69         |
| Mario Resca                        |   | Director     |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 121       |   |   |   | 10        |   |   |       |   |   | 131        |
| Marco Pinto                        |   | Director     |   |   | 05.28-12.31 |   |   | 05.30.08 |   | 68        |   |   |   |      |   |   |       |   |   | 68         |
| Marco Reboa                        |   | Director     |   |   | 05.28-12.31 |   |   | 05.30.08 |   | 68        |   |   |   |      |   |   |       |   |   | 68         |
| Pierluigi Scibetta                 |   | Director     |   |   | 05.28-12.31 |   |   | 05.30.08 |   | 68        |   |   |   |      |   |   |       |   |   | 68         |
| **Board of Statutory Auditors**(6) |   |         |   |   |        |   |   |     |   |      |   |   |   |      |   |   |       |   |   |       |
| Andrea Monorchio                   |   | Chairman     |   |   | 01.01-05.27 |   |   |     |   | 51        |   |   |   |      |   |   |       |   |   | 51         |
| Paolo Andrea Colombo               |   | Chairman     | (7)    |   | 01.01-12.31 |   |   | 05.30.08 |   | 107       |   |   |   |      |   |   | 67         |   |   | 174        |
| Luigi Biscozzi                     |   | Auditor      |   |   | 01.01-05.27 |   |   |     |   | 38        |   |   |   |      |   |   | 51         |   |   | 89         |
| Filippo Duodo                      |   | Auditor      |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 91        |   |   |   |      |   |   | 55         |   |   | 146        |
| Edoardo Grisolia (8)               |   | Auditor      |   |   | 05.28-12.31 |   |   | 05.30.08 |   | 48        |   |   |   |      |   |   |       |   |   | 48         |
| Riccardo Perotta                   |   | Auditor      |   |   | 01.01-12.31 |   |   | 05.30.08 |   | 92        |   |   |   |      |   |   | 59         |   |   | 151        |
| Giorgio Silva                      |   | Auditor      |   |   | 05.28-12.31 |   |   | 05.30.08 |   | 48        |   |   |   |      |   |   | 13         |   |   | 61         |
| **General Managers**               |   |         |   |   |        |   |   |     |   |      |   |   |   |      |   |   |       |   |   |       |
| Stefano Cao                        |   | E&P Div. |   |   | 01.01-12.31 |   |   |     |   |      |   |   |   | 397       |   |   | 797        |   |   | 1,194      |
| Luciano Sgubini                    |   | G&P Div. |   |   | 01.01-12.31 |   |   |     |   |      |   |   |   | 311       |   |   | 2,286      | (9)    |   | 2,597      |
| Angelo Taraborrelli                |   | R&M Div. |   |   | 01.01-12.31 |   |   |     |   |      |   |   |   | 229       |   |   | 566        |   |   | 795        |
|                               |   |         |   |   |        |   |   |     |   | **2,591** |   | **70** |   | **2,423** |   |   | **14,131** |   |   | **19,215** |

----

|   |   |                                                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | The term of        position ends with the Meeting approving financial        statements for the year ending December 31, 2007.                            |
| (2)    |   | Based on        performance achieved in 2004.                                                                                                             |
| (3)    |   | Based on        performance achieved in 2004 and pro rata performance        related to the first five month period of 2005.                              |
| (4)    |   | In addition        to salary also includes indemnities paid upon termination        and further compensation determined by the Board of        Directors. |
| (5)    |   | Appointed as        director on May 28, 2005.                                                                                                             |
| (6)    |   | The        "Other Compensation" amounts refer to        compensation obtained as chairman or as auditor of        subsidiaries.                 |
| (7)    |   | Appointed as        Chairman on May 28, 2005. Previously Auditor.                                                                                         |
| (8)    |   | Compensation        for the service is paid to the Ministry of Economy and        Finance.                                                                |
| (9)    |   | In addition        to salary also includes indemnities paid upon        termination.                                                                      |

For the year ended December 31, 2005, the aggregatecompensation paid to or on behalf of the executive officers ofEni SpA was euro 20.06 million. The foregoing amounts includesalaries, fees for attending meetings, lump-sum amounts paid inlieu of expense reimbursements, stock options, stock grants,health and pension contributions and amounts accrued to thereserve for employee termination indemnities, which is used topay severance pay as required by Italian law to employees upontermination of employment. The members of the Board of Directorsin their capacity as such are not entitled to receive suchseverance pay. At December 31, 2005, the total amount accrued tothe reserve for employee termination indemnities with respect tomembers of the Board of Directors who were also employees of Eni,with respect to three general managers and with respect to theexecutive officers of Eni SpA was euro 3.36 million.

> 
***Stock compensation***

> 
*Stock grants*

With the aim of improving motivation and loyalty of Enimanagers through the linking of compensation to the attainment ofpreset individual and corporate objectives, making managementparticipate in corporate risk and motivating them towards thecreation of shareholder value and increasing at the same timetheir contribution to the management of the Company, beginning in2003, Eni has offered its own shares purchased under its buy-backprogram (treasury shares) for no consideration to those managersof Eni SpA and its subsidiaries as defined in Article 2359 of theCivil Code15 who have achievedcorporate and individual objectives.

Assignments vest within 45 days after the end of the thirdyear from the date of the offer.

Under this stock grant plan, on December 31, 2005 a total of3,127,200 grants were outstanding for the assignment of an equalamount of treasury shares (equal to 0.08% of current capitalstock) subdivided as follows: (i) a total of 1,018,400grants (fair value euro 11.20 per share) related to 2003; (ii) atotal of 912,400 grants (fair value euro 14.57 per share) relatedto 2004; and (iii) a total of 1,196,400 grants (fair value euro20.08 per share) related to 2005.

> 
*Stock options*

Eni offers to managers of Eni SpA and its subsidiaries asdefined in Article 2359 of the Civil Code16who hold positions of significant responsibility for achievingprofitability or strategic targets, the opportunity to acquire ashareholding in the Company as an element of remuneration throughthe assignment of options for the purchase of Eni’s treasuryshares.

Options provide grantees with the right to purchase Eni shareson a 1 to 1 ratio after three years from the date of the grantand upon a five year vesting period, at a price corresponding tothe higher of the arithmetic average of official prices recordedon the Mercato Telematico Azionario in the month preceding thedate of the grant and the average cost of the treasury shares asof the day prior to the assignment (strike price). Strike pricefor the 2005 assignment was euro 22.512 per share.

Grantees are able to make use of an advance from a Groupfinance company to purchase shares, on condition that at the sametime they sign an irrevocable order for selling the sharesthrough the finance company. Proceeds from the sale must then beused to repay the advance.

At December 31, 2005 there were 13,379,600 outstandingoptions, carrying an average strike price of euro 17.705 pershare.

The weighted-average remaining contractual life of optionsoutstanding at December 31, 2003, 2004 and 2005 was 5.6 years,6.6 years and 7.6 years, respectively. All stock options grantedare considered fixed.

The following is a summary of stock option activity for theyears 2003, 2004 and 2005:

|   | **2003** |   | **2004** |   | **2005** |
|--------|----------|--------|----------|--------|----------|
|   |          |   |          |   |          |

|   | **Number of shares** |   | **Weighted average        exercise price** (a)**(euro)** |   | **Number of shares** |   | **Weighted average        exercise price** (a)**(euro)** |   | **Number of shares** |   | **Weighted average        exercise price** (a)**(euro)** |
|--------|----------------------|--------|----------------------------------------------------------|--------|----------------------|--------|----------------------------------------------------------|--------|----------------------|--------|----------------------------------------------------------|
|   |                      |   |                                                          |   |                      |   |                                                          |   |                      |   |                                                          |

| **Options        as of January 1**               |   | **3,518,500** |   |   | **15.216** |   |   | **8,162,000**  |   |   | **14.367** |   |   | **11,789,000** |   |   | **15.111** |   |
|--------------------------------------------------|--------|---------------|--------|--------|------------|--------|--------|----------------|--------|--------|------------|--------|--------|----------------|--------|--------|------------|--------|
| New options granted                              |   | 4,703,000     |   |   | 13.743     |   |   | 3,993,500      |   |   | 16.576     |   |   | 4,818,500      |   |   | 22.512     |   |
| Options        exercised in the period           |   |          |   |   |       |   |   | (354,000       | )      |   | 14.511     |   |   | (3,106,400     | )      |   | 15.364     |   |
| Options cancelled in the period                  |   | (59,500       | )      |   | 15.216     |   |   | (12,500        | )      |   | 14.450     |   |   | (121,500       | )      |   | 16.530     |   |
| **Options        outstanding as of December 31** |   | **8,162,000** |   |   | **14.367** |   |   | **11,789,000** |   |   | **15.111** |   |   | **13,379,600** |   |   | **17.705** |   |
| **of which exercisable at December 31**          |   | **73,000**    |   |   | **14.802** |   |   | **-**          |   |   | **-**      |   |   | **1,540,600**  |   |   | **16.104** |   |

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

----

|   |   |                              |
|--------|--------|-----------------------------------|
| (a)    |   | Below quoted        market price. |

The fair value of stock options granted during the years endedDecember 31, 2003, 2004 and 2005 of euro 1.50, euro 2.01 and euro3.33, respectively, was calculated applying the Black-Scholesmethod and using the following assumptions:

| **Fair        value of stock options** |   | **2003** |   | **2004** |   | **2005** |
|----------------------------------------|--------|----------|--------|----------|--------|----------|
|                                   |   |          |   |          |   |          |

| Risk-free        interest rate |   | (%)    |   | 3.16 |   | 3.21 |   | 2.51 |
|--------------------------------|--------|--------|--------|------|--------|------|--------|------|
| Expected life                  |   | (year) |   | 8    |   | 8    |   | 8    |
| Expected        volatility     |   | (%)    |   | 22   |   | 19   |   | 21   |
| Expected dividends             |   | (%)    |   | 5.35 |   | 4.5  |   | 3.98 |

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

 

| **Stock        grant for Eni’s CEO and general managers** | **Grants outstanding at beginning of the period** |   | **Grants assigned during the period** |   | **Grants exercised during the period** |   | **Grants outstanding at end of the period** |
|----------------------------------------------------------------|---------------------------------------------------|--------|---------------------------------------|--------|----------------------------------------|--------|---------------------------------------------|
|                                                           |                                                   |   |                                       |   |                                        |   |                                             |

| **Name** |   | **Number of grants** |   | **Average maturity in        months** |   | **Number of grants** |   | **Average maturity in        months** |   | **Number of grants** |   | **Average market price at        date of exercise (euro)** |   | **Number of grants** |   | **Average maturity in        months** |
|----------|--------|----------------------|--------|---------------------------------------|--------|----------------------|--------|---------------------------------------|--------|----------------------|--------|------------------------------------------------------------|--------|----------------------|--------|---------------------------------------|
|     |   |                      |   |                                       |   |                      |   |                                       |   |                      |   |                                                            |   |                      |   |                                       |

| Vittorio        Mincato (1) | CEO                                            | 104,800 |   | 19 |   | 40,200 |   | 38 |   | 145,000 |   | 19.951 |   | -      |   | -  |
|-----------------------------|------------------------------------------------|---------|--------|----|--------|--------|--------|----|--------|---------|--------|--------|--------|--------|--------|----|
| Stefano Cao                 | General Manager of the        E&P Division | 40,500  |   | 20 |   | 16,000 |   | 38 |   | 12,800  |   | 23.785 |   | 43,700 |   | 21 |
| Luciano        Sgubini      | General Manager of the G&P Division        | 40,500  |   | 20 |   | 16,000 |   | 38 |   | 56,500  |   | 22.784 |   | -      |   | -  |
| Angelo Taraborrelli         | General Manager of the        R&M Division | 17,500  |   | 20 |   | 16,000 |   | 38 |   | 5,400   |   | 23.785 |   | 28,100 |   | 24 |

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

----

|   |   |                            |
|--------|--------|---------------------------------|
| (1)    |   | Retired on        May 27, 2005. |

 

| **Stock        options for Eni’s CEO and general managers** | **CEO**(1)    |   | **CEO**(2)       |   | **General Manager for the E&P Division** |   | **General Manager for the G&P Division** |   | **General Manager for the R&M Division** |
|------------------------------------------------------------------|---------------|--------|------------------|--------|----------------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------|
|                                                             |               |   |                  |   |                                              |   |                                              |   |                                              |
|                                                             | Paolo Scaroni |   | Vittorio Mincato |   | Stefano Cao                                  |   | Luciano Sgubini                              |   | Angelo Taraborrelli                          |
|                                                             |               |   |                  |   |                                              |   |                                              |   |                                              |

| Options        outstanding at the beginning of the period: |   |   |   |    |   |    |   |    |   |    |   |    |
|------------------------------------------------------------|--------|--------|--------|---------|--------|---------|--------|---------|--------|---------|--------|---------|
| - number of options                                        |   |   |   | -       |   | 499,000 |   | 182,000 |   | 170,000 |   | 96,500  |
| - average        exercise price                            |   | (euro) |   | -       |   | 15.090  |   | 15.185  |   | 15.086  |   | 15.379  |
| - average maturity in months                               |   |   |   | -       |   | 67      |   | 79      |   | 79      |   | 81      |
| Options        granted during the period:                  |   |   |   |    |   |    |   |    |   |    |   |    |
| - number of options                                        |   |   |   | 699,000 |   | -       |   | 75,500  |   | 60,500  |   | 50,000  |
| - average        exercise price                            |   | (euro) |   | 22.509  |   | -       |   | 22.509  |   | 22.509  |   | 22.509  |
| - average maturity in months                               |   |   |   | 96      |   | -       |   | 96      |   | 96      |   | 96      |
| Options        exercised at the end of period:             |   |   |   |    |   |    |   |    |   |    |   |    |
| - number of options                                        |   |   |   | -       |   | 499,000 |   | 56,000  |   | 230,500 |   | 23,500  |
| - average        exercise price                            |   | (euro) |   | -       |   | 15.090  |   | 15.216  |   | 17.035  |   | 15.216  |
| - average market price at date of exercise                 |   | (euro) |   | -       |   | 19.980  |   | 22.784  |   | 22.964  |   | 22.784  |
| Options        outstanding at the end of the period:       |   |   |   |    |   |    |   |    |   |    |   |    |
| - number of options                                        |   |   |   | 699,000 |   | -       |   | 201,500 |   | -       |   | 123,000 |
| - average        exercise price                            |   | (euro) |   | 22.509  |   | -       |   | 17.920  |   | -       |   | 18.308  |
| - average maturity in months                               |   |   |   | 91      |   | -       |   | 82      |   | -       |   | 83      |
|                                                       |   |   |   |         |   |         |   |         |   |         |   |         |

----

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

| (1) |   | Appointed on        June 1, 2005. |
|-----|--------|-----------------------------------|
| (2) |   | Retired on        May 27, 2005.   |

The table below sets forth the amount and maturity of stockoptions granted to Eni’s executive officers in 2005:

|   | **Options granted        in the year** |   | **Options held        at year end** |
|--------|----------------------------------------|--------|-------------------------------------|
|   |                                        |   |                                     |

| Number of options                                                                   |   |   | 1,350,000 |   | 2,329,500 |
|-------------------------------------------------------------------------------------|--------|--------|-----------|--------|-----------|
| Average        exercise price                                                       | (euro) |   | 22.509    |   | 19.217    |
| Maturity                                                                            | (days) |   | 1,096     |   | 707       |
| Expiration                                                                          | (days) |   | 2,923     |   | 2,498     |
| Weighted average exercise price for options        existing as of December 31, 2005 | (euro) |   | 15.231    |   |      |
|                                                                                |   |   |           |   |           |

The information in the table above is current as of June 5,2006. No additional options have been granted from December 31,2005 to that date. Eni issues only ordinary shares. For furtherinformation on Eni’s stock compensation see Note 26 to theConsolidated Financial Statements.

> 
*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 andregularly 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 frominvestor.relations@eni.it.

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 from segreteriasocietaria.azionisti@eni.itand the toll-free number 800940924 (Outside Italy 80011223456).

Information regarding periodic 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.

On February 28, 2006, Eni’s Board of Directors updatedthe "Procedure for the disclosure of information to themarket concerning Group activities" approved on December 18,2002 and published on Eni’s internet site. The procedureacknowledges Consob guidelines and the "Guidelines forinformation to the market" issued in June 2002 by the RefForum on company information and those included in the lawsimplementing the European Directive on market abuse, 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 in accordance with the crimes identified andsanctioned by the new law on the protection of savings.

Eni’s Code of Conduct defines confidentiality dutiesupheld by Group employees relating to the treatment of sensitiveinformation.

> 
*Internal dealing*

On February 28, 2006 the Board of Directors approved aprocedure concerning the creation and updating a register ofpersons with a right to access privileged information at Eni, asprovided for by Article 115 of Legislative Decree No. 58 ofFebruary 24, 1998 which states that "listed issuingcompanies and the subjects who have a control relation with them,or acting in their name, must establish and regularly update aregister of the persons that, due to their professional activityor functions performed have access to information as described inArticle 114 (privileged information)". The procedureimplementing Consob Decision No. 11971/1999, as amended, defines:(i) terms and procedures for the recording and possiblecancellation of the persons that, due to their professionalactivity or functions performed on behalf of Eni, have access toprivileged information; and (ii) terms and procedures ofinformation of said persons of their recording or cancellationand relevant reasons. The procedure became effective on April 1,2006.

In the same meeting the Board approved the "Internaldealing procedure" for the identification of relevantpersons and the communication of transactions involving financialinstruments issued by Eni SpA and its listed subsidiaries, whichsubstitutes the Internal Dealing Code approved by the Board onDecember 18, 2002.

The procedure implements the provisions of Article 114,paragraph 7 of Legislative Decree No. 58 of February 24, 1998which states that "subjects performing administration,control or management activities for a listed issuer and managershaving regular access to privileged information as per paragraph1 and having the power to make operating decisions that canaffect the development and future situation of the issuer andwhoever holds shares corresponding to at least 10% of thecompany’s share capital and any other person controlling theissuer are obliged to inform Consob and the market of anytransaction involving financial instruments issued by the issuer,also when performed by others on their behalf." Thiscommunication is due also by spouses not legally separated,children, parents, relatives living with the subject and in theother cases indicated by Consob in implementation of Directive2004/72/CE of the European Commission. Eni’s procedure: (i)identifies relevant persons; (ii) defines the transactionsinvolving financial instruments issued by Eni SpA; (iii)determines the terms and conditions for the disclosure to thepublic of such information; and (iv) reports the sanctionsintroduced by the law for the case of non compliance. Theprocedure that became effective on April 1, 2006 is published onEni’s internet site.

 

##### Table of Contents

**Employees**

At December 31, 2005, Eni’s employees numbered 72,258representing an increase of 1,910 employees from December 31,2004, or 2.7%, reflecting a 2,479 increase in employees hired andworking outside Italy and a 569 decline in employees hired inItaly.

Employees hired in Italy were 40,192 (55.6% of all Groupemployees), of these 37,493 were working in Italy, 2,480 outsideItaly and 219 on board of vessels. As compared to 2004, the 569unit decline in employees was due mainly to changes inconsolidation (723 employees, due to the divestment of the waterbusiness, IP and technical services at Porto Marghera) offset inpart by the positive balance of persons leaving their job and newhirings and net transfers from unconsolidated subsidiaries.

The process of improvement in the quality mix of employeescontinued in 2005 with the hiring of 2,099 persons, of which 727were hired with open-end contracts. A total of 1,372 persons werehired with this type of contract and with apprenticeshipcontracts, most of them with university qualifications (800persons of which 509 are engineers) and 533 persons with a highschool diploma. During the year 2,027 persons left their job atEni, of these 1,438 had an open-end contract and 589 a fixed-termcontract.

Employees hired and working outside Italy at December 31, 2005were 32,066 (44.4% of all Group employees), with an increase of2,479 persons due to the positive balance of new hirings withopen-end contracts and persons leaving their job in Saipem andSnamprogetti (2,639 employees) and the negative balance (160persons) of persons leaving the job and new hirings with open-endcontracts in the rest of the Group.

| **Employees        at year end** | **2003** |   | **2004** |   | **2005** |
|----------------------------------|----------|--------|----------|--------|----------|
|                             |          |   |          |   |          |

|   | **(units)** |
|--------|-------------|

| Exploration & Production                   |   | 7,492      |   | 7,477      |   | 7,491      |
|------------------------------------------------|--------|------------|--------|------------|--------|------------|
| Gas &        Power                         |   | 12,982     |   | 12,843     |   | 12,324     |
| Refining & Marketing                       |   | 13,277     |   | 9,224      |   | 8,894      |
| Petrochemicals                                 |   | 7,050      |   | 6,565      |   | 6,462      |
| Oilfield Services Construction and Engineering |   | 25,583     |   | 25,819     |   | 28,684     |
| Other        activities                        |   | 6,380      |   | 4,983      |   | 4,638      |
| Corporate and financial companies              |   | 2,657      |   | 3,437      |   | 3,765      |
|                                           |   |            |   |            |   |            |
|                                           |   | **75,421** |   | **70,348** |   | **72,258** |
|                                           |   |            |   |            |   |            |

The table below sets forthEni’s employees at December 31, 2003, 2004 and 2005 in Italyand outside Italy:

|   |   | **2003**    |   | **2004** |   | **2005** |
|--------|--------|-------------|--------|----------|--------|----------|
|   |   |             |   |          |   |          |
|   |   | **(units)** |

| Exploration        & Production                   | Italy         |   | 4,555      |   | 4,539      |   | 4,510      |
|-------------------------------------------------------|---------------|--------|------------|--------|------------|--------|------------|
|                                                  | Outside Italy |   | 2,937      |   | 2,938      |   | 2,981      |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 7,492      |   | 7,477      |   | 7,491      |
|                                                  |          |   |            |   |            |   |            |
| Gas &        Power                                | Italy         |   | 10,302     |   | 10,216     |   | 9,733      |
|                                                  | Outside Italy |   | 2,680      |   | 2,627      |   | 2,591      |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 12,982     |   | 12,843     |   | 12,324     |
|                                                  |          |   |            |   |            |   |            |
| Refining        & Marketing                       | Italy         |   | 6,882      |   | 6,879      |   | 6,680      |
|                                                  | Outside Italy |   | 6,395      |   | 2,345      |   | 2,214      |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 13,277     |   | 9,224      |   | 8,894      |
|                                                  |          |   |            |   |            |   |            |
| Petrochemicals                                        | Italy         |   | 5,585      |   | 5,237      |   | 5,164      |
|                                                  | Outside Italy |   | 1,465      |   | 1,328      |   | 1,298      |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 7,050      |   | 6,565      |   | 6,462      |
|                                                  |          |   |            |   |            |   |            |
| Oilfield        Services Construction and Engineering | Italy         |   | 5,314      |   | 5,580      |   | 5,799      |
|                                                  | Outside Italy |   | 20,269     |   | 20,239     |   | 22,885     |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 25,583     |   | 25,819     |   | 28,684     |
|                                                  |          |   |            |   |            |   |            |
| Other        activities                               | Italy         |   | 6,367      |   | 4,959      |   | 4,616      |
|                                                  | Outside Italy |   | 13         |   | 24         |   | 22         |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 6,380      |   | 4,983      |   | 4,638      |
|                                                  |          |   |            |   |            |   |            |
| Corporate        and financial companies              | Italy         |   | 2,577      |   | 3,351      |   | 3,683      |
|                                                  | Outside Italy |   | 80         |   | 86         |   | 82         |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | 2,657      |   | 3,437      |   | 3,765      |
|                                                  |          |   |            |   |            |   |            |
| **Total**                                             | Italy         |   | 41,582     |   | 40,761     |   | 40,185     |
| **Total**                                             | Outside Italy |   | 33,839     |   | 29,587     |   | 32,073     |
|                                                  |          |   |            |   |            |   |            |
|                                                  |          |   | **75,421** |   | **70,348** |   | **72,258** |
|                                                  |          |   |            |   |            |   |            |
| of which senior managers                              |          |   | 1,733      |   | 1,764      |   | 1,748      |
|                                                  |          |   |            |   |            |   |            |

 

##### Table ofContents

**Share Ownership**

As of April 30, 2006, the total number of shares owned by thedirectors, statutory auditors and executive officers of Eni SpAas a Group was 202,078 equal to approximately 0.005% ofEni’s share capital outstanding at December 31, 2005. Eniissues only ordinary shares, each bearing one-vote right;therefore shares held by Eni SpA directors, statutory auditorsand executive officers have no different voting rights.

 

 

##### Table of Contents

**Item 7. MAJOR SHAREHOLDERS AND RELATED PARTYTRANSACTIONS**

**Major Shareholders**

As of May 25, 2006, the Ministry of Economy and Finance, CassaDepositi e Prestiti SpA and Gruppo Banca Intesa were the onlypersons known by Eni to own more than 2% of any class of EniSpA’s voting securities. At such date, the total amount ofEni SpA’s voting securities owned by these shareholders 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%               |
| Banca Intesa                     |   | 97,522,352                 |   | 2.44%                |
|                                  |   |                            |   |                      |

 

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 – TheOffer and the Listing".

 

 

##### 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 ConsolidatedFinancial Statements.

 

 

##### Table of Contents

**Item 8. FINANCIAL INFORMATION**

**Consolidated Statements and Other FinancialInformation**

See Item 18 – Financial Statements.

> 
***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 provisions, Eni believes that the foregoing will not have anadverse effect on Eni’s Consolidated Financial Statements.

Following is a description of the most significant proceedingscurrently pending; unless otherwise indicated below, noprovisions have been made for these legal proceedings as Enibelieves that negative outcomes are not probable or because theamount of the provision can not be estimated reliably.

> 
**Environment**

*Eni SpA*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’sGela refinery. In November 2002, "Italia Nostra" andthe association "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). Threeenvironmental organizations act as plaintiffs and requesteddamage payment for euro 551 million. Two of these organizationsare also acting against the Gela refinery.

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 that have occurred since 1997. The Municipality of Gela,the Province of Caltanissetta and others filed civil claims inthis proceeding and requested the payment of compensatory damagesfor a total of euro 878 million. The judgment of first degreebefore the Court of 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. Somelocal public entities, environmental NGOs and landowners areacting as plaintiffs. On January 17, 2005, a second inquiry phaseaimed at ascertaining which sort of emissions had eventuallyproduced the alleged pollution caused by the refinery of Gela,was completed. On February 3, 2006, the notice of the conclusionof preliminary investigations was filed conclusion of thepreliminary inquiry.

In June 2002, in connection with a fire in the refinery ofGela, a criminal investigation began concerning arson,environmental crimes and crimes against natural heritage. On May12, 2004 the first hearing was held.

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. Theinvestigation concerns the environmental rules about thepollution of water and soil and illegal disposal of liquid andsolid waste materials. On November 7, 2003 the judge forpreliminary investigations accepted to continue the inquiries asrequested by the public prosecutor 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. With a decision of November 3, 2003,the Court for preliminary investigation, in agreement with arequest of the public prosecutor of Gela, ordered the preventiveseizure of 92 storage tanks, later reopened except for nine tanksthat remained under seizure but do not prevent full operations atthe refinery. The report filed by experts of the publicprosecutor is currently under review.

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. A qualified company has been given the taskto verify the cause, the origin and the extension of the allegedinfiltration. 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 areafarther from and higher than the industrial site; and (iii)install a purification system for drinkable water. With adecision of June 1, 2004 the seizure was lifted on the storagetanks that had been seized on April 17, 2003, except for fivestorage tanks that are still under seizure. The report of expertshas been filed and its findings can be opposed to defendants.

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 and platforms. OnJune 10, 2004 the Court responded to the claim filed by Eni andlifted the seizure of the Angela/Angelina - Ravenna Mare Sudfields and related wells and platforms. On March 10, 2005, theCourt of Cassation confirmed this decision. On February 5, 2003,a seizure had already been applied to the Naomi/Pandora platform,the Naomi 4 Dir, Naomi 2 Dir and 3 Dir - Pandora 2 Dir wells, andthe underwater pipeline for the transportation of gas to theCasalborsetti facility. Eni believes it has always acted in fullcompliance with existing laws under the required authorizations.Taking account of the observations of the consultants of theCourt of Rovigo on which the Public Prosecutor based his case,Eni constituted an independent and interdisciplinary scientificcommission, chaired by Prof. Enzo Boschi, professor of seismologyat the Università degli Studi di Bologna and chairman of theIstituto nazionale di geofisica e vulcanologia, composed ofprominent and highly qualified international experts ofsubsidence caused by hydrocarbon exploration, with the aim ofverifying the size and the effects and any appropriate actions toreduce or to neutralize any subsidence phenomenon in the Ravennaand North Adriatic area both on land and in the sea. Thecommission produced a study which denies the possibility for anyrisk for human health and for damage to the environment. It alsostates that no example is known anywhere in the world ofaccidents that caused harm to the public safety caused bysubsidence induced by hydrocarbon production. The study alsoshows that Eni employs the most advanced techniques for themonitoring, measuring and control of the soil. On May 11, 2006the Court of Rovigo accepted as plaintiffs the Veneto Region, theEnte Parco della Provincia del Po, the Ferrara Province, theVenice Province, the city of Venice, the city of Comacchio, theRovigo Province and two private entities. Eni was accepted as adefendant. The Court of Rovigo rejected the accusation ofenvironmental disaster and therefore transferred the proceedingto the Court of Adria, where the first hearing has been scheduledfor October 31, 2006.

*EniPower SpA*In autumn 2004 the Public Prosecutor of Rovigo started aninvestigation for alleged crimes related to unauthorized wastemanagement activities in Loreo relating to samples of the soilused in the construction of the new EniPower’s power stationin Mantova. EniPower requested the closing of the investigation.

*Polimeri Europa SpA*Before the Court of Gela one criminal action took placerelating to the alleged violation on part of Eni of environmentalregulations on waste management concerning the ACN plant and thedisposal of FOK residue deriving from the steam cracking process.The defendant was found guilty and a damage payment in firstinstance was required to be made to an environmental associationacting as plaintiff. The sentence was passed to the civil courtfor the quantification of any further damage and claim. Eniappealed 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. Edison agreed on a settlementthat quantified damage to be paid covering also Syndial. Theproceeding continues for the alleged damage in the 1989-1990period.

In 2000, the Public Prosecutor of Brindisi started a criminalaction against 68 persons who are employees or former employeesof companies that owned and managed plants for the manufacture ofdichloroethane, vinyl chloride monomer and vinyl polychloridefrom the early 1960s to date, some of which were managed byEniChem from 1983 to 1993. At the end of the preliminaryinvestigation phase, the Public Prosecutor asked for thedismissal of the case in respect of the employees and themanagers of EniChem. Plaintiffs presented oppositions while theprosecutor confirmed his request for dismissal of the case.

On December 18, 2002 EniChem SpA, jointly with Ambiente SpA(now merged in Syndial SpA) and European Vinyls CorporationItalia SpA, was summoned before the Court of Venice by theProvince of Venice. The province requested compensation forenvironmental damages, not quantified, caused to the lagoon ofVenice by the Porto Marghera plants, which were already thesubject of two previous proceedings against employees andmanagers. In a related action, European Vinyls Corporation Italiapresented an action for recourse against EniChem and Ambiente.The requests for damage of the Province of Venice and that of EVCItalia to EniChem and Ambiente have not been quantified. Thefinal judgment is pending.

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, will act as plaintiffs. The collection ofevidence effected before the hearing starts in Court has beenconcluded and preliminary investigations have ended with theconfirmation of accusations. During the inquiries traces ofmercury were found in the sea. The Public Prosecutor of Siracusastarted an inquiry for ascertaining the conditions of sedimentsand marine fauna in the bay of Augusta. According to theplaintiffs, mercury would have been spilled into the sea andpoisoned the marine fauna and therefore resulted in fetalmalformations and abortions due to the consumption ofcontaminated seafood fished in this area. The chlorine sodaplant, built in the late 50s was conferred to Syndial in 1989when the Enimont joint venture was formed. It was therefore easyto prove that Eni holds no responsibility for the crimes it wasaccused of. On March 15, 2006 the judge for preliminaryinvestigations decided the dismissal of the case against Syndialemployees.

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 approximately 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. TheProvince of Crotone entered the proceeding, claimingenvironmental damages for euro 300 million. Technical aspectsconcerning the role of the delegated commissioner make itnecessary to decide on this aspect. Syndial was notified onOctober 21, 2004 of the request of the Calabria Region to appearbefore the Court of Milan in order to obtain a preliminary damagepayment, in anticipation of the expiration of the special officefor managing emergency events in Calabria. The Region requestedpayments for over euro 800 million.

On February 28, 2006 the Council of Ministers, the Ministryfor the Environment and the Delegated Commissioner forenvironmental emergency in the Calabria Region represented by theState Lawyer requested Syndial to appear before the Court ofMilan in order to obtain the ascertainment, quantification andpayment of damage (in the form of pollution of land, air andwater and therefore of the general condition of the population)caused by the operations of Pertusola Sud SpA in the municipalityof Crotone and in surrounding municipalities. The localauthorities request the ascertainment of Syndial’sresponsibility as concerns expenses borne and to be borne for thecleanup and reclamation of sites, currently quantified at euro129 million. This proceeding concerns the same company anddamages as indicated in the previous paragraph.

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’sopposition.

In October 2004, Sitindustrie SpA started an analogousproceeding against Syndial concerning the plant for themanufacture of products in copper and copper alloy at PieveVergonte.

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. On March 1,2006 the State Lawyer in an attempt to settle the case proposedthat Syndial pay 10% of the requested damage corresponding toeuro 239 million. This attempt to settle failed.

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 that occurred in 1984, as a consequenceof which EniChem Agricoltura SpA (later merged into Syndial SpA),at the 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. The judge requested an expert report to beprepared in order to ascertain what damage has been remediatedand what remains to be cleaned up after the interventions startedby Agricoltura and continued by EniChem/Syndial. The expertreport quantifies the damage still to be remediated in euro 15million.

> 
**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) should 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 was requestedfrom the Ministry of Finance and Economy. With a decision of May29, 2001, the Ministry confirmed that this additional excise taxcannot be applied. The Region decided not to revoke its decreeand Snam took appropriate legal action. On the basis of actioncarried out by Snam, the Council of State decided on March 18,2002 that the jurisdiction of the Administrative court did notapply to this case. In case the Region should request payment,Eni will challenge this request in the relevant Court. TheLombardia Region decided with regional Law No. 27/2001 that noadditional tax is due from January 1, 2002 onwards, but stillrequested the payment of the additional taxes due before thatdate.

With a formal assessment presented by the municipality ofPineto (Teramo), Eni SpA has been accused of not having paid amunicipal tax on real estate for the period from 1993 to 1998 onfour oil platforms located in the Adriatic Sea territorial watersin front of the coast of Pineto. Eni has been requested to pay atotal of approximately euro 17 million also including interestand a fine for lacking declaration. Eni filed a claim againstthis request stating that the sea where the platforms are locatedis not part of the municipal territory and the application of thetax at requested by the municipality lacked objectivefundamentals. The claim has been accepted in the first twodegrees of judgment at the Provincial and Regional TaxCommissions. But the Court of Cassation cancelled both judgmentsdeclaring that a municipality can consider requesting a tax onreal estate also in the sea facing its territory and with adecision of February 21, 2005 sent the proceeding to anothersection of the Regional Tax Commission in order to judge on theother reason opposed by Eni. On December 28, 2005 themunicipality of Pineto presented the same request for the sameplatforms for the years 1999 to 2004. The total amount requestedto Eni is of euro 24 million. Eni filed a claim against thisrequest.

*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, on the final outcome of the tax audits performedfor fiscal years 2000 to 2003. Claims by the Kazakh authoritiesconcern unpaid taxes for a total of $43 million, net to Eni, andthe anticipated offsetting of VAT credits for $140 million, netto Eni, as well as the payment of interest and penalties for atotal of $128 million. Both companies filed a counterclaim. Withan agreement reached on November 18, 2004, the original amountswere reduced to $26 million net to Eni that includes taxes,surcharges and interest. Meetings continue regarding residualmatters. Eni recorded a specific provision for this matter.

*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.With the ruling of December 20, 2002, the Court judged the tax atvariance with European rules. In December 2002, Snam Rete Gassuspended payments based on the above Court ruling. Paymentseffected until November 2002 totalled euro 86.1 million. InJanuary 2003 the Sicilia Region presented an appeal to theCouncil of State against the ruling of the RegionalAdministrative Court of Lombardia for the part that states thevariance of the regional law with European rules. On December 16,2003, the European Commission judged the tax instituted by theRepublic of Italy, through the Sicilia Region, to be in contrastwith European rules and with the cooperation agreement betweenthe European Economic Community and the Peoples’ DemocraticRepublic of Algeria; the European Commission also stated thatsuch environmental tax is in contrast with the common customstariff because it modifies the equality of customs expenses oncommodities imported from third countries and could create adeviation in trade with such countries and a distortion in accessand competition rules. The Commission with its opinion presentedon July 7, 2004 formally requested Italy to cancel the tax. TheItalian Government must conform within two months from thereception of the opinion. As it did not conform, on December 20,2004 the European Commission passed the case to the Court ofJustice requesting a ruling. With a decision dated January 5,2004, and confirmed on March 4, 2005 by the Regional TaxCommission, the Provincial Tax Commission of Palermo declared theenvironmental tax of the Sicilia Region illegitimate because itis in contrast with European rules and therefore accepted SnamRete Gas’s claim for the repayment of the first installmentof euro 10.8 million, already paid in April 2002 to the SiciliaRegion. On May 4, 2004, the Sicilia Region repaid the firstinstallment. As for the seven remaining installments paid afterApril 2002 (euro 75.3 million) the Provincial Tax Commission ofPalermo with decision of January 5, 2005 confirmed theillegitimacy of the tax condemning the Region to repay theamounts paid and interest accrued to Snam Rete Gas. The SiciliaRegion presented recourse to the Regional Tax Commission atPalermo, a hearing has been scheduled for April 5, 2006. OnNovember 3, 2003, the Sicilia Region, following the procedurepresented by Snam Rete Gas concerning the yearly liquidation ofthe tax for 2002, requested liquidation of tax, fines andinterest (euro 14.2 million) relating to the unpaid December 2002installment. On December 30, 2003 Snam Rete Gas filed a claimwith request of suspension of payment as a result of theliquidation notice received from the Sicilia Region with theProvincial Tax Commission of Palermo, that, on June 25, 2004accepted Snam Rete Gas’s claim and decided the cancellationof the liquidation notice served by the Sicilia Region, confirmedby the Regional Tax Commission on March 7, 2005. In any case SnamRete Gas will not have to pay the tax: if the tax is consideredillegitimate in other Courts of law, the company will have theright to the restitution of the money. If, to the contrary, thetax is considered legitimate by the other Courts, the Authorityfor Electricity and Gas will include the tax (Decision No.146/2002 and No. 71/2003) in tariff with automatic andretroactive 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 -in liquidation), that has been merged into EniChem SpA (nowSyndial SpA). Such receivables were transferred by Agricolturaand Terni Industrie Chimiche to Serfactoring, which appointedAgrifactoring as its agent to collect payments. Agrifactoringguaranteed to pay the amount of such receivables to Serfactoring,regardless of whether or not it received payment at the due date.Following payment by Agrifactoring to Serfactoring, Agrifactoringwas placed 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 pendingwas set to be discussed in a hearing set for March 16, 2007 butwas rescheduled for October 27, 2006 upon request ofAgrifactoring. The judge of the Court of Rome, responsible forthe 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. Against this suspension Serfactoring and Syndialrequested to the Court of Cassation the cancellation of thesuspension and the return of the case to its original court.

*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. With ajudgment of October 11, 2005 the Court rejected ICR’srequest and order that ICR pay all expenses. ICR filed a claimagainst this decision.

> 
**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/EC, 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. On December 22, 2005, the Authority notified thepreliminary results of the inquiry concerning: (i) informationflows to oil companies related to the functioning of sharedstorage and uploading companies; (ii) barriers to the entrance ofnew competitors; and (iii) the price of jet fuel is higher thanon other European markets. On June 20, 2006, the Antitrustnotified Eni the final decision of this proceeding and fined Eniby an amount of euro 117 million. The Antitrust fined other oilcompanies involved in the matter. Eni is evaluating this decisionin order to file a claim against it decision before anadministrative court.

On April 28, 2005 the Commission of the European Communitiesstarted a formal assessment to evaluate the alleged participationof Eni and its subsidiaries to activities limiting competition inthe field of paraffin. The alleged violation of competition wouldhave consisted in: (i) the determination of and increase inprices; (ii) the subdivision of customers; and (iii) exchange oftrade secrets, such as production capacity and sales volumes. OnNovember 3, the Commission requested information on Eni’sactivities in the field of paraffins. On November 29, 2005 Enifiled the requested information. On April 21, 2006 the AntitrustAuthority requested information on the processing of rawparaffin, which Eni supplied in a letter dated May 25, 2006.

The Department of Justice of the United States of America -Antitrust Division, notified Eni Petroleum Co Inc of a subpoenarequesting information and documents relating to activities inthe field of wax to be filed before June 20, 2005. The Companyinformed the department that it does not produce nor import waxin the United States of America.

*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 from 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 Syndialthe relevant charges to that effect on March 8, 2005. At ahearing held on July 27, 2005 the two companies presentedmemoranda and confirmed their position. The parties await for adecision of the Commission.

EP(D)M manufacture is also under scrutiny in the UnitedStates, 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. In July 2005Syndial signed a settlement agreement for the civil class actionwhich entails the payment of approximately $3.2 million, approvedby the federal court.

The investigation was also extended to the following products:NBR, CR, BR, SSBR and SBR.

The European Commission started an investigation regarding BR,SBR, SSBR. On January 26, 2005 the Commission dropped the chargesin relation to SSBR, while for the other two products theCommission started an infraction procedure by notifying Eni,Polimeri Europa and Syndial the relevant charges. The companiespresented a written memorandum and the Commission decided to openan inquiry, as a consequence of which the Commission sent a newdescription of the charges. The companies are preparing a newmemorandum.

With regard to NBR an inquiry is underway in Europe and theUSA, where class actions also have been started. The class actionat federal level was abandoned by the plaintiffs. The federaljudge acknowledged this abandonment.

With regard to CR, as part of an investigation carried out inthe USA, Syndial entered into a plea agreement with theDepartment of Justice pursuant to which Syndial would agree topay a fine of $9 million, while the Department of Justice wouldagree that it will not bring further criminal charges againstSyndial or against its affiliate companies. On June 27, 2005 theplea agreement was approved. For CR the civil class action wasclosed with a settlement agreement approved by the federal judgeon July 8, 2005 whereby the company will pay $5 million. TheEuropean Commission requested Eni, Polimeri Europa and Syndial toprovide information about CR. The two companies decided tocooperate with the Commission.

Eni recorded a provision for these matters.

*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 decisions with theRegional Administrative Court of Lombardia requesting theircancellation. With a decision dated September 29, 2003, thatCourt rejected the appeal presented by Stogit. Stogit filed anappeal to the Council of State against the sentence which wasrejected by the Council of State on January 6, 2006.

*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. On April 28,2006, the Company filed a formal request for examining thedocuments used as evidence of the alleged violation.

> 
***Court inquiries***

The Milan Public Prosecutor is inquiring into contractsawarded by Eni’s subsidiary EniPower and on supplies fromother companies to EniPower. The media have provided widecoverage of these inquiries. It emerged that illicit paymentshave been made by EniPower suppliers to a manager of EniPower whohas been immediately 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 investigation on two Eni managers, the PublicProsecutor of Rome on March 10, 2005 notified Eni of the seizureof papers concerning Eni’s relations with two oil producttrading companies.

> 
***TSKJ Consortium - Investigations of SEC and other    Authorities***

In June 2004 the U.S. Securities and Exchange Commission (SEC)notified Eni a request of collaboration on a voluntary basis,which Eni promptly carried out, in order to obtain informationregarding the TSKJ consortium in relation to the construction ofnatural gas liquefaction facilities at Bonny Island in Nigeria.The TSKJ consortium is formed by Snamprogetti (Eni 100%) with a25% interest and, for the remaining part, by subsidiaries ofHalliburton/KBR, Technip and JGC. The investigations of theCommission concern alleged improper payments. Other Authoritiesare currently investigating this matter. Eni is currentlyproviding its own information to the Commission and to otherauthorities.

> 
***Settled Proceedings***

*Tax Proceedings*In August 2005, the internal revenue service of Venezuelaserved to Eni Dación BV four formal assessment on income taxesfor the years 2001 to 2004 that, by excluding the deductibilityof certain costs: (i) annul the losses recorded for the periodsamounting to a total of bolivar 910 billion (corresponding to$425 million); (ii) determine for the same periods a taxableincome amounting to a total of bolivar 115 billion (correspondingto $54 million); and (iii) request a tax amounting to bolivar 52billion (corresponding to $24 million) determined by applying a50% tax rate rather than the 34% rate applied to other companiesperforming activities analogous to those of Eni Dación BV. Inparticular it excluded the deductibility of: (i) interest chargesdue to other Eni Group companies that provided loans denominatedin U.S. dollars; and (ii) exchange rate losses recorded in thefinancial statements and related to such loans resulting from thedevaluation of the Venezuelan currency. The formal assessmentsserved have a preliminary nature and do not request immediatepayment nor do they specify the amount of a fine (from 10 to250%) and of interest (average rate for the period approximately23%). Eni Dación filed a claim for the cancellation of theassessment. In the 2005 accounts, Eni recorded a specificprovision for this matter. In April 2006 the appeal was rejectedand the final tax assessment was issued. The final taxassessment: (i) substantially confirmed the preliminaryassessments, although reducing the originally assessed income taxliability to bolivar 39 billion ($18 million); and (ii) imposedfines and late payment interests of bolivar 109 billion ($51million). Eni Dación BV presented a further administrativeappeal before the expiration of the time limit for filing ajudicial tax appeal, thereby obtaining a reduction of the overallamount from bolivar 148 billion ($69 million) to bolivar 52billion ($24 million) including taxes in the amount of bolivar12.5 billion ($6 million) and fines and late payment interest inthe amount of bolivar 39.5 billion ($18 million). In order toavoid further charges deriving from the increase of thecorresponding fines and late payment interest, Eni Dación BVpaid the newly assessed amount in May 2006, thereby reaching asettlement. Consistently, Eni Dación BV filed an integrativeincome tax return for year 2005, considering the new tax basesfor years 2001 to 2004, and paid accordingly bolivar 128 billion($60 million) of income taxes and bolivar 4.4 billion ($2million) of fines and late payment interest. 

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 byEni’s Taranto refinery in 2000, 2001 and 2002 to Eni SpA, asthe successor 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 did 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 was based on the fact that the company didnot 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 canceling the 147formal assessments. On March 12, 2004 the Comando NucleoRegionale Polizia Tributaria 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. The notification was based on the same lack ofadministrative authorization, already contested by the CustomsDistrict of Taranto, that was concluded in favor of Eni by theRegional Director. On January 26, 2006 the judge for preliminaryinvestigation of the Court of Taranto dismissed the accusationsand closed the assessment.

*Legal Proceedings*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 later merged into AgipPetroli SpA. Theclaims for these damages amount to euro 103 million. At the endof 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 that agreed to pay13% of the remediation costs. The first action promoted by Grifilbefore the Court of La Spezia remained pending. On January 7,2004 the Municipality of La Spezia put Eni in possession of thearea and from that date Eni started remediation works paying therelevant costs on its own. Eni requested the conservative seizureof Grifil’s land parcel, up to a maximum value of euro 19million. With two administrative measures, on December 2, 2003and January 13, 2004 respectively, the Court of Genova declaredthe right of Eni legitimate, based on the sale contractstipulated between Italiana Petroli and Grifil, to claim thepayment of all clean-up expenses that Eni will incur as Grifildid not fulfill its obligation. The judge closed the inquiryphase and stated that the judgment can be brought to an end. Asfor 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. On September 6, 2005 Eni and Immobiliare Helios SpA(that acquired all of Grifil’s share capital) reached asettlement that: (i) concluded all disputes outstanding withGrifil and constitutes a waiver to any possible future claimdirectly or indirectly related to the sale of the land parcel;(ii) passed to the acquirer all residual expense to be incurredfor the reclamation of the land parcel with the explicit approvalof the municipality of La Spezia; and (iii) provided for Enito pay to the new owner of Grifil a lump sum of euro 15.1 millionthat will be paid when the new owner provides confirmation ofworks performed for the reclamation; the sum is covered byprovisions in the risk reserve.

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. Defendants includedcertain employees of Eni which has been managing the PortoMarghera plant since the beginning of the eighties. On November2, 2001, the Court of Venice acquitted all defendants. The appealagainst the decision was presented by the public prosecutor, theState Attorney on behalf of the Ministry of Environment and theCouncil of Ministers, 5 public entities, 12 associations andother entities and 48 individual persons. On December 15, 2004the Venice Court of Appeals confirmed the preceding judgment,changing only some marginal parts. As concerns some defendants,the Court of Appeals decided not to proceed due to the statute oflimitations for some crimes, while it confirmed the precedingjudgment for the other matters. On May 19, 2006, the Court offinal instance, before which plaintiffs appealed the decision ofthe Court of Appeals, acquitted all defendants stating thatpollution and mismanagement of the plant occurred before theeighties and consequently Eni and its employees could not bedeemed responsible for that. In January 2006 Eni settled thismatter with the Council of Ministers and the Ministry for theEnvironment paying an amount of euro 40 million. Under terms ofthe settlement, the latter will abstain from the recourse to theCourt of final instance and will not act on any otherenvironmental damage concerning the management of Porto Margherauntil the date of the settlement. Eni had already recorded aprovision for this matter which was sufficient to cover theamount of the settlement.

> 
***Dividends***

Eni’s dividend policy in future periods and thesustainability and the amount of future dividends over the nextfour year period will depend upon a number of factors includingthe increase in earnings and in cash flow provided by operatingactivities, a sound balance sheet structure, capital expenditureand development plans, and the "Risk Factors" set outin Item 3. Eni SpA’s net profit and, therefore, the amountsavailable for payment of dividends therefrom will also depend onthe level of dividends received from Eni’s subsidiaries.However, subject to such factors, the Board of Directors expectsto recommend to future meetings of shareholders to maintain aflow of dividends in line with the level of 2005 for the nextfour year period. On May 25, 2006, Eni’s generalshareholders’ meeting approved a dividend of euro 1.10 pershare for fiscal year 2005 as proposed by Eni’s Board ofDirectors. This dividend (of which euro 0.45 was already paid asan interim dividend in October 2005) represented an increase of22% with respect to the dividend paid for fiscal year 2004 (euro0.90 per share); the ratio of aggregate dividends payments toconsolidated net profit (pay-out) for year 2004 stands at 47%.Eni plans to continue paying interim dividends in future years.

 

##### Tableof Contents

**Significant Changes**

See "Item 5 – Recent Developments" for adiscussion of Eni’s results of operations in the firstquarter of 2006 and other material developments that occurredafter December 31, 2005.

 

##### 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 1,000 million. AmericanDepositary Shares ("ADSs"), each representing twoshares, are listed on the New York Stock Exchange. The ratio haschanged from one ADS per five Shares to one ADS per two Shares,effective January 10, 2006.

The table below sets forth the reported high and low referenceprices of Shares on Telematico and of ADSs on the New York StockExchange, respectively. Due to the ratio change, the historicalprices of ADSs have been adjusted by an adjustment factor of 2.5.See "Item 3 – Key Information – ExchangeRates" regarding applicable exchange rates during theperiods indicated below.

|   | **Telematico** |   | **New York        Stock Exchange** |
|--------|----------------|--------|------------------------------------|
|   |                |   |                                    |

|   | **High** |   | **Low** |   | **High** |   | **Low** |
|--------|----------|--------|---------|--------|----------|--------|---------|
|   |          |   |         |   |          |   |         |

|   | **(euro        per Share)** |   | **(U.S.        $ per ADS)** |
|--------|-----------------------------|--------|-----------------------------|

| 2001                                    |   | 15.598 |   | 11.564 |   | 27.880 |   | 21.000 |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| 2002                                    |   | 17.145 |   | 12.938 |   | 32.844 |   | 24.360 |
| 2003                                    |   | 15.746 |   | 11.881 |   | 37.992 |   | 26.460 |
| 2004                                    |   | 18.748 |   | 14.723 |   | 50.580 |   | 36.940 |
| 2005                                    |   | 24.960 |   | 17.930 |   | 60.540 |   | 47.400 |
|                                    |   |   |   |   |   |   |   |   |
| **2004**                                |   |   |   |   |   |   |   |   |
| First        quarter                    |   | 16.640 |   | 14.723 |   | 40.536 |   | 36.940 |
| Second quarter                          |   | 17.980 |   | 16.319 |   | 43.364 |   | 38.924 |
| Third        quarter                    |   | 18.584 |   | 16.272 |   | 45.804 |   | 39.608 |
| Fourth quarter                          |   | 18.748 |   | 17.651 |   | 50.580 |   | 44.244 |
|                                    |   |   |   |   |   |   |   |   |
| **2005**                                |   |   |   |   |   |   |   |   |
| First        quarter                    |   | 20.480 |   | 17.930 |   | 54.288 |   | 47.400 |
| Second quarter                          |   | 22.070 |   | 19.270 |   | 54084  |   | 49.004 |
| Third        quarter                    |   | 24.960 |   | 21.430 |   | 60.540 |   | 51.320 |
| Fourth quarter                          |   | 24.770 |   | 21.640 |   | 59.020 |   | 51.628 |
|                                    |   |   |   |   |   |   |   |   |
| **2006**                                |   |   |   |   |   |   |   |   |
| First        quarter                    |   | 24.880 |   | 23.050 |   | 60.650 |   | 55.170 |
| January 2006                            |   | 24.880 |   | 23.710 |   | 60.650 |   | 57.640 |
| February        2006                    |   | 24.860 |   | 23.840 |   | 59.510 |   | 56.550 |
| March 2006                              |   | 23.770 |   | 23.050 |   | 58.130 |   | 55.170 |
| April 2006                              |   | 24.810 |   | 23.370 |   | 61.320 |   | 57.050 |
| May 2006                                |   | 24.570 |   | 22.500 |   | 62.630 |   | 58.680 |
| June 2006        (through June 5, 2006) |   | 23.600 |   | 23.340 |   | 60.780 |   | 60.280 |
|                                    |   |        |   |        |   |        |   |        |

JPMorgan Chase Bank, N.A. (the "Depositary")functions as depositary bank issuing American Depositary Receipts("ADRs") pursuant to the Deposit Agreement among Eni,the Depositary and the beneficial owners ("BeneficialOwners") and registered holders from time to time of ADRsissued thereunder.

At June 5, 2006 there were 45,497,401 ADRs outstanding,representing 90,994,802 ordinary shares, or 2.27% of allEni’s shares outstanding, held by 65 holders of record(including The Depository Trust Company) in the United States ofAmerica, 62 of which are U.S. residents. Since certain of suchADRs are held by nominees, the number of holders may not berepresentative of the number of Beneficial Owners in the UnitedStates or elsewhere.

The Shares are included in the S&P/MIB, the new primaryItalian stock exchange index that measures the performance of the40 leading companies in leading industries listed on the marketsorganized and managed by Borsa Italiana SpA ("BorsaItaliana"). The constituents of the S&P/MIB are selectedaccording to the following criteria: sectorial representation,market capitalization 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 future and option contracts traded in the ItalianDerivatives Market ("IDEM") managed by Borsa Italiana.The Shares are the second largest component of the S&P/MIB,after the shares of Unicredito Italiano SpA, with a weighting ofapproximately 16.5%, as established by Standard & Poor’sand Borsa Italiana after reviewing the composition of theS&P/MIB on May 19, 2006. In addition, future and optioncontracts on the Shares are traded on IDEM and securitisedderivatives based on the Shares are traded on the ItalianSecuritised Derivatives Market ("SeDeX"). IDEMfacilitates the trading of future and option contracts on indexand shares issued by companies that meet certain requiredcapitalization and liquidity thresholds. SeDeX is the BorsaItaliana electronic regulated market where it is possible totrade securitised derivatives (covered warrants andcertificates).

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), Mercato MTAX (high growthcompanies), After Hours, Mercato Expandi (small companies), IDEM(index and stock derivatives market), SeDeX (covered warrants andcertificates), MOT (bond markets), as well as the admission tolisting 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 as amended by Eni’s Extraordinary Shareholders’Meeting held on May 25, 2006, is attached as an exhibit to thisannual report. See Exhibit 1.

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, on April 13, 2005, theEni’s Board of Directors modified the Eni’s by-laws inorder to apply the provisions of Law No. 350 of December 24, 2003(2004 budget law), which modified Article 2 of Law Decree No. 332of May 31, 1994, as modified and converted into Law No. 474 ofJuly 30, 1994, regarding the Special Powers of the State.Eni’s by-laws acknowledge in Article 6.2 that the SpecialPowers 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 canceling 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 Commission's informed opinion, therefore it did nottake into account DPCM of May 4, 1999, Article 66 of Law No.488/1999 and DPCM of June 10, 2004 and Law No. 350 of December24, 2003 which included provisions limiting those "specialpowers" of the Minister of Economy and Finance. These arecurrently being analyzed by the European Commission.

Furthermore Law No. 266 of December 23, 2005 (the Budget Law)in Article 1 paragraphs from 381 to 384 in order to favor theprocess of privatization and the diffusion of investments incompanies also held by the State, introduced the option toinclude in the by-laws of companies formerly owned by the State,as in the case of Eni SpA, regulations against takeovers, whichin particular provide for the issue of shares, also at nominalvalue, and similar shareholding certificates bearing the right tovote at ordinary and extraordinary Shareholders’ Meetings infavor of one or more shareholders identified in terms of thenumber of shares held. The introduction of these norms, which aresubject to approval by the EU, will cause the cancellation of theabove mentioned special powers of the State contained in Article6.2 of Eni’s by-laws.

> 
*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 leasttwo-thirds of the shares represented at the meeting, on thefirst, second or third call (Articles 2368-2369 c.c.) by themajority, one-third and one-fifth of the outstanding sharecapital, respectively; (iii) shareholders’ actionsagainst the Board of Directors, the Statutory Auditors. OfficialReceivers and the Managing Director may be initiated byshareholders holding at least 5% of the outstanding shares(Article 2393 bis c.c.); (iv) the actions for which a singleshareholder 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). Effective from July 1, 1998, accounting control functionsare under the exclusive competence of company’s independentauditors, and the company’s Board of Statutory Auditors nolonger carries out such functions.

Further protection to Italian minority shareholders wasintroduced by Law of January 12, 2006, the so called "LeggeRisparmio", that provided for among others the followings:

| • |   | sets new independence and        honorability requirements for directors of listed        companies;                                                                                                                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | introduces the list vote for        the election of directors as a protection of minority        shareholders and delegates to Consob, the Italian        financial markets regulator, the power to regulate the        appointment of a statutory auditor by minority        shareholders. The law states that shareholders        representing at least 2.5% of share capital can present a        list; |
| • |   | delegates to Consob the        determination of the limits to the number of memberships        of boards of directors and boards of statutory auditors        that directors and auditors of listed companies can hold        in other listed companies;                                                                                                                                                   |
| • |   | states that the chairman of        the Board of Statutory Auditors must be elected among the        candidates presented by minority lists; and                                                                                                                                                                                                                                                            |
| • |   | introduces the function of a        "Manager responsible for the preparation of        financial reporting documents" to be appointed in        accordance with rules set out in a company’s        by-laws, subject to a prior advice on part of the Board        of Statutory Auditors.                                                                                                   |

Companies must amend their own by-laws within twelve monthsfrom the entry into force of the law. Certain provisions of thislaw were already reflected into Eni’s by-laws; certain otherprovisions have been incorporated into Eni’s by-lawseffective May 25, 2006 by Eni’s Extraordinary ShareholdersMeeting.

> 
*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 theShareholders’ Meeting.

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’Meeting for any item on the agenda of the meeting and thefinancial statements to be submitted to the shareholders’approval, shall be deposited at the shareholders’ disposalat the Company’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.

 

##### Table of Contents

**Material Contracts**

None.

 

##### 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 100 F 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.

 

##### Tableof Contents

**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 12.5 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 tax law as reflected in the DepositAgreement, the Company is not involved: (i) in withholdingamounts due by holders of ADSs to relevant taxing authorities inconnection with any distributions relating to ADSs; or (ii) inthe procedures through which certain holders of ADSs may obtaintax rebates, credits, refunds or other similar benefits. Pursuantto the Deposit Agreement, the custodian and the Depositary haveundertaken to use reasonable efforts to make and maintainarrangements to enable persons that are considered the UnitedStates residents for purposes of applicable law to receive anyrebates or tax credits (pursuant to treaty or otherwise) relatingto distributions on the ADSs to which such persons are entitledin addition, the Depositary has agreed to establish procedures toenable all holders to take advantage of any rebates or taxcredits (pursuant to treaty of otherwise) relating todistributions on the ADSs to which such holders are entitled andto provide, at least annually, a written notice, in a formpreviously agreed to by the Company, to the holders of ADSs ofany necessary actions to be undertaken by such Holders.

> 
*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); and |
| • |   | 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 exceedingeuro 180,759.91, 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 euro 129.11.

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 ADSs. 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) a citizen or resident of the United States; (ii) adomestic corporation; (iii) an estate the income of which issubject to the United States federal income tax without regard toits source; or (iv) a trust if a court within the United Statesis able to exercise primary supervision over the administrationof the 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 ADRs, and ADRs 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 capital gain. A U.S. Holder will be subject to U.S.federal taxation, on the date of actual or constructive receiptby the U.S. Holder (in the case of Shares) or by the Depositary(in the case of ADSs) with respect to the gross amount of anydividends, including any Italian tax withheld therefrom, withoutregard to whether any portion of such tax may be refunded to theU.S. Holder by the Italian tax authorities. If you are anon-corporate U.S. Holder, dividends paid to you in taxable yearsbeginning before January 1, 2011 that constitute qualifieddividend income will be taxable to you at a maximum tax rate of15% provided that you hold the Shares or ADSs for more than 60days during the 121-day period beginning 60 days before theex-dividend date and meet other holding period requirements.Dividends we pay with respect to the shares or ADSs generallywill be qualified dividend income. The amount of the dividenddistribution that you must include in your income as a U.S.Holder will be the U.S. dollar value of the euro payments made,determined at the spot euro/U.S. dollar rate on the date thedividend distribution is includible in your income, regardless ofwhether the payment is in fact converted into U.S. dollars.Generally, any gain or loss resulting from currency exchangefluctuations during the period from the date you include thedividend payment in income to the date you convert the paymentinto U.S. dollars will be treated as ordinary income or loss andwill not be eligible for the special tax rate applicable toqualified dividend income. The gain or loss generally will beincome or loss from sources within the United States for foreigntax credit limitation purposes.

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 U.S.dollars), as the case may be, and the amount realized on the saleor exchange (or if the amount realized is denominated in aforeign currency its U.S. dollar equivalent, determined at thespot rate on the date of disposition). Generally, such gain orloss will be treated as capital gain or loss if the Shares orADSs are held as capital assets and will be a long-term capitalgain or loss if the shares or ADSs have been held for more thanone year on the date of such sale or exchange. Long-term capitalgain of a non-corporate U.S. Holder that is recognized in taxableyears beginning before January 1, 2011 is generally subject to amaximum tax rate of 15%. In addition, any such gain or lossrealized by a U.S. Holder generally will be treated as U.S.source income or loss for U.S. foreign tax credit purposes.

 

##### Table of Contents

**Item 11. QUALITATIVE AND QUANTITATIVEDISCLOSURES ABOUT MARKET RISK**

Market risk is the possibility that changes in currencyexchange rates, interest rates or oil, natural gas, petroleumproducts and electricity prices will adversely affect the valueof the group’s financial assets, liabilities or expectedfuture cash flows. Eni has developed policies aimed at managingthe market risk inherent in its activities and, in accordancewith these policies, the group enters into various transactionsusing derivative financial and commodity instruments(derivatives). Derivatives are contracts whose value is derivedfrom one or more underlying financial instruments, indices orprices that are defined in the contract. The group also tradesderivatives in conjunction with these risk management activities.Eni does not enter into derivative transactions on a speculativebasis.

All derivative activity, whether for risk management ortrading, is carried out by specialist teams that have theappropriate skills, experience and supervision. Eni’s Boardof Directors has defined a policy that requires the TreasuryDepartment of Eni SpA to determine the maximum level of foreignexchange rate and interest rate risks that can be assumed byEni’s companies responsible for treasury operations. Suchpolicy also defines the eligible counterparties in derivativetransactions. Eni’s Treasury Department is responsible formonitoring compliance with Eni’s policy and the correlationbetween the indicators adopted for both measuring the tolerablerisk level and composition of the portfolios and marketconditions.

As far as interest rate and foreign exchange rate risks areconcerned, calculation and measurement techniques followed byEni’s finance companies are in accordance with establishedbanking standards (such standards are established by the BaselCommittee). However, the tolerable level of risk adopted byEni’s subsidiaries is more conservative than the recommendedone. Eni’s guidelines for the management of commodity riskcontain maximum limits to the price risk deriving from tradingactivities.

According to International Accounting Standard No. 39"Financial instruments: recognition and measurement"(IAS 39), derivatives are classified as hedging instruments whenthe relationship between the derivative and the subject of thehedge is formally documented and the effectiveness of the hedgeis high and is checked periodically. When derivatives constitutea fair value hedge, the group’s exposure to market riskcreated by the derivative is offset by the opposite exposurearising from the asset or liability. When derivates aredesignated as a part of a cash flow hedge, changes in the fairvalue of the derivates are initially stated in net equity andthen recognized in the profit and loss account consistent witheffects economic produced by the hedged transaction. Derivativesthat do not meet the conditions required by IAS 39 qualify asderivatives held for trading purposes and are accounted for atfair value, with change in fair value recorded in the profit andloss account.

Nature and classification of derivative financial instrumentsheld by Eni as of December 31, 2005 and related fair value at thesame date are set out in the table below.

|   |   | **Years ended December 31, 2005** |
|--------|--------|-----------------------------------|
|   |   |                                   |

|   |   | **Fair value asset** |   | **Contractual or notional amounts** |   | **Fair value liability** |   | **Contractual or notional amounts** |
|--------|--------|----------------------|--------|-------------------------------------|--------|--------------------------|--------|-------------------------------------|
|   |   |                      |   |                                     |   |                          |   |                                     |

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

| **Fair value        of non-hedging derivates** |   |    |   |      |   |    |   |       |
|------------------------------------------------|--------|---------|--------|-----------|--------|---------|--------|------------|
| Exchange rate                                  |   | 73      |   | 3,681     |   | 214     |   | 8,743      |
| Interest rate                                  |   | 14      |   | 1,281     |   | 101     |   | 5,145      |
| Commodities                                    |   | 30      |   | 405       |   | 63      |   | 417        |
|                                           |   | **117** |   | **5,367** |   | **378** |   | **14,305** |
| **Fair value of cash flow-hedging derivates**  |   |    |   |      |   |    |   |       |
| Exchange rate                                  |   | 0       |   | 5         |   | 5       |   | 42         |
| Interest rate                                  |   |    |   |      |   |    |   |       |
| Commodities                                    |   | 32      |   | 171       |   |    |   |       |
|                                           |   | **32**  |   | **176**   |   | **5**   |   | **42**     |
|                                           |   |         |   |           |   |         |   |            |

> 
***Sensitivity analysis***

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.The interest rate used for periods shorter than one year isLIBOR/EURIBOR. The Company has applied the sensitivity analysisto derivative financial and commodity instruments and otherfinancial instruments that are exposed to interest rate, foreignexchange rate and commodities price risk. Actual changes inmarket prices or rates may differ from hypothetical changes.

The table below presents the potential impact on the fairvalue of the current financial instruments as of December 31,2005, of an increase or a decrease of 10% in the interest rateyield curves in each of the currencies.

| (euro        million)
**As of December 31,        2005        ———————————————————        Assets/Liabilities** | **Notional value/ Carrying amount assets** |   | **Notional value/ Carrying amount liabilities** |   | **Fair value assets** |   | **Fair value liabilities** |   | **Change in fair value with a 10% interest rate        increase** |   | **Change in fair value with a 10% interest rate        decrease** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|--------|-------------------------------------------------|--------|-----------------------|--------|----------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------------------------------------|
|                                                                                                                                                                                                         |                                            |   |                                                 |   |                       |   |                            |   |                                                                   |   |                                                                   |

| **Interest rate**                                                      |   |      |   |   |      |   |   |    |   |   |      |   |   |    |   |   |     |   |
|------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|---------|--------|--------|----------|--------|
| Financial        instruments                                           |   | 233       |   |   | 1,499     |   |   | 236     |   |   | 1,698     |   |   | 38      |   |   | (54      | )      |
| Derivative financial instruments                                       |   | 1,281     |   |   | 5,145     |   |   | 14      |   |   | 101       |   |   | 47      |   |   | (48      | )      |
| - of which             interest rate swap     |   | 1,281     |   |   | 5,145     |   |   | 14      |   |   | 101       |   |   | 47      |   |   | (48      | )      |
|                                                                   |   | **1,514** |   |   | **6,644** |   |   | **250** |   |   | **1,799** |   |   | **85**  |   |   | **(102** | **)**  |
|                                                                   |   |      |   |   |      |   |   |    |   |   |      |   |   |    |   |   |     |   |
| **Exchange rate**                                                      |   |      |   |   |      |   |   |    |   |   |      |   |   |    |   |   |     |   |
| Financial        instruments                                           |   | 197       |   |   | 120       |   |   | 235     |   |   | 120       |   |   | 13      |   |   | (12      | )      |
| Derivative financial instruments                                       |   | 3,686     |   |   | 8,785     |   |   | 73      |   |   | 218       |   |   | 164     |   |   | (202     | )      |
| - of which             interest currency swap |   | 1,277     |   |   | 2,316     |   |   | 58      |   |   | 73        |   |   | 170     |   |   | (175     | )      |
|      currency swap                            |   | 2,378     |   |   | 6,370     |   |   | 15      |   |   | 139       |   |   | (15     | )      |   | (15      | )      |
|      other                                    |   | 31        |   |   | 99        |   |   |    |   |   | 6         |   |   | 9       |   |   | (12      | )      |
|                                                                   |   | **3,883** |   |   | **8,905** |   |   | **308** |   |   | **338**   |   |   | **177** |   |   | **(214** | **)**  |

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

As of the same date, Eni’s exposure to commodity marketrisk was immaterial.

**Currency risk** Fluctuations in exchange rates can havesignificant effects on the group’s reported profit. Theeffects of most exchange rate fluctuations are absorbed inbusiness operating results through changing cost-competitiveness,changes in the price of certain products via indexation tointernational parameters quoted in U.S. dollars, lags in marketadjustment to movements in rates and conversion differencesaccounted for on specific transactions. For this reason, thetotal effect of exchange rate fluctuations is not identifiableseparately in the group’s reported profit, nor is the wholeexchange rate risk entirely covered. In addition to the euro,which the currency adopted for financial reporting purposes, themain underlying economic currency of the group’s cash flowsis the U.S. dollar. This is because Eni’s major products arepriced internationally in U.S. dollars or linked to certainproducts priced in U.S. dollars. Eni’s foreign exchangemanagement policy is to minimize economic and significanttransactional exposures arising from movements of the euroagainst the U.S. dollar. The group co-ordinates the handling offoreign exchange risks centrally, by netting off naturallyoccurring opposite exposures wherever possible to reduce therisks, and then dealing with any material residual foreignexchange risks.

**Interest rate risk** The group is exposed to interestrate risk on short- and long-term floating rate instruments andas a result of the refinancing of fixed rate finance debt.Eni’s policy foresees to incur long-term debt at a floatingrate, or at a fixed rate depending on opportunities at theissuance with regards to the level of interest rates, in euros orin U.S. dollars according to general corporate purposes (tooptimize level of liquidity, to optimize revenue from investmentsconsidering existing interest yield curves, and to minimize thecost of borrowing).

The group is exposed predominantly to Euribor (Euro InterbankOffered Rate) and U.S. dollar LIBOR (London Inter-Bank OfferRate) interest rates as borrowings are mainly denominated in euroor U.S. dollars. To manage the balance between fixed and floatingrate debt, the group enters into interest rate and cross-currencyswaps in which the group agrees to exchange, at specifiedintervals, the difference between fixed and variable rateinterest amounts calculated by reference to an agreed notionalprincipal amount. The proportion of floating rate debt atDecember 31, 2005 was 83% of total finance debt outstanding.

**Commodity risk** Eni’s results of operations areexposed to fluctuations in prices of crude oil, petroleum prices,natural gas and electricity. Changes in commodity prices areabsorbed by the Group’s business units. A decrease in oilprices generally has a negative impact on Eni’s results ofoperations and vice versa. Eni also bears commodity risks inconnection with certain trading activities. Eni’s tradingfunction uses financial and commodity derivatives as part of theassociated trading of crude oil, refined products, electricityand related instruments to manage certain of the group’sexposures to price fluctuations.

 

##### 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.

 

##### Table of Contents

**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.

 

 

##### Table of Contents

**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. A copy of this codeof ethics is included as an exhibit to this annual report.

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.

 

##### Table of Contents

**Item 16C. Principal Accountant Fees andServices**

PricewaterhouseCoopers SpA has served as Eni independentpublic auditor for fiscal year 2003 and as Eni principalindependent public auditor for fiscal years 2004 and 2005, 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,** |
|--------|--------------------------------------------|
|   |                                            |

| (thousand euro) | **2004** |   | **2005** |
|-----------------|----------|--------|----------|
|            |          |   |          |

| Audit fees         | 9,344     |   |   | 12,591     |   |
|--------------------|-----------|--------|--------|------------|--------|
| Audit-related fees | 136       |   |   | 190        |   |
| Tax fees           | 344       |   |   | 246        |   |
| All other fees     | 54        |   |   | 38         |   |
| **Total**          | **9,878** |   |   | **13,065** |   |
|               |           |   |        |

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 Board of Statutory Auditors 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 Board ofStatutory Auditors.

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 the Boardof Statutory Auditors, which also informed all Group companiesthat pre-approval by the Board is required for any other servicerequested to be performed by the external auditors, includingthose non-audit services which are permissible under applicablerules and regulations. During 2005, no audit-related fees, taxfees or other non-audit fees were approved by the Board ofStatutory Auditors pursuant to the de minimis exception to thepre-approval requirement provided by paragraph (c)(7)(i) (c) ofRule 2-01 of Regulation S-X.

 

##### Table of Contents

**Item 16D. Exemptions from the ListingStandards for Audit Committees**

Making use of the exemption provided by Rule 10A-(c)(3) fornon-U.S. private issuers, Eni has identified the Board ofStatutory Auditors as the body that, starting from June 1, 2005,is performing the functions required by the SEC rules and theSarbanes-Oxley Act to be performed by the audit committees ofnon-U.S. companies listed on the NYSE (see "Item 6 –Board of Statutory Auditors" above).

 

 

##### Table of Contents

**Item 16E. Purchases of Equity Securities bythe Issuer and Affiliated Purchasers**

The following tables present purchases of own shares by Enifrom the beginning of the program through May 31, 2006 (1):

| **Period** |   | **Number of shares (million)** |   | **Average price        (euro per share)** |   | **Total cost        (million euro)** |   | **Share capital %** |
|------------|--------|--------------------------------|--------|-------------------------------------------|--------|--------------------------------------|--------|---------------------|
|       |   |                                |   |                                           |   |                                      |   |                     |

| 2000 (Since September 1)                                                                                                                           |   | 44.38      |   |   | 12.92     |   | 574       |   | 1.11     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|-----------|--------|-----------|--------|----------|--------|
| 2001                                                                                                                                               |   | 110.00     |   |   | 13.58     |   | 1,494     |   | 2.75     |   |
| 2002                                                                                                                                               |   | 52.26      |   |   | 14.74     |   | 771       |   | 1.30     |   |
| 2003                                                                                                                                               |   | 23.95      |   |   | 13.76     |   | 329       |   | 0.60     |   |
| 2004                                                                                                                                               |   | 4.23       |   |   | 16.60     |   | 70        |   | 0.10     |   |
| 2005                                                                                                                                               |   | 47.06      |   |   | 21.97     |   | 1,034     |   | 1.18     |   |
| 2006, through May 31, 2006                                                                                                                         |   | 25.02      |   |   | 23.74     |   | 594       |   | 0.62     |   |
| **Total        purchased as of May 31, 2006**                                                                                                      |   | **306.90** |   |   | **15.85** |   | **4,866** |   | **7.66** |   |
| minus:                                                                                                                                             |   |       |   |   |      |   |      |   |     |   |
| - stock        option exercised and shares grantedpursuant to stock        option and stock grant plans for the 2003-2005 three year        period |   | (5.01      | )      |   |      |   |      |   |     |   |
|                                                                                                                                               |   | **301.89** |   |   |      |   |      |   | **7.54** |   |

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

 

|   | **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**(2) |
|--------|--------------------------------------|--------|-----------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|
|   |                                      |   |                                         |   |                                                                                              |   |                                                                                              |

| At        December 31, 2004 |   | 234,812,701 |   | 13.79 |   | 234,812,701 |   |   |   | 165,605,112 |
|-----------------------------|--------|-------------|--------|-------|--------|-------------|--------|--------|--------|-------------|
| January 2005                |   | 560,260     |   | 18.17 |   | 235,372,961 |   |   |   | 165,044,852 |
| February        2005        |   | 854,920     |   | 19.06 |   | 236,227,881 |   |   |   | 164,193,332 |
| March 2005                  |   | 1,297,742   |   | 19.92 |   | 237,525,623 |   |   |   | 162,901,290 |
| April 2005                  |   | 3,764,013   |   | 19.49 |   | 241,289,636 |   |   |   | 159,137,277 |
| May 2005                    |   | 4,030,350   |   | 19.80 |   | 245,319,986 |   |   |   | 155,307,627 |
| June 2005                   |   | 1,041,403   |   | 21.23 |   | 246,361,389 |   |   |   | 154,802,124 |
| July 2005                   |   | 57,200      |   | 21.46 |   | 246,418,589 |   |   |   | 154,812,924 |
| August        2005          |   | 494,349     |   | 23.53 |   | 246,912,938 |   |   |   | 156,116,575 |
| September 2005              |   | 33,900      |   | 24.57 |   | 246,946,838 |   |   |   | 156,496,575 |
| October        2005         |   | 20,875,450  |   | 22.37 |   | 267,822,288 |   |   |   | 135,746,725 |
| November 2005               |   | 7,974,000   |   | 22.82 |   | 275,796,288 |   |   |   | 127,864,925 |
| December        2005        |   | 6,081,000   |   | 23.62 |   | 281,877,288 |   |   |   | 121,986,025 |
| January 2006                |   | 4,539,921   |   | 24.23 |   | 286,417,209 |   |   |   | 117,874,304 |
| February        2006        |   | 2,449,000   |   | 24.17 |   | 288,866,209 |   |   |   | 115,478,004 |
| March 2006                  |   | 6,163,400   |   | 23.35 |   | 295,029,609 |   |   |   | 109,420,304 |
| April 2006                  |   | 3,629,000   |   | 24.17 |   | 298,658,609 |   |   |   | 106,045,904 |
| May 2006                    |   | 8,246,033   |   | 23.43 |   | 306,904,642 |   | (3)    |   | 98,105,871  |

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

----

| (1) |   | Since May        2000, Eni’s Ordinary Shareholders’ Meeting        authorized Eni’s Board of Directors to carry out a        program for the repurchase of its own shares within set        limits taking account also of Italian law restrictions        which relate to the obligation of the Company to purchase        its own shares paying for such shares only out of        distributable earnings and distributable reserves as        reflected in the most recent financial statements        approved by a shareholders’ meeting. In subsequent        years, Eni’s Ordinary Shareholders’ Meeting        re-authorized the Board to continue this program for the        repurchase of its own shares and increased the amount of        cash to be spent on it. The nominal value of shares so        purchased, including shares held by subsidiaries, may not        exceed 10% of such company’s share capital. Shares        purchased in excess of such 10% limit must be resold        within one year from the date of their purchase.        Identical limitations apply to purchases of shares of a        company by its subsidiaries.                                                                                                                   |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Based on the        authorized purchase ceiling, deducting the total number        of shares purchased and adding the total number of stock        options exercised by and shares granted to Eni’s        managers pursuant to stock option and stock grant plans        for the 2003-2005 three year period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3) |   | On May 25,        2006 Eni’s Ordinary Shareholders’ Meeting        authorized the continuation of the program for the        repurchase of its own shares for a further 18 month        period and up to 400 million ordinary shares, nominal        value euro 1 each, for an aggregate amount not exceeding        euro 7.4 billion. The 400 million shares and the 7.4        billion thresholds take into account the number and        amount of Eni shares purchased from the beginning of the        program until May 24, 2006. As of May 24, 2006, Eni        purchased approximately 304.94 million own shares, equal        to approximately 7.61% of Eni’s share capital, for        an aggregate amount of euro 4,820 million (corresponding        to an average purchase price of euro 15.81 per share).        The shares are to be purchased on the Telematico at a        price no lower than their nominal value and no higher        than 5% over the reference price recorded on the business        day preceding each purchase. At the same date, and taking        account shares granted to Eni’s managers pursuant to        stock option and stock grant plans, Eni held 300.13        million own shares corresponding to 7.49% of Eni’s        share capital. |

 

##### Table of Contents

**PART III**

**Item 17. FINANCIAL STATEMENTS**

Not applicable.

**Item 18. FINANCIAL STATEMENTS**

Index to Financial Statements:

 

Report of Independent RegisteredPublic Accounting Firm

Balance Sheets at December 31, 2004and 2005

Profit and loss account atDecember 31, 2004 and 2005

Statement of changes inshareholder’s equity for the years ended December 31, 2004and 2005

Statements of cash flows for theyears ended December 31, 2004 and 2005

Supplemental cash flows informationfor the years ended December 31, 2004 and 2005

Notes to the Consolidated FinancialStatements

 

##### Table of Contents

**Item 19. EXHIBITS**

1. By-laws as amended as of May 25, 2006

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 21, 2006

 

 

 

 

 

 

 

| Eni SpA                         |
|---------------------------------|
|                            |
| /s/FABRIZIO COSCO               |
|                                 |
|                            |
| Fabrizio Cosco                  |
| Title: Deputy Company Secretary |

 

----

##### Table of Contents

**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

To the Board of Directors and Shareholdersof Eni SpA

 

In our opinion, the accompanying consolidated balance sheetsand the related consolidated profit and loss account, andconsolidated statements of cash flows and of changes inshareholder's equity present fairly, in all material respects,the financial position of Eni SpA and its subsidiaries (the"Company") at December 31, 2005, and 2004, and theresults of their operations and their cash flows for each of thetwo years in the period ended December 31, 2005, in accordancewith International Financial Reporting Standards as adopted inthe European Union. 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 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 provide a reasonablebasis for our opinion.

International Financial Reporting Standard as adopted by theEuropean Union vary in certain significant respects fromaccounting principles generally accepted in the United States ofAmerica. Information relating to the nature and effect of suchdifferences is presented in Notes 33, 34 and 35 of the financialstatements.

As discussed in Notes 2, 4, 6 and 17 of the financialstatements, as a result of adopting IAS 32 and IAS 39 on January1, 2005, the Company changed its method of accounting forfinancial instruments.

**PricewaterhouseCoopers SpA**

Rome, June 21, 2006

----

 

**Effects of the adoption of IFRS**1Starting in 2005 companies with securities listedon a regulated stock market of a Member State of the EuropeanUnion are required to prepare their Consolidated FinancialStatements in accordance with the international accountingprinciples (IFRS) approved by the European Commission.

At January 1, 2004, date of the firstapplication of the new accounting principles, which correspondswith the first period to be compared, Eni must present a balancesheet which:

• reports all and only the assets andliabilities accounted under the new accounting principles;• accounts the assets and liabilities as if the newaccounting principles had always been applied (retrospectivemethod); and• reclassifies the items indicated under differentprinciples instead of IFRS.

The effect of the adjustments of the initialbalance of assets and liabilities to the new accountingprinciples has been accounted with a corresponding entry toshareholders’ equity, taking account of the relevant fiscaleffects to be recognized as deferred tax liabilities or deferredtax assets.

In application of IFRS 1, the following is theindication of: (i) balance sheet at December 31, 2004 restatedunder IFRS; (ii) profit and loss account of 2004 restated underIFRS; (iii) the reconciliation between shareholders’ equity,including minority interest, of 2003 and 2004 reported underItalian GAAP and shareholders’ equity under IFRS; (iv) thereconciliation between net profit of the Group at December 31,2004 reported under Italian GAAP and net profit under IFRS.

The international accounting principles arereported in the section "Principles of consolidation".The main options provided under IFRS 1 and adopted in the firsttime application of IFRS concern the non-reopening of thebusiness combinations and the designation of January 1, 2005, asthe date of the first application of IAS 32 and 39, concerningthe valuation of financial instruments, including derivatives.

**Inclusion of Saipem in consolidation**

As regards to the information reported in thereports of the year 2005, the following restatements andreconciliations have been modified to include the recentguidelines of the International Accounting Standards Board(IASB), relating to the conception of "de facto"control and providing the inclusion in the scope of theconsolidation of the Saipem SpA and its subsidiaries.

Saipem SpA, in which Eni held a 43.26% share ofvoting stock as of December 31, 2005, was excluded fromconsolidation due to a restrictive interpretation of theprovisions of IAS 27 Consolidated Financial Statements andAccounting for Investments in Subsidiaries, according to whichfull consolidation is admissible only if the parent company holdsthe majority of voting rights exercisable in ordinaryshareholders’ meetings, or failing this, when there existsan agreement among shareholders or other situations that give tothe parent company the power to appoint the majority of the Boardof Directors. Under this interpretation Saipem SpA, despite beingcontrolled by Eni in accordance with article 2359, paragraph 2 ofthe Italian Civil Code, was accounted for under the equitymethod.

IASB is reviewing the requirements of IAS 27;in October 2005, IASB Update published a statement indicatingthat the concept of control as defined by IAS 27 included thesituation as described by article 2359, paragraph 2 of theItalian Civil Code, despite the fact that the lack of preciseindications allows also for a different interpretation of thisstandard. IASB declared its intention to provide more detailedindications on the exercise of control in its new version of IAS27. In consideration of the intention expressed by IASB, Eniincluded Saipem SpA and its subsidiaries in consolidation underIFRS starting January 1, 2004, with the aim of giving an economicand financial state of the Group more consistent with itscommercial situation.

**Balance sheet at December 31, 2004**The following is the reconciliation to IFRS ofEni’s balance sheet calculated in accordance with ItalianGAAP at December 31, 2004:

| (million        euro) |   | **Italian GAAP        2004** |   | **Exclusion of joint venture** |   | **Pro-forma** |   | **Adjustments** |   | **IFRS** |
|-----------------------|--------|------------------------------|--------|--------------------------------|--------|---------------|--------|-----------------|--------|----------|
|                  |   |                              |   |                                |   |               |   |                 |   |          |

| **ASSETS**                                                      |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|
| **Current        assets**                                       |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| Cash and cash equivalent                                        |   |   |   |   | 1,264      |      |   | (261     | )      |   | 1,003      |   |   |      |   |   | 1,003      |   |
| Other        financial assets for trading or available for sale |   |   |   |   | 1,292      |      |   | (4       | )      |   | 1,288      |   |   | (22       | )      |   | 1,266      |   |
| Trade and other receivables                                     |   |   |   |   | 13,715     |      |   | (95      | )      |   | 13,620     |   |   | 114       |   |   | 13,734     |   |
| Inventories                                                     |   |   |   |   | 2,658      |      |   | (135     | )      |   | 2,523      |   |   | 324       |   |   | 2,847      |   |
| Income tax receivables                                          |   |   |   |   | 702        |      |   | (28      | )      |   | 674        |   |   |      |   |   | 674        |   |
| Other        current assets                                     |   |   |   |   | 629        |      |   | (1       | )      |   | 628        |   |   | (40       | )      |   | 588        |   |
| **Total current assets**                                        |   |   |   |   | **20,260** |      |   | **(524** | **)**  |   | **19,736** |   |   | **376**   |   |   | **20,112** |   |
| **Non-current        assets**                                   |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| Property, plant and equipment                                   |   |   |   |   | 37,616     |      |   | (293     | )      |   | 37,323     |   |   | 3,263     |   |   | 40,586     |   |
| Inventories        - compulsory stock                           |   |   |   |   | 662        |      |   |     |   |   | 662        |   |   | 724       |   |   | 1,386      |   |
| Intangible assets                                               |   |   |   |   | 3,190      |      |   |     |   |   | 3,190      |   |   | 123       |   |   | 3,313      |   |
| Investments        accounted for using the equity method        |   |   |   |   | 2,753      |      |   | 313      |   |   | 3,066      |   |   | 90        |   |   | 3,156      |   |
| Other investments                                               |   |   |   |   | 529        |      |   |     |   |   | 529        |   |   |      |   |   | 529        |   |
| Other        financial assets                                   |   |   |   |   | 932        |      |   | 4        |   |   | 936        |   |   |      |   |   | 936        |   |
| Deferred tax assets                                             |   |   |   |   | 2,203      |      |   |     |   |   | 2,203      |   |   | (376      | )      |   | 1,827      |   |
| Other        non-current assets                                 |   |   |   |   | 967        |      |   | (17      | )      |   | 950        |   |   | 58        |   |   | 1,008      |   |
| **Total non-current assets**                                    |   |   |   |   | **48,852** |      |   | **7**    |   |   | **48,859** |   |   | **3,882** |   |   | **52,741** |   |
| **TOTAL        ASSETS**                                         |   |   |   |   | **69,112** |      |   | **(517** | **)**  |   | **68,595** |   |   | **4,258** |   |   | **72,853** |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                   |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| **Current        liabilities**                                  |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| Current financial liabilities                                   |   |   |   |   | 4,115      |      |   | 35       |   |   | 4,150      |   |   |      |   |   | 4,150      |   |
| Current        portion of long-term debt                        |   |   |   |   | 936        |      |   | (9       | )      |   | 927        |   |   |      |   |   | 927        |   |
| Trade and other payables                                        |   |   |   |   | 11,008     |      |   | (469     | )      |   | 10,539     |   |   | (6        | )      |   | 10,533     |   |
| Taxes        payable                                            |   |   |   |   | 2,514      |      |   | (16      | )      |   | 2,498      |   |   |      |   |   | 2,498      |   |
| Other current liabilities                                       |   |   |   |   | 517        |      |   | (12      | )      |   | 505        |   |   |      |   |   | 505        |   |
| **Total        current liabilities**                            |   |   |   |   | **19,090** |      |   | **(471** | **)**  |   | **18,619** |   |   | **(6**    | **)**  |   | **18,613** |   |
| **Non-current liabilities**                                     |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| Long-term        debt                                           |   |   |   |   | 7,674      |      |   | 17       |   |   | 7,691      |   |   | (84       | )      |   | 7,607      |   |
| Provisions for contingencies                                    |   |   |   |   | 6,107      |      |   | (4       | )      |   | 6,103      |   |   | (367      | )      |   | 5,736      |   |
| Provisions        for employee benefits                         |   |   |   |   | 820        |      |   | (5       | )      |   | 815        |   |   | 167       |   |   | 982        |   |
| Deferred tax liabilities                                        |   |   |   |   | 2,533      |      |   | (59      | )      |   | 2,474      |   |   | 1,474     |   |   | 3,948      |   |
| Other        non-current liabilities                            |   |   |   |   | 422        |      |   | 5        |   |   | 427        |   |   |      |   |   | 427        |   |
| **Total non-current liabilities**                               |   |   |   |   | **17,556** |      |   | **(46**  | **)**  |   | **17,510** |   |   | **1,190** |   |   | **18,700** |   |
| **TOTAL        LIABILITIES**                                    |   |   |   |   | **36,646** |      |   | **(517** | **)**  |   | **36,129** |   |   | **1,184** |   |   | **37,313** |   |
| **SHAREHOLDERS’ EQUITY**                                   |   |   |   |   |       |      |   |     |   |   |       |   |   |      |   |   |       |   |
| Minority        interests                                       |   |   |   |   | 2,128      |      |   |     |   |   | 2,128      |   |   | 1,038     |   |   | 3,166      |   |
| Eni        shareholders’ equity                            |   |   |   |   | 30,338     |  (1) |   |     |   |   | 30,338     |   |   | 2,036     |   |   | 32,374     |   |
| **TOTAL        SHAREHOLDERS’ EQUITY**                      |   |   |   |   | **32,466** |      |   |     |   |   | **32,466** |   |   | **3,074** |   |   | **35,540** |   |
| **TOTAL LIABILITIES AND SHAREHOLDERS’        EQUITY**      |   |   |   |   | **69,112** |      |   | **(517** | **)**  |   | **68,595** |   |   | **4,258** |   |   | **72,853** |   |

|   |   |                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | Net of        treasury shares in portfolio at the date for euro 3,229        million (IFRS require that treasury shares be deducted        from shareholders’ equity). |

 

**Profit and loss account at December 31, 2004**The following is the reconciliation to IFRS ofEni’s profit and loss account for the year ended December31, 2004:

 

| (million        euro) |   | **2004** |   | **Exclusion of joint venture** |   | **Restatement of extraordinary        items** |   | **Pro-forma** |   | **Adjustments** |   | **IFRS** |
|-----------------------|--------|----------|--------|--------------------------------|--------|-----------------------------------------------|--------|---------------|--------|-----------------|--------|----------|
|                  |   |          |   |                                |   |                                               |   |               |   |                 |   |          |

| Net sales from operations                                     |   | 58,382     |   |   | (916     | )      |   |     |   |   | 57,466     |   |   | 79       |   |   | 57,545     |   |
|---------------------------------------------------------------|--------|------------|--------|--------|----------|--------|--------|----------|--------|--------|------------|--------|--------|----------|--------|--------|------------|--------|
| Other        income and revenues                              |   | 1,298      |   |   | (12      | )      |   | 79       |   |   | 1,365      |   |   | 12       |   |   | 1,377      |   |
| Purchases, services and other                                 |   | (39,092    | )      |   | 679      |   |   | (623     | )      |   | (39,036    | )      |   | 689      |   |   | (38,347    | )      |
| Payroll        and related costs                              |   | (3,264     | )      |   | 64       |   |   | (54      | )      |   | (3,254     | )      |   | 9        |   |   | (3,245     | )      |
| Depreciation, amortization and impairments                    |   | (4,861     | )      |   | 72       |   |   | (18      | )      |   | (4,807     | )      |   | (124     | )      |   | (4,931     | )      |
| **Operating        profit**                                   |   | **12,463** |   |   | **(113** | **)**  |   | **(616** | **)**  |   | **11,734** |   |   | **665**  |   |   | **12,399** |   |
| Financial expense, net                                        |   | (95        | )      |   | (6       | )      |   |     |   |   | (101       | )      |   | (55      | )      |   | (156       | )      |
| Other        income (expense) from investments                |   | 229        |   |   | 81       |   |   | 608      |   |   | 918        |   |   | (98      | )      |   | 820        |   |
| **Profit before extraordinary items and income        taxes** |   | **12,597** |   |   | **(38**  | **)**  |   | **(8**   | **)**  |   | **12,551** |   |   | **512**  |   |   | **13,063** |   |
| Extraordinary        items                                    |   | (56        | )      |   |     |   |   | 56       |   |   |       |   |   |     |   |   |       |   |
| **Profit before income taxes**                                |   | **12,541** |   |   | **(38**  | **)**  |   | **48**   |   |   | **12,551** |   |   | **512**  |   |   | **13,063** |   |
| Income        taxes                                           |   | (4,653     | )      |   | 38       |   |   | (48      | )      |   | (4,663     | )      |   | (859     | )      |   | (5,522     | )      |
| **Profit before minority interest**                           |   | **7,888**  |   |   |     |   |   |     |   |   | **7,888**  |   |   | **(347** | **)**  |   | **7,541**  |   |
| Minority        interest in net profit                        |   | (614       | )      |   |     |   |   |     |   |   | (614       | )      |   | 132      |   |   | (482       | )      |
| **Net profit**                                                |   | **7,274**  |   |   |     |   |   |     |   |   | **7,274**  |   |   | **(215** | **)**  |   | **7,059**  |   |

 

**Reconciliation of shareholders’ equity atDecember 31, 2003**The following is the reconciliation ofshareholders’ equity as at December 31, 2003, includingminority interest, determined under Italian GAAP to IFRS:

(million euro)

| **Items**(*) |   |                                                                                                                      |   |       |   |
|--------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|
|         |   | **2003 Shareholders’ equity**                                                                                        |   | **28,318** |   |
| 1.           |   | Different        useful lives of gas pipelines, compression stations,        distribution networks and other assets       |   | 1,570      |   |
| 2.           |   | Different recognition of deferred tax                                                                                     |   | 1,233      |   |
| 3.           |   | Application        of the weighted-average cost method instead of LIFO in        inventory valuation                      |   | 479        |   |
| 4.           |   | Different criteria of capitalization of        financial charges                                                          |   | 394        |   |
| 5.           |   | Different        recognition of the provisions for contingencies                                                          |   | 269        |   |
| 6.           |   | Effect of the capitalization of estimated costs        for asset retirement obligations                                   |   | 152        |   |
| 7.           |   | Underlifting                                                                                                              |   | 61         |   |
| 8.           |   | Write-off of the difference between nominal and        present value of deferred taxation in business        combinations |   | (514       | )      |
| 9.           |   | Adjustment        of tangible and intangible assets                                                                       |   | (189       | )      |
| 10.          |   | Employee benefits                                                                                                         |   | (92        | )      |
| 11.          |   | Effects on        investments accounted for under the equity method                                                       |   | (43        | )      |
|         |   | Other net adjustments                                                                                                     |   | (121       | )      |
|         |   | **Net        changes**                                                                                                    |   | **3,199**  |   |
|         |   | **Shareholders’ equity under IFRS**                                                                                  |   | **31,517** |   |

|   |   |                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
| (*)    |   | Each number        refers to the illustration provided in the next paragraph        “Description of main changes”. |

 

**Reconciliation of shareholders’ equity atDecember 31, 2004**The following is the reconciliation ofshareholders’ equity as at December 31, 2004, includingminority interest, determined under Italian GAAP to IFRS:

(million euro)

| **Items**(*) |   |   |   |   |   |
|--------------|--------|--------|--------|--------|--------|

|   |   | **2004        Shareholders’ equity**                                                                                 |   | **32,466** |   |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|
| 1.     |   | Different useful lives of gas pipelines,        compression stations, distribution networks and other        assets       |   | 1,501      |   |
| 2.     |   | Different        recognition of deferred tax                                                                              |   | 563        |   |
| 3.     |   | Application of the weighted-average cost method        instead of LIFO in inventory valuation                             |   | 677        |   |
| 4.     |   | Different        criteria of capitalization of financial charges                                                          |   | 393        |   |
| 5.     |   | Different recognition of the provisions for        contingencies                                                          |   | 295        |   |
| 6.     |   | Effect of        the capitalization of estimated costs for asset        retirement obligations                            |   | 215        |   |
| 7.     |   | Underlifting                                                                                                              |   | 87         |   |
| 8.     |   | Write-off        of the difference between nominal and present value of        deferred taxation in business combinations |   | (470       | )      |
| 9.     |   | Adjustment of tangible and intangible assets                                                                              |   | (130       | )      |
| 10.    |   | Employee        benefits                                                                                                  |   | (81        | )      |
| 11.    |   | Effects on investments accounted for under the        equity method                                                       |   | 79         |   |
| 12.2   |   | Amortization        of goodwill                                                                                           |   | 102        |   |
|   |   | Other net adjustments                                                                                                     |   | (157       | )      |
|   |   | **Net        changes**                                                                                                    |   | **3,074**  |   |
|   |   | **Shareholders’ equity under IFRS**                                                                                  |   | **35,540** |   |

|   |   |                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
| (*)    |   | Each number        refers to the illustration provided in the next paragraph        “Description of main changes”. |

 

**Reconciliation of consolidated net profit at December31, 2004**The following is the reconciliation of net profitfor the year ended December 31, 2004 from Italian GAAP to IFRS:

 

(million euro)

| **Items**(*) |   |   |   |   |   |
|--------------|--------|--------|--------|--------|--------|

|   |   | **2004 consolidated net profit under        Italian GAAP**                                                                |   | **7,274** |   |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|
| 1.     |   | Different        useful lives of gas pipelines, compression stations,        distribution networks and other assets       |   | (70       | )      |
| 2.     |   | Different recognition of deferred tax                                                                                     |   | (671      | )      |
| 3.     |   | Application        of the weighted-average cost method instead of LIFO in        inventory valuation                      |   | 199       |   |
| 4.     |   | Different criteria of capitalization of        financial charges                                                          |   | (3        | )      |
| 5.     |   | Different        recognition of the provisions for contingencies                                                          |   | 31        |   |
| 6.     |   | Effect of the capitalization of estimated costs        for asset retirement obligations                                   |   | 63        |   |
| 7.     |   | Underlifting                                                                                                              |   | 33        |   |
| 8.     |   | Write-off of the difference between nominal and        present value of deferred taxation in business        combinations |   | 38        |   |
| 9.     |   | Adjustment        of tangible and intangible assets                                                                       |   | 39        |   |
| 10.    |   | Employee benefits                                                                                                         |   | 8         |   |
| 11.    |   | Effects on        investments accounted for under the equity method                                                       |   | 126       |   |
| 12.    |   | Other changes in 2004 results under IFRS                                                                                  |   | (109      | )      |
| *12.1* |   | *Adjustment        on gain from sale of a 9.054% interest in Snam Rete Gas*                                               |   | *(211*    | *)*    |
| *12.2* |   | *Amortization of goodwill*                                                                                                |   | *102*     |   |
|   |   | Other net        adjustments                                                                                              |   | (31       | )      |
|   |   | Effect of IFRS adjustment on minority interest (1)                                                                        |   | 132       |   |
|   |   | **Net        changes**                                                                                                    |   | **(215**  | **)**  |
|   |   | **Shareholders’        equity under IFRS**                                                                           |   | **7,059** |   |

|   |   |                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
| (*)    |   | Each number        refers to the illustration provided in the next paragraph        “Description of main changes”. |
| (1)    |   | This adjustment derives        from the attribution of their share of IFRS adjustments        to minority interest.          |

**Description of main changes**

The following is a description of the mainchanges introduced in the balance sheet of Eni for 2003, whoseeffects are reflected in the profit and loss account and balancesheet for the 2004 and in the balance sheet at December 31, 2004.

**1. Different useful lives of gas pipelines,compression stations, distribution networks and other assets**

This change concerns essentially the naturalgas transport pipelines, compression stations and distributionnetworks that until 1999 were depreciated in accordance withItalian practice applying rates established by tax authorities(10%, 10% and 8%, respectively) both in statutory andConsolidated Financial Statements. In Consolidated FinancialStatements prepared in accordance with U.S. GAAP, these assetswere depreciated at a 4% rate, based on the internationalestimate of a 25-year long useful life.

The useful life of gas pipelines, compressionstations and distribution networks was changed in 2000 followinga determination 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 amortizationprovisions 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 adoptionof the retrospective method implies the adoption of the newprinciples as if they had always been applied using the bestinformation available at each time frame. Therefore, the bookvalue of gas pipelines, compression stations and distributionnetworks, at January 1, 2004 was restated by using until 1999 theinternationally accepted rate of 25 years; from 2000 onwards theresidual value was depreciated according to the useful livesestimated by the Authority for Electricity and Gas.

Consistent with this approach, the book valueof tanker ships at January 1, 2004 was restated due to therevision of their useful life using until 2001 theinternationally accepted rate of 20 years; from 2002 onwardstheir residual value was depreciated according to an estimateduseful life of 30 years defined after their conferral from SnamSpA to LNG Shipping SpA.

Under Italian GAAP the book value of complexassets is divided according to various tax categories on thebasis of the depreciation rate tables contained in a Decree ofthe Ministry of Economy and Finance. Under IFRS the components ofa complex asset that have different useful lives are recordedseparately in order to be depreciated according to their usefullife; land parcels, which cannot be depreciated, are recordedseparately even when they are bought along with buildings.

The restatement determined an increase in fixedassets of euro 2,563 million with a corresponding entry toshareholders’ equity (euro 1,570 million) and to deferredtax liabilities (euro 993 million).

The adoption of IFRS resulted in a decrease in2004 results of euro 70 million.

**2. Different recognition of deferred tax**

Changes in shareholders’ equity of euro1.233 were determined in particular by the following causes.

*2.1 Recognition of deferred tax assets onthe revaluation of assets (Law 342/2000)*

Under Italian GAAP deferred tax assets arerecorded if recoverable with "reasonable certainty".

Under IFRS deferred tax assets are recorded iftheir recovery is more likely than not.

In 2000 Snam SpA, now merged into Eni SpA,revalued its assets as permitted by Law 342/2000 aligning theirbook value to their fair value. On this revaluation ofdepreciable assets Eni paid a special rate tax (19% instead ofthe statutory 34% rate), thus recording a deferred tax asset.Eni’s transport assets were conferred in 2001 to Snam ReteGas SpA. The revaluation carried out had no impact on Eni’sConsolidated Financial Statements; but a temporary differencearose between the taxable value and the book value which led, inaccordance with Italian GAAP, to the recognition of a provisionfor deferred tax assets that amounted to euro 629 million atDecember 31, 2003, corresponding to 19%2 of depreciationestimated in the 2004-2007 plan on the deductible timingdifference.

Under IFRS, deferred taxes has been recognizedon the entire timing difference at the current statutory tax rate(37.25%).

The application of this principle resulted inan increase in deferred tax assets of euro 828 million with acorresponding entry to shareholders’ equity.

The adoption of IFRS resulted in a decrease in2004 results of euro 266 million, following the"reversal" of taxes related to accelerateddepreciations3.

*2.2 Recognition of deferred tax assets onStogit’s inventories*

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. A portion of the timing difference concernsthe inventories of natural gas; however, in Eni’s 2003Consolidated Financial Statements the deferred tax asset relatedto the timing difference on natural gas inventories was notrecognized on the assumption that its recoverability was notreasonably certain at the end of the concession, if not renewed.

The application of IFRS resulted in therecognition of deferred tax assets of euro 259 million, with acorresponding entry to shareholder’s equity.

In Eni’s 2004 Consolidated FinancialStatements the deferred tax assets were recognized on thetemporary difference related to inventories because Law 239/2001(so called Marzano Law) permitted to set the year of recovery4;such effect resulted on equivalent decrease in the 2004 result.

*2.3 Other effects of the differentrecognition of deferred tax assets*

The application of the "more likely thannot" criterion rather than that of the "reasonablecertainty" of recoverability of other deductible temporarydifferences resulted in the recognition of deferred tax assets ofeuro 146 million with a corresponding entry to shareholders’equity. Such deferred taxes were recognized in Eni’s 2004Consolidated Financial Statements following the fulfillment ofthe conditions for their recognition; such effect resulted in anequivalent decrease in the 2004 result.

**3. Application of the weighted-average costmethod instead of LIFO**

Under Italian GAAP the cost of inventories maybe determined with the weighted-average cost method or with theFIFO or LIFO methods. Until January 1, 2004 Eni applied the LIFOmethod, in its evaluation of crude oil, natural gas and oilproducts inventories applied on an annual basis.

IFRS do not allow the use of the LIFO method;they allow the FIFO method and the weighted-average cost.

The application of the weighted-average cost ona three-month basis in the evaluation of crude oil, natural gasand refined products inventories resulted in an increase in thevalue of inventories of euro 764 million5 with acorresponding entry to shareholders’ equity (euro 479million) and to deferred tax liabilities (euro 285 million).

With the application of the LIFO method,changes in oil and refined products prices had no impact on theevaluation of inventories, which was affected only by declines involumes. With the adoption of the weighted-average cost, changesin oil and refined products prices have a direct effect on 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.

The adoption of IFRS resulted an increase inthe 2004 results of euro 199 million, due to higher oil and gasprices.

**4. Different criteria of capitalization offinancial charges**

Under Italian GAAP financial charges arecapitalized when incurred within the amount not financed byinternally-generated funds or contribution by third parties.

Under IFRS, when a relevant time interval isnecessary until the capital asset is ready for use, financecharges can be capitalized as an increase of the asset book valuefor the amount of financial charges that could have been saved ifcapital expenditures had not been made.

The application of this principle resulted inan increase in the book value of fixed assets of euro 615 millionwith a corresponding entry to shareholders’ equity (euro 394million) and to deferred tax liabilities (euro 221 million).

The adoption of IFRS resulted in a decrease in2004 results of euro 3 million (the effect of higher amortizationwas partially offset by the increase of financial chargescapitalized).

**5. Different recognition of the provisions forcontingencies**

Under Italian GAAP the provisions forcontingencies concern costs and charges of a determined nature,whose existence is certain or probable, but whose amounts oroccurrence are not determinable at the period end. The provisionsfor contingencies are stated on an undiscounted basis.

Under IFRS a provision is made only if there isa current obligation considered "probable" as aconsequence of events occurred before period end deriving fromlegal or contractual obligations or from behaviors orannouncements of the company that determine valid expectations inthird parties (implicit obligations), provided that the amount ofthe liability can be reasonably determined. When the financialeffect of time is significant and the date of the expense toclear the relevant obligation can be reasonably determined, theestimated cost is discounted on the basis of the risk-free rateof interest and adjusted for the Company’s credit cost.

As for the provision for redundancy incentives,IFRS require the preparation of a detailed formalizedrestructuring plan, indicating at least the activities,locations, categories and approximate number of employeesaffected by the restructuring. The plan must have commenced or beproperly communicated to the parties involved before period end,generating the expectation that the company will carry out theplan.

As for provision for catastrophic risks, PadanaAssicurazioni SpA, in application of rules imposed by theMinister of Industry on June 15, 1984, makes integrativeprovisions for the risk of earthquakes, seaquakes, volcaniceruptions and similar events. These integrative provisions arenot allowed by IFRS in absence of a current obligation.

No provision is made for periodic maintenanceunder IFRS. These costs are capitalized when incurred as aseparate component of the asset and are depreciated according totheir useful lives, as they do not represent a currentobligation.

As a consequence of the absence of a currentobligation, the application of this principle resulted in areversal of the provisions for contingencies of euro 327 millionwith a corresponding entry to shareholders’ equity (euro 269million), to deferred tax liabilities (euro 36 million) and to adecrease in other assets (euro 22 million) referred to theportion of re-insured risks.

The adoption of IFRS resulted in an increase in2004 results of euro 31 million.

**6. Effect of the capitalization of costs forasset retirement obligations**

Under Italian GAAP, site restoration andabandonment costs are allocated annually in a specific provisionso that the ratio of the allocations made and the amount ofestimated costs equals the percentage of depreciation of therelevant asset. In particular in the Exploration & Productionsegment, the costs estimated to be incurred at the end ofproduction activities for the site abandonment and restorationare accrued so that the ratio of the provision and the amount ofestimated costs correspond to the ratio of cumulative productionat period end and proved developed reserves at period end pluscumulative production.

Under IFRS, estimated site restoration andabandonment costs are recorded in a specific provision with acorresponding entry to the relevant asset; when the financialeffect of time is relevant, the estimated cost is recordedconsidering the present value of the costs to be incurredcalculated using a rate representative of the Company’scredit cost. The cost assigned to the different relevantcomponents of the asset is recognized in the profit and lossaccount through the amortization process. The provision, andconsequently the assets’ book value, is periodicallyadjusted to reflect the changes in the estimates of the costs, ofthe timing and of the discount rate.

The application of this principle resulted inan increase in fixed assets of euro 254 million, inshareholders’ equity of euro 152 million and in deferred taxliabilities of euro 158 million, and a decrease in the provisionsfor site abandonment and restoration of euro 56 million.

The adoption of IFRS resulted in an increase in2004 results of euro 63 million.

**7. Underlifting**

In the Exploration & Production segmentjoint venture agreements regulate, among other things, the rightof each partner to withdraw its own share of production volumesavailable in the period.

Higher production volumes withdrawn as comparedto net working interest volume determine the recognition of acredit by a partner who has withdrawn lower production volumes ascompared to its net working interest volume.

Under Italian GAAP, this credit is evaluated onthe basis of production costs; under IFRS it is evaluated atcurrent prices at period end.

The application of this principle resulted inan increase in other assets of euro 78 million with acorresponding entry to shareholders’ equity (euro 61million) and to deferred tax liabilities (euro 17 million).

The adoption of IFRS resulted in an increase in2004 results of euro 33 million.

**8. Write-off of the difference betweennominal and present value of deferred taxation in businesscombinations**

Under Italian GAAP the difference between thepresent value of deferred taxes included in the determination ofthe fair value of net assets acquired as part of a businesscombination and related deferred tax liabilities recognized atnominal value ("difference") is recognized under theitem accrued assets.

Under IFRS this difference is recognized under"Goodwill"; however, in the event of the firstapplication goodwill can be adjusted only in case of specificcircumstances that do not occur in this case. This difference istherefore written off because it cannot be considered an assetunder IFRS.

The application of this principle resulted in adecrease in shareholders’ equity of euro 514 million with acorresponding entry to deferred tax assets.

The adoption of IFRS resulted in an increase in2004 results of euro 38 million.

**9. Adjustment of tangible and intangibleassets**

The decrease in shareholders’ equity ofeuro 189 million related in particular to the following aspects.

*9.1 Intangible assets*

Under Italian GAAP costs for extraordinarycompany transactions, costs for the start-up or expansion ofproduction activities and costs for the establishment of acompany or for issuance of capital stock can be capitalized.

IFRS require these costs to be charged againstthe profit and loss account, except for establishment andissuance of capital stock of the parent company that arerecognized as a decrease in shareholders’ equity net of therelevant fiscal effect.

Under Italian GAAP costs for softwaredevelopment can be capitalized under certain circumstances. IFRSpose more stringent conditions for their capitalization.

The application of these principles resulted inthe write-off of intangible assets for euro 114 million with acorresponding entry to a decrease in shareholders’ equity(euro 81 million) and the recognition of deferred tax assets(euro 33 million).

The adoption of IFRS resulted in an increase in2004 results of euro 33 million.

*9.2 Revaluation of assets*

Under Italian GAAP revaluation of tangibleassets is allowed under specific law provisions within the limitof their recovery value.

IFRS prohibit this kind of tangible assetrevaluation.

The application of this principle resulted in adecrease in tangible assets of euro 75 million with acorresponding entry to a decrease in shareholders’ equity(euro 54 million) and the recognition of deferred tax assets(euro 21 million). The decrease in fixed assets takes intoaccount the restatement of gains/losses on disposal on the basisof the historical cost and the recalculation of amortizationuntil December 31, 2003.

The adoption of IFRS resulted in an increase in2004 results of euro 5 million.

*9.3 Pre-development costs*

Under Italian GAAP costs related to preliminarystudies, researches and surveys aimed at testing differentoptions for development of hydrocarbon fields are recognizedunder tangible assets.

Under IFRS these costs are consideredexploration costs and are expensed when incurred.

The application of this principle resulted inthe write-off of capitalized pre-development costs for euro 71million with a corresponding entry to a decrease inshareholders’ equity (euro 54 million) and the recognitionof deferred tax liabilities (euro 17 million).

The adoption of IFRS resulted in an increase in2004 of euro 1 million.

**10. Employee benefits**

Under Italian GAAP employee terminationbenefits are accrued during the period of employment ofemployees, in accordance with the law and applicable collectivelabor contracts.

Under IFRS employee termination benefits (e.g.pension payments, life insurance payments, medical assistanceafter retirement, etc.) are defined on the basis of postemployment benefit plans that due to their mechanisms featuredefined contributions plans or defined benefit plans. In thefirst case, the company’s obligation consists in makingpayments to the state or to a trust or a fund.

Plans with defined benefits are pension,insurance or healthcare plans which provide for thecompany’s obligation, also in the form of implicitobligation (see the above mentioned item 5), to provide nonformalized benefits to its former employees6. The relateddiscounted charges, determined with actuarial assumptions7,are accrued annually on the basis of the employment periodsrequired for the granting of such benefits.

The application of this principle resulted in adecrease in shareholders’ equity of euro 92 million, therecognition of deferred tax assets (euro 54 million) with acorresponding entry to an increase in the provisions forcontingencies of euro 146 million, referred in particular tocharges for medical assistance granted upon termination and topension plans outside Italy.

The adoption of IFRS resulted in an increase in2004 of euro 8 million.

**11. Effects on investments accounted forunder the equity method**

Joint ventures and affiliates are accounted forunder the equity method. The application of IFRS to the initialbalance at January 1, 2004 of assets and liabilities of thesecompanies resulted in a decrease in investments of euro 43million with a corresponding entry to shareholders’ equity.

The adoption of IFRS resulted in an increase in2004 of euro 126 million, essentially related to the eliminationof the amortization of goodwill (see Note 12.2 below).

**12. Other changes in 2004 result under IFRS**

The decrease in 2004 results of euro 109million related in particular to the following.

*12.1 Adjustment on gain from sale of a9.054% interest in Snam 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 SpA carried out in 2004 increased by euro 2,335 millionrelated essentially to an increase in the book value of naturalgas pipelines (see item 1) and deferred tax assets (see item2.1).

The adoption of IFRS resulted in a decrease in2004 results of euro 211 million.

*12.2 Amortization of goodwill*

Under Italian GAAP goodwill is amortized on astraight-line basis in the periods of its expected utilization,provided it is no longer than five years; in case of specificconditions related to the kind of company the goodwill relatesto, goodwill can be amortized for a longer period not exceeding20 years.

Under IFRS goodwill cannot be amortized, but itis subject to a yearly evaluation in order to define the relevantimpairment, if needed.

The adoption of IFRS resulted in an increase in2004 of euro 102 million.

##### Table of Contents

**Balance sheet**

| (million euro) |   | **Note** |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|----------|--------|-------------------|--------|-------------------|
|           |   |          |   |                   |   |                   |

| **ASSETS**                                                                                                                         |   |   |   |   |       |   |   |       |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| **Current assets**                                                                                                                 |   |   |   |   |       |   |   |       |   |
| Cash and        cash equivalent                                                                                                    |   | 1      |   |   | 1,003      |   |   | 1,333      |   |
| Other financial assets for trading or available        for sale                                                                    |   | 2      |   |   | 1,266      |   |   | 1,368      |   |
| Trade and        other receivables                                                                                                 |   | 3      |   |   | 13,734     |   |   | 17,902     |   |
| Inventories                                                                                                                        |   | 4      |   |   | 2,847      |   |   | 3,563      |   |
| Income tax        receivables                                                                                                      |   | 5      |   |   | 674        |   |   | 697        |   |
| Other current assets                                                                                                               |   | 6      |   |   | 588        |   |   | 369        |   |
| **Total        current assets**                                                                                                    |   |   |   |   | **20,112** |   |   | **25,232** |   |
| **Non-current assets**                                                                                                             |   |   |   |   |       |   |   |       |   |
| Property,        plant and equipment                                                                                               |   | 7      |   |   | 40,586     |   |   | 45,013     |   |
| Inventories - compulsory stock                                                                                                     |   | 8      |   |   | 1,386      |   |   | 2,194      |   |
| Intangible        assets                                                                                                           |   | 9      |   |   | 3,313      |   |   | 3,194      |   |
| Investments accounted for using the equity        method                                                                           |   | 10     |   |   | 3,156      |   |   | 3,890      |   |
| Other        investments                                                                                                           |   | 10     |   |   | 529        |   |   | 421        |   |
| Other financial assets                                                                                                             |   | 11     |   |   | 936        |   |   | 1,050      |   |
| Deferred        tax assets                                                                                                         |   | 12     |   |   | 1,827      |   |   | 1,861      |   |
| Other non-current assets                                                                                                           |   | 13     |   |   | 1,008      |   |   | 995        |   |
| **Total        non-current assets**                                                                                                |   |   |   |   | **52,741** |   |   | **58,618** |   |
| **TOTAL ASSETS**                                                                                                                   |   |   |   |   | **72,853** |   |   | **83,850** |   |
| **LIABILITIES        AND SHAREHOLDERS’ EQUITY**                                                                               |   |   |   |   |       |   |   |       |   |
| **Current liabilities**                                                                                                            |   |   |   |   |       |   |   |       |   |
| Current        financial liabilities                                                                                               |   | 14     |   |   | 4,150      |   |   | 4,612      |   |
| Current portion of long-term debt                                                                                                  |   | 18     |   |   | 927        |   |   | 733        |   |
| Trade and        other payables                                                                                                    |   | 15     |   |   | 10,533     |   |   | 13,095     |   |
| Taxes payable                                                                                                                      |   | 16     |   |   | 2,498      |   |   | 3,430      |   |
| Other        current liabilities                                                                                                   |   | 17     |   |   | 505        |   |   | 613        |   |
| **Total current liabilities**                                                                                                      |   |   |   |   | **18,613** |   |   | **22,483** |   |
| **Non-current        liabilities**                                                                                                 |   |   |   |   |       |   |   |       |   |
| Long-term debt                                                                                                                     |   | 18     |   |   | 7,607      |   |   | 7,653      |   |
| Provisions        for contingencies                                                                                                |   | 19     |   |   | 5,736      |   |   | 7,679      |   |
| Provisions for employee benefits                                                                                                   |   | 20     |   |   | 982        |   |   | 1,031      |   |
| Deferred        tax liabilities                                                                                                    |   | 21     |   |   | 3,948      |   |   | 4,890      |   |
| Other non-current liabilities                                                                                                      |   | 22     |   |   | 427        |   |   | 897        |   |
| **Total        non-current liabilities**                                                                                           |   |   |   |   | **18,700** |   |   | **22,150** |   |
| **TOTAL LIABILITIES**                                                                                                              |   |   |   |   | **37,313** |   |   | **44,633** |   |
| **SHAREHOLDERS’        EQUITY**                                                                                               |   | 23     |   |   |       |   |   |       |   |
| **Minority interests**                                                                                                             |   |   |   |   | **3,166**  |   |   | **2,349**  |   |
| **Eni        shareholders’ equity:**                                                                                          |   |   |   |   |       |   |   |       |   |
| Share capital: 4,005,358,876 fully paid shares        nominal value euro 1 each (4,004,424,476 shares at        December 31, 2004) |   |   |   |   | 4,004      |   |   | 4,005      |   |
| Share        premium                                                                                                               |   |   |   |   |       |   |   |       |   |
| Other reserves                                                                                                                     |   |   |   |   | 9,629      |   |   | 10,910     |   |
| Retained        earnings                                                                                                           |   |   |   |   | 14,911     |   |   | 17,381     |   |
| Net profit                                                                                                                         |   |   |   |   | 7,059      |   |   | 8,788      |   |
| Treasury        shares                                                                                                             |   |   |   |   | (3,229     | )      |   | (4,216     | )      |
| **Total Eni shareholders’ equity**                                                                                            |   |   |   |   | **32,374** |   |   | **36,868** |   |
| **TOTAL        SHAREHOLDERS’ EQUITY**                                                                                         |   |   |   |   | **35,540** |   |   | **39,217** |   |
| **TOTAL LIABILITIES AND SHAREHOLDERS’        EQUITY**                                                                         |   |   |   |   | **72,853** |   |   | **83,850** |   |

##### Table of Contents

**Profit and loss account**

| (million euro) |   | **Note** |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|--------|----------|
|           |   |          |   |          |   |          |

| **REVENUES**                                                        |   | 25     |   |   |       |   |   |       |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| Net sales        from operations                                    |   |   |   |   | 57,545     |   |   | 73,728     |   |
| Other income and revenues                                           |   |   |   |   | 1,377      |   |   | 798        |   |
| **TOTAL        REVENUES**                                           |   |   |   |   | **58,922** |   |   | **74,526** |   |
| **Operating expenses**                                              |   | 26     |   |   |       |   |   |       |   |
| Purchases,        services and other                                |   |   |   |   | 38,347     |   |   | 48,567     |   |
| Payroll and related costs                                           |   |   |   |   | 3,245      |   |   | 3,351      |   |
| Depreciation,        amortization and impairments                   |   |   |   |   | 4,931      |   |   | 5,781      |   |
| **Operating profit**                                                |   |   |   |   | **12,399** |   |   | **16,827** |   |
| **Financial        income (expense)**                               |   | 27     |   |   |       |   |   |       |   |
| Financial income                                                    |   |   |   |   | 2,589      |   |   | 3,131      |   |
| Financial        expense                                            |   |   |   |   | (2,745     | )      |   | (3,497     | )      |
|                                                                |   |   |   |   | **(156**   | **)**  |   | **(366**   | **)**  |
| **Income        (expense) from investments**                        |   | 28     |   |   |       |   |   |       |   |
| Effects of investments accounted for using the        equity method |   |   |   |   | 332        |   |   | 737        |   |
| Other        income (expense) from investments                      |   |   |   |   | 488        |   |   | 177        |   |
|                                                                |   |   |   |   | **820**    |   |   | **914**    |   |
| **Profit        before income taxes**                               |   |   |   |   | **13,063** |   |   | **17,375** |   |
| **Income taxes**                                                    |   | 29     |   |   | **(5,522** | **)**  |   | **(8,128** | **)**  |
| **Net        profit**                                               |   |   |   |   | **7,541**  |   |   | **9,247**  |   |
| Pertaining to:                                                      |   |   |   |   |       |   |   |       |   |
| - Eni                                                               |   |   |   |   | 7,059      |   |   | 8,788      |   |
| - minority interest                                                 |   |   |   |   | 482        |   |   | 459        |   |
|                                                                |   |   |   |   | **7,541**  |   |   | **9,247**  |   |
| **Earnings per share pertaining to Eni**(euro        per share)     |   | 30     |   |   |       |   |   |       |   |
| - basic                                                             |   |   |   |   | 1.87       |   |   | 2.34       |   |
| - diluted                                                           |   |   |   |   | 1.87       |   |   | 2.34       |   |

##### Table of Contents

**Statement of changes inshareholders’ equity**

|   | **Eni shareholders’ equity** |   |
|--------|-----------------------------------|--------|
|   |                                   |   |

| (million        euro) |   | Share capital |   | Legal reserve of Eni SpA |   | Reserve for treasury shares |   | Other reserves |   | Cumulative translation adjustment reserve |   | Treasury shares |   | Retained earnings |   | Interim dividend |   | Net profit for the period |   | Total |   | Minority interests |   | Total shareholders’ equity |
|-----------------------|--------|---------------|--------|--------------------------|--------|-----------------------------|--------|----------------|--------|-------------------------------------------|--------|-----------------|--------|-------------------|--------|------------------|--------|---------------------------|--------|-------|--------|--------------------|--------|---------------------------------|
|                  |   |               |   |                          |   |                             |   |                |   |                                           |   |                 |   |                   |   |                  |   |                           |   |       |   |                    |   |                                 |

| **Balance at December 31, 2003**                                                                                      |   | **4,003** |   |   | **959** |   |   | **5,397** |   |   | **3,200** |   |   | **(2,505** | **)**  |   | **(3,164** | **)**  |   | **13,221** |   |   |   |   |   | **5,585**  |   |   | **26,696** |   |   | **1,622** |   |   | **28,318** |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|
|                                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Changes in accounting principles                                                                                      |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   | 2,234      |   |   |   |   |   |       |   |   | 2,234      |   |   | 965       |   |   | 3,199      |   |
| Annulment        of exchanges differences                                                                             |   |      |   |   |    |   |   |      |   |   |      |   |   | 2,505      |   |   |       |   |   | (2,505     | )      |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| **Adjusted balance at January 1, 2004**                                                                               |   | **4,003** |   |   | **959** |   |   | **5,397** |   |   | **3,200** |   |   |       |   |   | **(3,164** | **)**  |   | **12,950** |   |   |   |   |   | **5,585**  |   |   | **28,930** |   |   | **2,587** |   |   | **31,517** |   |
| **Net        profit for the year**                                                                                    |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   | **7,059**  |   |   | **7,059**  |   |   | **482**   |   |   | **7,541**  |   |
| **Net income (expense) recognized directly in        equity**                                                         |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Exchange        differences from translation of financial statements        denominated in currencies other than euro |   |      |   |   |    |   |   |      |   |   |      |   |   | (750       | )      |   |       |   |   |       |   |   |   |   |   |       |   |   | (750       | )      |   | 1         |   |   | (749       | )      |
|                                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   | **(750**   | **)**  |   |       |   |   |       |   |   |   |   |   |       |   |   | **(750**   | **)**  |   | **1**     |   |   | **(749**   | **)**  |
| **Total        (expense) income for the period**                                                                      |   |      |   |   |    |   |   |      |   |   |      |   |   | **(750**   | **)**  |   |       |   |   |       |   |   |   |   |   | **7,059**  |   |   | **6,309**  |   |   | **483**   |   |   | **6,792**  |   |
| **Transactions with shareholders**                                                                                    |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Dividend        distribution of Eni SpA (euro 0.75 per share)                                                         |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   | (2,828     | )      |   | (2,828     | )      |   |      |   |   | (2,828     | )      |
| Dividend distribution of other companies                                                                              |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   | (248      | )      |   | (248       | )      |
| Allocation        of 2003 net profit                                                                                  |   |      |   |   |    |   |   |      |   |   | 22        |   |   |       |   |   |       |   |   | 2,735      |   |   |   |   |   | (2,757     | )      |   |       |   |   |      |   |   |       |   |
| Shares repurchased (Note 23)                                                                                          |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   | (70        | )      |   |       |   |   |   |   |   |       |   |   | (70        | )      |   |      |   |   | (70        | )      |
| Shares        issued under stock grant plans                                                                          |   | 1         |   |   |    |   |   |      |   |   | (1        | )      |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Treasury shares sold under incentive plans for        Eni managers                                                    |   |      |   |   |    |   |   | (5        | )      |   | 5         |   |   |       |   |   | 5          |   |   |       |   |   |   |   |   |       |   |   | 5          |   |   |      |   |   | 5          |   |
|                                                                                                                  |   | **1**     |   |   |    |   |   | **(5**    | **)**  |   | **26**    |   |   |       |   |   | **(65**    | **)**  |   | **2,735**  |   |   |   |   |   | **(5,585** | **)**  |   | **(2,893** | **)**  |   | **(248**  | **)**  |   | **(3,141** | **)**  |
| **Other changes in shareholders’ equity**                                                                        |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Cost of        stock option                                                                                           |   |      |   |   |    |   |   |      |   |   | 3         |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   | 3          |   |   |      |   |   | 3          |   |
| Former Italgas SpA reserves reconstituted                                                                             |   |      |   |   |    |   |   |      |   |   | (43       | )      |   |       |   |   |       |   |   | 43         |   |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Reserves        from merger of EniData SpA                                                                            |   |      |   |   |    |   |   |      |   |   | 4         |   |   |       |   |   |       |   |   | (4         | )      |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Reclassification                                                                                                      |   |      |   |   |    |   |   |      |   |   | 775       |   |   |       |   |   |       |   |   | (775       | )      |   |   |   |   |       |   |   |       |   |   |      |   |   |       |   |
| Sale of        9.054% of Snam Rete Gas SpA share capital                                                              |   |      |   |   |    |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |   |   |   |       |   |   | 326        |   |   | 326       |   |   |       |   |
| Exchange differences arising on the distribution        of dividends and other changes                                |   |      |   |   |    |   |   |      |   |   |      |   |   | 63         |   |   |       |   |   | (38        | )      |   |   |   |   |       |   |   | 25         |   |   | 18        |   |   | 43         |   |
|                                                                                                                  |   |      |   |   |    |   |   |      |   |   | **739**   |   |   | **63**     |   |   |       |   |   | **(774**   | **)**  |   |   |   |   |       |   |   | **28**     |   |   | **344**   |   |   | **372**    |   |
| **Balance at December 31, 2004**(Note 23)                                                                             |   | **4,004** |   |   | **959** |   |   | **5,392** |   |   | **3,965** |   |   | **(687**   | **)**  |   | **(3,229** | **)**  |   | **14,911** |   |   |   |   |   | **7,059**  |   |   | **32,374** |   |   | **3,166** |   |   | **35,540** |   |

|                                                                                                                  |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Changes in        accounting principles (IAS 32 and 39) (Notes 2-4-6-17)                                              |   |      |   |   |    |   |   |      |   |   | 13        |   |   |      |   |   |       |   |   | (40        | )      |   |       |   |   |       |   |   | (27        | )      |   | 12         |   |   | (15        | )      |
| **Adjusted balance at January 1, 2005**                                                                               |   | **4,004** |   |   | **959** |   |   | **5,392** |   |   | **3,978** |   |   | **(687**  | **)**  |   | **(3,229** | **)**  |   | **14,871** |   |   |       |   |   | **7,059**  |   |   | **32,347** |   |   | **3,178**  |   |   | **35,525** |   |
| **Net        profit for the year**                                                                                    |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   | **8,788**  |   |   | **8,788**  |   |   | **459**    |   |   | **9,247**  |   |
| **Net income (expense) recognized directly in        equity**                                                         |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |
| Variation        of the fair value of financial assets for trading (Note        2)                                    |   |      |   |   |    |   |   |      |   |   | 6         |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   | 6          |   |   |       |   |   | 6          |   |
| Variation of the fair value of cash flow hedge        derivative contracts (Notes 6-17)                               |   |      |   |   |    |   |   |      |   |   | 16        |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   | 16         |   |   |       |   |   | 16         |   |
| Exchange        differences from translation of financial statements        denominated in currencies other than euro |   |      |   |   |    |   |   |      |   |   |      |   |   | 1,497     |   |   |       |   |   |       |   |   |       |   |   |       |   |   | 1,497      |   |   | 15         |   |   | 1,512      |   |
|                                                                                                                  |   |      |   |   |    |   |   |      |   |   | **22**    |   |   | **1,497** |   |   |       |   |   |       |   |   |       |   |   |       |   |   | **1,519**  |   |   | **15**     |   |   | **1,534**  |   |
| **Total        (expense) income for the period**                                                                      |   |      |   |   |    |   |   |      |   |   | **22**    |   |   | **1,497** |   |   |       |   |   |       |   |   |       |   |   | **8,788**  |   |   | **10,307** |   |   | **474**    |   |   | **10,781** |   |
| **Transactions with shareholders**                                                                                    |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |
| Dividend        distribution of Eni SpA (euro 0.90 per share) (Note 23)                                               |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   | (3,384     | )      |   | (3,384     | )      |   |       |   |   | (3,384     | )      |
| Interim dividend (euro 0.45 per share) (Note 23)                                                                      |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   | (1,686     | )      |   |       |   |   | (1,686     | )      |   |       |   |   | (1,686     | )      |
| Dividend        distribution of other companies                                                                       |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   | (1,218     | )      |   | (1,218     | )      |
| Allocation of 2004 net profit                                                                                         |   |      |   |   |    |   |   |      |   |   | 1,300     |   |   |      |   |   |       |   |   | 2,375      |   |   |       |   |   | (3,675     | )      |   |       |   |   |       |   |   |       |   |
| Shares        repurchased (Note 23)                                                                                   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   | (1,034     | )      |   |       |   |   |       |   |   |       |   |   | (1,034     | )      |   |       |   |   | (1,034     | )      |
| Shares issued under stock grant plans                                                                                 |   | 1         |   |   |    |   |   |      |   |   | (1        | )      |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |
| Treasury        shares sold under incentive plans for Eni managers                                                    |   |      |   |   |    |   |   | (47       | )      |   | 47        |   |   |      |   |   | 47         |   |   |       |   |   |       |   |   |       |   |   | 47         |   |   |       |   |   | 47         |   |
|                                                                                                                  |   | **1**     |   |   |    |   |   | **(47**   | **)**  |   | **1,346** |   |   |      |   |   | **(987**   | **)**  |   | **2,375**  |   |   | **(1,686** | **)**  |   | **(7,059** | **)**  |   | **(6,057** | **)**  |   | **(1,218** | **)**  |   | **(7,275** | **)**  |
| **Other        changes in shareholders’ equity**                                                                 |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |
| Cost of stock option                                                                                                  |   |      |   |   |    |   |   |      |   |   | 5         |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   | 5          |   |   |       |   |   | 5          |   |
| Sale of        consolidated companies                                                                                 |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   | (40        | )      |   | (40        | )      |
| Exchange differences arising on the distribution        of dividends and other changes                                |   |      |   |   |    |   |   |      |   |   |      |   |   | 131       |   |   |       |   |   | 135        |   |   |       |   |   |       |   |   | 266        |   |   | (45        | )      |   | 221        |   |
|                                                                                                                  |   |      |   |   |    |   |   |      |   |   | **5**     |   |   | **131**   |   |   |       |   |   | **135**    |   |   |       |   |   |       |   |   | **271**    |   |   | **(85**    | **)**  |   | **186**    |   |
| **Balance at December 31, 2005**                                                                                      |   | **4,005** |   |   | **959** |   |   | **5,345** |   |   | **5,351** |   |   | **941**   |   |   | **(4,216** | **)**  |   | **17,381** |   |   | **(1,686** | **)**  |   | **8,788**  |   |   | **36,868** |   |   | **2,349**  |   |   | **39,217** |   |

##### Table of Contents

**Statement of cash flows**

| (million euro) |   |       |   | **2004** |   | **2005** |
|----------------|--------|--------------------------------|--------|----------|--------|----------|
|           |   |                           |   |          |   |          |

| **Cash flow from operating activities**                                                                           |   |       |   |   |       |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Net profit                                                                                                        |   | 7,541      |   |   | 9,247      |   |
| Depreciation and amortization                                                                                     |   | 4,598      |   |   | 5,509      |   |
| Writedowns        (revaluations), net                                                                             |   | 27         |   |   | (288       | )      |
| Net change in provisions for contingencies                                                                        |   | 418        |   |   | 1,279      |   |
| Net change        in the provisions for employee benefits                                                         |   | 49         |   |   | 18         |   |
| Gain on disposal of assets, net                                                                                   |   | (793       | )      |   | (220       | )      |
| Dividend        income                                                                                            |   | (72        | )      |   | (33        | )      |
| Interest income                                                                                                   |   | (198       | )      |   | (214       | )      |
| Interest        expense                                                                                           |   | 567        |   |   | 654        |   |
| Exchange differences                                                                                              |   | (79        | )      |   | (64        | )      |
| Current        and deferred income taxes                                                                          |   | 5,522      |   |   | 8,128      |   |
| *Cash generated from operating profit before        changes in working capital*                                   |   | 17,580     |   |   | 24,016     |   |
| (Increase)        decrease:                                                                                       |   |       |   |   |       |   |
| - inventories                                                                                                     |   | (355       | )      |   | (1,402     | )      |
| - accounts        receivable                                                                                      |   | (1,241     | )      |   | (4,413     | )      |
| - other assets                                                                                                    |   | 43         |   |   | 351        |   |
| - trade        and other accounts payable                                                                         |   | 727        |   |   | 3,030      |   |
| - other liabilities                                                                                               |   | (83        | )      |   | 12         |   |
| *Cash        from operations*                                                                                     |   | 16,671     |   |   | 21,594     |   |
| Dividends received                                                                                                |   | 394        |   |   | 366        |   |
| Interest        received                                                                                          |   | 167        |   |   | 214        |   |
| Interest paid                                                                                                     |   | (533       | )      |   | (619       | )      |
| Income        taxes paid                                                                                          |   | (4,199     | )      |   | (6,619     | )      |
| **Net cash provided from operating activities**                                                                   |   | **12,500** |   |   | **14,936** |   |
| **Cash        flow from investing activities**                                                                    |   |       |   |   |       |   |
| Investments:                                                                                                      |   | (714       | )      |   | (856       | )      |
| -        intangible assets                                                                                        |   | (6,785     | )      |   | (6,558     | )      |
| - tangible assets                                                                                                 |   |       |   |   | (73        | )      |
| -        consolidated subsidiaries and businesses                                                                 |   | (316       | )      |   | (54        | )      |
| - investments                                                                                                     |   | (675       | )      |   | (464       | )      |
| -        securities                                                                                               |   | (470       | )      |   | (683       | )      |
| - financing receivables                                                                                           |   |       |   |   |       |   |
| - change        in accounts payable and receivable in relation to        investments and capitalized depreciation |   | (13        | )      |   | 149        |   |
| *Cash flow from investments*                                                                                      |   | (8,973     | )      |   | (8,539     | )      |
| Disposals:                                                                                                        |   |       |   |   |       |   |
| - intangible assets                                                                                               |   | 13         |   |   | 13         |   |
| - tangible        assets                                                                                          |   | 279        |   |   | 99         |   |
| - consolidated subsidiaries and businesses                                                                        |   | 538        |   |   | 252        |   |
| -        investments                                                                                              |   | 61         |   |   | 178        |   |
| - securities                                                                                                      |   | 659        |   |   | 369        |   |
| -        financing receivables                                                                                    |   | 808        |   |   | 804        |   |
| - change in accounts receivable in relation to        disposals                                                   |   | (1         | )      |   | 9          |   |
| *Cash        flow from disposals*                                                                                 |   | 2,357      |   |   | 1,724      |   |
| **Net cash used in investing activities**                                                                         |   | **(6,616** | **)**  |   | **(6,815** | **)**  |

 

| (million euro) |   |       |   | **2004** |   | **2005** |
|----------------|--------|--------------------------------|--------|----------|--------|----------|
|           |   |                           |   |          |   |          |

| Proceeds        from long-term debt                               |   |   |   |   |   |   |   | 1,229      |   |   | 2,755      |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| Payments of long-term debt                                        |   |   |   |   |   |   |   | (797       | )      |   | (2,978     | )      |
| Reductions        of short-term debt                              |   |   |   |   |   |   |   | (4,175     | )      |   | (317       | )      |
|                                                              |   |   |   |   |   |   |   | **(3,743** | **)**  |   | **(540**   | **)**  |
| Capital        contributions/payments by/to minority shareholders |   |   |   |   |   |   |   | 1          |   |   | 24         |   |
| Sale (acquisition) of additional interests in        subsidiaries |   |   |   |   |   |   |   | 621        |   |   | (33        | )      |
| Dividends        to minority shareholders                         |   |   |   |   |   |   |   | (3,076     | )      |   | (6,288     | )      |
| Shares repurchased                                                |   |   |   |   |   |   |   | (65        | )      |   | (987       | )      |
| **Net        cash used in financing activities**                  |   |   |   |   |   |   |   | **(6,262** | **)**  |   | **(7,824** | **)**  |
| *Effect of change in consolidation area*                          |   |   |   |   |   |   |   | 12         |   |   | (38        | )      |
| *Effect        of exchange differences*                           |   |   |   |   |   |   |   | (67        | )      |   | 71         |   |
| **Net cash flow for the period**                                  |   |   |   |   |   |   |   | **(433**   | **)**  |   | **330**    |   |
| **Cash        and cash equivalent at beginning of the year**      |   |   |   |   |   |   |   | **1,436**  |   |   | **1,003**  |   |
| **Cash and cash equivalent at end of the year**                   |   |   |   |   |   |   |   | **1,003**  |   |   | **1,333**  |   |

##### Table of Contents

**SUPPLEMENTAL CASH FLOWSINFORMATION**

| (million euro) |   |       |   | **2004** |   | **2005** |
|----------------|--------|--------------------------------|--------|----------|--------|----------|
|           |   |                           |   |          |   |          |

| **Effect of investment of consolidated        subsidiaries and businesses**           |   |    |   |   |    |   |
|---------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| Non-current        assets                                                             |   |    |   |   | 122     |   |
| Net borrowings                                                                        |   |    |   |   | (19     | )      |
| Current        and non-current liabilities                                            |   |    |   |   | (22     | )      |
| Net effect of investment                                                              |   |    |   |   | **81**  |   |
| Fair value        of the participations held before the acquisition of        control |   |    |   |   | (8      | )      |
| *Purchase price*                                                                      |   |    |   |   | **73**  |   |
| **Cash        flow on investment**                                                    |   |    |   |   | **73**  |   |
| **Effect of disposal of consolidated        subsidiaries and businesses**             |   |    |   |   |    |   |
| Current        assets                                                                 |   | 261     |   |   | 204     |   |
| Non-current assets                                                                    |   | 285     |   |   | 189     |   |
| Net        borrowings                                                                 |   | (138    | )      |   | 42      |   |
| Current and non-current liabilities                                                   |   | (167    | )      |   | (217    | )      |
| Exchange        rate differences realized following disposal                          |   | 45      |   |   |    |   |
| Net effect of disposal                                                                |   | **286** |   |   | **218** |   |
| Gain on        disposal                                                               |   | 304     |   |   | 140     |   |
| Minority interest                                                                     |   |    |   |   | (43     | )      |
| *Selling        price*                                                                |   | **590** |   |   | **315** |   |
| less:                                                                                 |   |    |   |   |    |   |
| *Cash        and cash equivalent*                                                     |   | (52     | )      |   | (63     | )      |
| **Cash flow on disposal**                                                             |   | **538** |   |   | **252** |   |

**Transactions that did not produce cash flows**

In 2005 the Group contributed assets andliabilities of a business with a carrying amount of euro 18million in exchange for equity investment in the companies towhich those businesses were contributed.

The Consolidated Financial Statements wereapproved by Eni’s Board of Directors on March 30, 2006.

**Basis of presentation**

In application of EC Regulation 1606/2002approved by the European Parliament and Council on July 19, 2002,starting from 2005 companies with securities listed on aregulated stock market of a Member State of the European Unionare required to prepare their Consolidated Financial Statementsin accordance with International Financial Reporting Standards(IFRS), as approved by the European Commission.

The Consolidated Financial Statements of Enihave been prepared in accordance with IFRS issued by theInternational Accounting Standards Board (IASB) and adopted bythe European Commission following the procedure contained inarticle 6 of the EC Regulation No. 1606/2002 of the EuropeanParliament and Council of July 19, 2002. For hydrocarbonexploration and production, accounting policies followed at aninternational level have been applied, with particular referenceto amortization according to the Unit Of Production method,buy-back contracts and Production Sharing Agreements.

The IFRS under which Eni’s ConsolidatedFinancial Statements have been prepared differ in certain limitedrespects from the IFRS adopted by the IASB, the effect of suchdifferences on the Consolidated Financial Statements is notmaterial.

The Consolidated Financial Statements have beenprepared by applying the cost method except for items that underIFRS must be recognized at fair value as described in theevaluation criteria.

The Consolidated Financial Statements includethe statutory accounts of Eni SpA and of all Italian and foreigncompanies in which Eni SpA holds the right to directly orindirectly exercise control, determine financial and managementdecisions, and obtain economic and financial benefits.

Insignificant subsidiaries are not included inthe scope of consolidation. A subsidiary is consideredinsignificant when it does not exceed two of these limits: (i)total assets or liabilities: euro 3,125 thousand; (ii) totalrevenues: euro 6,250 thousand; (iii) average number of employees:50 units. Moreover, companies, for which the consolidation doesnot produce significant economic and financial effects are notincluded in the scope of consolidation. Such companies generallyrepresent subsidiaries that work on account of other companies asthe sole operator in the management of upstream oil contracts;these companies are financed on a proportional basis according tobudgets approved, by the companies involved in the project, towhich the company periodically reports costs and receiptsderiving from the contract. Costs and revenues and otheroperating data (production, reserves, etc.) of the project, aswell as the obligations arising from the project, are recognizedproportionally in the financial statements of the companiesinvolved. The effects of these exclusions are not material8.

Subsidiaries excluded from consolidation, jointventures, affiliated companies and other interests are accountedfor as described below under the heading "Financial fixedassets".

Financial statements of consolidated companiesare audited by auditing companies that examine and certify theinformation required to be disclosed when preparing theconsolidated financial statement.

Considering their materiality, amounts arestated in millions of euro.

**Principles of consolidation**

**Interests in companies included in the scopeof consolidation**

Assets and liabilities, expense and incomerelated to fully consolidated companies are wholly incorporatedinto the Consolidated Financial Statements; the book value ofthese interests is eliminated against the corresponding fractionof the shareholders’ equity of the companies owned,attributing to each item of the balance sheet the current valueat the date of acquisition of control. Any positive residualdifference as regard to the acquisition cost is recognized as"Goodwill". Negative residual differences are chargedagainst the profit and loss account.

Gains or losses on the sale of shares inconsolidated subsidiaries are recorded in the profit and lossaccount for the amount corresponding to the difference betweenproceeds from the sale and the divested portion of net equitysold.

Fractions of shareholders’ equity and ofnet profit of minority interest are recognized under specificitems in the profit and loss account. Minority interest isdetermined based on the current value attributed to assets andliabilities at the date of the acquisition of control, excludingany related goodwill.

**Inter-company transactions**

Income deriving from inter-company transactionsunrealized towards third parties is eliminated. Receivables,payables, revenues and costs, guarantees, commitments and risksamong consolidated companies are eliminated, as well.Inter-company losses are not eliminated, since they reflect anactual decrease in the value of divested assets.

**Foreign currency translation**

Financial statements of consolidated companiesdenominated in currencies other than the euro are converted intoeuro applying exchange rates prevailing at year end to assets andliabilities, the historical exchange rates to equity accounts andthe average rates for the period to profit and loss account(source: Ufficio Italiano Cambi).

Exchange rate differences from the conversionderiving from the application of different exchange rates forassets and liabilities, shareholders’ equity and profit andloss account are recognized under the item "Otherreserves" within shareholders’ equity for the portionrelating to the Group and under the item "Minorityinterest" for the portion related to minority shareholders.

Financial statements of foreign subsidiarieswhich are translated into euro are denominated in the functionalcurrencies of the country where the enterprise operates.

**Evaluation criteria**

The most significant evaluation criteria usedfor the preparation of the Consolidated Financial Statements areshown below.

**Current assets**

Financial assets held for trading and financialassets available for sale are stated at fair value and theeconomic effects are charged to the profit and loss account item"Financial Income (Expense)" and undershareholders’ equity within "Other reserves".

The fair value of financial instruments isrepresented by market quotations or, in their absence, by thevalue resulting from the adoption of suitable financial valuationmodels which take into account all the factors adopted by themarket operators and the prices obtained in similar actualtransactions in the market.

When the conditions for the purchase or sale offinancial assets provide for the settlement of the transactionand the delivery of the assets within a given number of daysdetermined by entities controlling the market or by agreements(e.g. purchase of securities on regulated markets), thetransaction is entered at the date of settlement.

Receivables are stated at their amortized cost(see below "Financial fixed assets").

Transferred financial assets are eliminatedwhen the transaction, together with the cash flows deriving fromit, lead to the substantial transfer of all risks and benefitsassociated to the property.

Inventories, excluding contract work inprogress and including compulsory stocks, are stated at the lowerof purchase or production cost and market value represented bythe proceeds the company expects to collect from the sale of theinventories in the normal course of business.

The cost for inventories of hydrocarbons (crudeoil, condensates and natural gas) and petroleum products isdetermined by applying the weighted-average cost method on athree-month basis; the cost for inventories of the Petrochemicalsegment is determined by applying the weighted-average cost on anannual basis.

Contract work in progress is recorded on thebasis of contractual considerations by reference to the stage ofcompletion of a contract measured on a cost-to-cost basis.Advances are deducted from inventories within the limits ofcontractual considerations; any excess of such advances over thevalue of the work performed is recorded as a liability. Lossesrelated to construction contracts are accrued for as soon as thecompany becomes aware of such losses. Contract work in progressnot yet invoiced, whose payment is agreed in a foreign currency,is translated to euro using the current exchange rates at yearend and effects are reflected in the profit and loss account.

Hedging instruments are described in thesection "Derivative Instruments".

**Non-current assets**

**Property, plant and equipment**9

Tangible assets, including investmentproperties, are recognized using the cost model and stated attheir purchase or production cost including ancillary costs whichcan be directly attributed to them as are required to make theasset ready for use. In addition, when a substantial amount oftime is required to make the asset ready for use, the purchaseprice or production cost includes the financial expenses incurredthat would have theoretically been saved had the investment notbeen made.

In the case of current obligations for thedismantling and removal of assets and the reclamation of sites,the carrying value includes, with a corresponding entry to aspecific provision, the estimated (discounted) costs to be borneat the moment the asset is retired. Revisions of estimates forthese provisions, for the passage of time and for changes in thediscount rate are recognized under "Provisions forcontingencies". The company recognizes material provisionsfor the retirement of assets in the Exploration & Productionbusiness. No significant asset retirement obligations associatedwith any legal obligations to retire refining, marketing andtransportation (downstream) and chemical long-lived assetsgenerally are recognized, as indeterminate settlement dates forthe asset retirements prevented estimation of the fair value ofthe associated asset retirement obligation. The company performsperiodic reviews of its downstream and chemical long-lived assetsfor any changes in facts and circumstances that might requirerecognition of a retirement obligation.

No revaluation is made even in application ofspecific laws.

Assets carried under financial leasing areincluded within the tangible assets, with a corresponding entryto the financial payable to the lessor, and depreciated using thecriteria detailed below. When the renewal is not reasonablycertain, assets carried under financial leasing are depreciatedover the period of the lease if shorter than the useful life ofthe asset.

Tangible assets are depreciated systematicallyover the duration of their useful life taken as an estimate ofthe period for which the assets will be used by the company. Whenthe tangible asset comprises more than one significant elementwith different useful lives, the depreciation is carried out foreach component. The amount to be depreciated is represented bythe book value reduced by the presumable net realizable value atthe end of the useful life, if it is significant and can bereasonably determined. Land is not depreciated, even if boughttogether with a building. Tangible assets held for sales are notdepreciated but are valued at the lower of the book value andfair value less costs of disposal.

Assets that can be used free of charge aredepreciated over the shorter of the duration of the concessionand the useful life of the asset.

Renewals, improvements and transformationswhich extend asset lives are capitalized.

The costs for the substitution of identifiablecomponents in complex assets are capitalized and depreciated overtheir useful life; the residual book value of the component thathas been substituted is charged to the profit and loss account.Ordinary maintenance and repair costs are expensed when incurred.

When events occur that lead to a presumablereduction in the book value of tangible assets, theirrecoverability is checked by comparing their book value with therealizable value, represented by the greater of fair value lesscosts of disposal and replacement cost. In the absence of abinding sales agreement, fair value is estimated on the basis ofmarket values, of recent transactions, or of the best availableinformation that shows the proceeds that the company couldreasonably expect to collect from the disposal of asset.Replacement cost is determined by discounting the expected cashflows deriving from the use of the asset and, if significant andreasonably determinable, the cash flows deriving from itsdisposal at the end of its useful life, net of disposal costs.Cash flows are determined on the basis of reasonable anddocumented assumptions that represent the best estimate of thefuture economic conditions during the remaining useful life ofthe asset, giving more importance to independent assumptions. Thediscounting is carried out at a rate that takes into account theimplicit risk in the sectors where the entity operates. Valuationis carried out for each single asset or, if the realizable valueof a single asset cannot be determined, for the smallestidentifiable group of assets that generates independent cashinflows from their continuous use, the so called cash generatingunit. When the reasons for their impairment cease to exist, Enireverses previously recorded impairment charges and records asincome an asset revaluation in the profit and loss account forthe relevant year. This asset revaluation is the lower of thefair value and the book value increased by the amount ofpreviously incurred impairments net of related amortization thatwould have been made had the impairment not been made.

**Intangible assets**

Intangible assets include assets which lackphysical qualities that are identifiable, controlled by thecompany and able to produce future economic benefits, andgoodwill acquired in business combinations. An asset isclassified as intangible when the management is able todistinguish its clearly from goodwill. This condition is normallymet when: (i) the intangible asset can be traced back to a legalor contractual right, or (ii) the asset is separable, i.e. can besold, transferred, licensed, rented or exchanged, eitherindividually or as an integral part of other assets. An entitycontrols an asset if it has the power to obtain the futureeconomic benefits flowing from the underlying resource and torestrict the access of others to those benefits.

Intangible assets are stated at cost asdetermined with the criteria used for tangible assets. Norevaluation is made even in application of specific laws.

Intangible assets with a defined useful lifeare amortized systematically over the duration of their usefullife taken as an estimate of the period for which the assets willbe used by the company; the recoverability of their book value ischecked using the criteria described in the section"Tangible Assets".

Goodwill and other intangible assets with anindefinite useful life are not amortized. The recoverability oftheir carrying value is checked at least annually and wheneverevents or changes in circumstances indicate that the carryingvalue may not be recoverable. With reference to goodwill, thischeck is performed at the level of the smallest aggregate onwhich the company, directly or indirectly, evaluates the returnon the capital expenditure that included said goodwill.Impairment charges against goodwill may not be revalued.

Costs of technological development activitiesare capitalized when: (i) the cost attributable to the intangibleasset can be reasonably determined; (ii) there is the intention,the availability of funding and the technical capacity to makethe asset available for use or sale; and (iii) it can be shownthat the asset is able to produce future economic benefits.

**Exploration and production activities**10

*Acquisition of mineral rights*

Costs associated with the acquisition ofmineral rights are capitalized in connection with the assetsacquired (exploratory potential, probable and possible reserves,proved reserves). When the acquisition is related to a set ofexploratory potential and reserves, the cost is allocated to thedifferent assets acquired on the basis of the value of therelevant discounted cash flow.

Expenditure for the exploratory potential,represented by the costs for the acquisition of the explorationpermits and for the extension of existing permits, is recognizedunder "Intangible assets" and is amortized on astraight-line basis over the period of the exploration ascontractually established. If the exploration is abandoned, theresidual expenditure is charged to the profit and loss account.

Acquisition costs for proved reserves and forpossible and probable reserves are recognized under"Intangible assets" or "Tangible assets"depending on the nature of the underlying assets. Costsassociated with proved reserves are amortized on a Unit OfProduction (UOP) basis, as detailed in the section"Development", considering both developed andundeveloped reserves. Expenditures associated with possible andprobable reserves are not amortized until classified as provedreserves; in case of a negative result the costs are charged tothe profit and loss account.

*Exploration*

Costs associated with exploratory activitiesfor oil and gas producing properties incurred both before andafter the acquisition of mineral rights (such as acquisition ofseismic data from third parties, test wells and geophysicalsurveys) are capitalized, to reflect their nature of investment,and amortized in full when incurred.

*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 generally on a UOP basis, as their useful life isclosely related to the availability of feasible reserves. Thismethod provides for residual costs to be amortized through a raterepresenting the ratio between the volumes extracted during theperiod and the proved developed reserves existing at the end ofthe period, increased by the volumes extracted during the period.This method is applied with reference to the smallest aggregaterepresenting a direct correlation between investment and proveddeveloped reserves.

Costs related to unsuccessful development wellsor damaged wells are expensed immediately as loss on disposal.

Impairments and reversal of impairments ofdevelopment costs are made on the same basis as those fortangible assets.

*Production*

Production costs are costs to operate andmaintain wells and field equipment and are expensed as incurred.

*Production sharing agreements and buy-backcontracts*

Revenues and provisions related to ProductionSharing Agreements and buy-back contracts are settled on thebasis of contractual clauses related to the repayment of costsincurred following the exploration, development and operatingactivities (cost oil) and to the relevant amount of realizedproductions (profit oil).

*Retirement*

Costs expected to be incurred with respect tothe retirement of the well, including costs associated withremoval of production facilities, dismantlement and siterestoration, are capitalized and amortized on a UOP basis,consistent with the policy described under Tangible assets.

**Grants**

Grants are recorded in a contra asset accountwhen authorized, if all the required conditions have been met andas a reduction of purchase price or production cost of therelevant assets. Grants of the year are recognized in the profitand loss account.

**Financial fixed assets**

*Investments*

Investments in subsidiaries excluded fromconsolidation, joint ventures and affiliates are accounted forusing the equity method. If it does not result in amisrepresentation of the company’s financial condition andconsolidated results, subsidiaries, joint ventures and affiliatesexcluded from consolidation may be accounted for at cost,adjusted for permanent impairment of value. When the reasons fortheir impairment cease to exist, investments accounted for atcost are revalued within the limit of the impairment made andtheir effects are charged to the profit and loss account item"Other income (expense) from investments".

Other investments are recognized at their fairvalue and their effects are included in shareholders’ equityunder "Other reserves". When fair value cannot bereasonably ascertained, investments are accounted for at cost,adjusted for permanent impairment of value; impairment of valuemay not be revalued.

The risk deriving from losses exceedingshareholders’ equity is recognized in a specific provisionto the extent the parent company is required to fulfill legal orimplicit obligations towards the subsidiary or to cover itslosses.

*Receivables and financial assets to be heldto maturity*

Receivables and financial assets that must beheld to maturity are stated at cost represented by the fair valueof the initial exchanged amount adjusted to take into accountdirect external costs related to the transaction (e.g. fees ofagents or consultants, etc.). The initial carrying value is thencorrected to take into account capital repayments, devaluationsand amortization of the difference between the reimbursementvalue and the initial carrying value; amortization is carried outon the basis of the effective internal rate of return representedby the rate that equalizes, at the moment of the initialrevaluation, the current value of expected cash flows to theinitial carrying value (so-called amortized cost method). Theeconomic effects of the valuation according to the amortized costmethod are charged as "Financial income (expense)".

**Financial liabilities**

Debt is carried at amortized cost (see item"Financial fixed assets" above).

**Provisions for contingencies**

Provisions for contingencies concern risks andcharges of a definite nature and whose existence is certain orprobable but for which at year end the amount or date ofoccurrence remains uncertain. Provisions are made when: (i) thereis a current obligation, either legal or implicit, deriving froma past event; (ii) it is probable that the fulfillment of thatobligation will result in an outflow of resources embodyingeconomic benefits; and (iii) the amount of the obligation can bereliably estimated. Provisions are stated at the value thatrepresents the best estimate of the amount that the company wouldreasonably pay to fulfill the obligation or to transfer it tothird parties at year end. When the financial effect of time issignificant and the payment date of the obligations can bereasonably estimated, the provisions are discounted back at thecompany’s average rate of indebtedness. The increase in theprovision due to the passing of time is charged to the profit andloss account in the item "Financial Income (Expense)".

When the liability regards a tangible asset(e.g. site restoration and abandonment), the provision is statedwith a corresponding entry to the asset to which it refers;profit and loss account charge is made with the amortizationprocess.

The costs that the company expects to bear tocarry out restructuring plans are recognized in the year in whichthe company formally defines the plan and the interested partieshave developed the reasonable expectation that the restructuringwill happen.

The provisions are periodically updated to showthe variations of estimates of costs, production times andactuarial rates; the estimated revisions to the provisions arerecognized in the same profit and loss account item that hadpreviously held the provision, or, when the liability regardstangible assets (i.e. site restoration and abandonment) with acorresponding entry to the assets to which they refer.

In the Notes to the Financial Statements thefollowing potential liabilities are described: (i) possible, butnot probable obligations deriving from past events, whoseexistence will be confirmed only when one or more future eventsbeyond the company’s control occur; and (ii) currentobligations deriving from past events whose amount cannot bereasonably estimated or whose fulfillment will probably be notexpensive.

**Employee post-employment benefits**

Post employment benefit plans are defined onthe basis of plans, even if not formalized ones, that due totheir mechanisms feature defined contributions plans or definedbenefit plans. In the first case, the company’s obligation,consisting in making payments to the State or to a trust or afund, is determined on the basis of contributions due.

The liabilities related to defined benefitplans11, net of any plan assets, are determined on the basis ofactuarial assumptions12 and charged to the relevant year consistently with theemployment period required to obtain the benefits; the evaluationof liabilities is made by independent actuaries.

The actuarial gains and losses of definedbenefit plans, deriving from a change in the actuarialassumptions used or from a change in the conditions of the plan,are charged to the profit and loss account, proportionallythrough the residual average working life of the employeesparticipating to the plan, in the limits of the share of thediscounted profit/loss not charged beforehand, that exceeds thegreater of 10% of liabilities and 10% of the fair value of theplan assets (corridor method).

**Treasury shares**

Treasury shares are recorded at cost and as areduction of shareholders’ equity. Gains followingsubsequent sales are recorded as an increase inshareholders’ equity.

**Revenues and costs**

Revenues from sales of products and servicesrendered are recognized upon transfer of risks and advantagesassociated with the property or upon settlement of thetransaction. In particular, revenues are recognized:

| • |   | for crude        oil, generally upon shipment;                                                                                                                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | for natural        gas, when the natural gas is delivered to the customer;                                                                                                                         |
| • |   | for petroleum        products sold to retail distribution networks, generally        upon delivery to the service stations, whereas all other        sales are generally recognized upon shipment; |
| • |   | for        petrochemical products and other products, generally upon        shipment.                                                                                                              |

Revenues are recognized upon shipment when, atthat date, the risks of loss are transferred to the acquirer.

Revenues from the sale of crude oil and naturalgas produced in properties in which Eni has an interest togetherwith other producers are recognized on the basis of Eni’sworking interest in those properties (entitlement method).Differences between Eni’s net working interest volume andactual production volumes are recognized at current prices atperiod end.

Income related to partially rendered servicesare recognized with respect to the accrued revenues, if it ispossible to reasonably determine the state of completion andthere are no relevant uncertainties concerning the amounts andthe existence of the revenue and related costs; otherwise it isrecognized within the limits of the recoverable costs incurred.

The revenues accrued in the period related toconstruction contracts are recognized on the basis of contractualrevenues by reference to the stage of completion of a contractmeasured on the cost-to-cost basis. The requests of additionalrevenues, deriving from a change in the scope of the work, areincluded in the total amount of revenues when it is probable thatthe customer will approve the variation and the relevant amount;claims deriving for instance from additional costs incurred forreasons attributable to the client are included in the totalamount of revenues when it is probable that the counterpart willaccept them.

Revenues are stated net of returns, discounts,rebates and bonuses, as well as directly related taxation.Exchanges of goods and services with similar nature and value donot give rise to revenues and costs as they do not represent saletransactions.

Costs are recognized when the related goods andservices are sold, consumed or allocated, or when their futureuseful lives cannot be determined.

Costs related to the amount of emissions,determined on the basis of the average prices of the mainEuropean markets at the end of the period, are reported inrelation to the amount of the carbon dioxide emissions thatexceed the amount assigned; revenues are related to the amount ofemissions are reported when are recognized following the sale.

Operating lease payments are recognized in theprofit and loss account over the length of the contract.

Labor costs include stock grants and stockoptions granted to managers, consistent with their actualremunerative nature. The cost is determined based on the fairvalue of the rights awarded to the employee; the portion relevantto the year is calculated pro rata over the period to which theincentive refers (vesting period13). The fair valueof stock grants is represented by the current value of the sharesat the date of the award, reduced by the current value of theexpected dividends in the vesting period. The fair value of stockoptions is the value of the option calculated with theBlack-Scholes method that takes into account the exerciseconditions, current price of the shares, expected volatility andthe risk-free interest rate. The fair value of the stock grantsand stock options is shown as a contra-entry to "Otherreserves".

The costs for the acquisition of new knowledgeor discoveries, the study of products or alternative processes,new techniques or models, the planning and construction ofprototypes or, in any case, costs borne for other scientificresearch activities or technological development, are generallyconsidered current costs and expensed as incurred.

**Accounting to Buy/Sell contracts**

In January and February 2005, the Securitiesand Exchange Commission ("SEC") issued comment lettersto Eni and other companies in the oil and gas industry requestingdisclosure of information related to the accounting for buy/sellcontracts. Eni routinely enters into 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 ofwhether terms of the buy/sell agreements were establishedjointly, in a single contract, or separately, in individualcontracts that are entered into concurrently or in contemplationof one another with a single counterparty. This accounting isconsistent with the most recent guidance of the SEC staff whoconsiders that the accounting for buy/sell contracts should beshown net on the income 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 Inventory with the SameCounterparty." At its September 2005 meeting, the EITFreached consensus that two or more legally separate exchangetransactions with the same counterparty, including buy/selltransactions, should be combined and considered as a singlearrangement when the transactions were entered into "incontemplation" of one another. EITF 04-13 was ratified bythe FASB in September 2005 and is effective for new arrangements,or modifications or renewals of existing arrangements, enteredinto beginning on or after April 1, 2006, which will be theeffective date for the company’s adoption of this standard.Upon adoption, the company will report the net effect of buy/selltransactions on its Consolidated Statement of Income as"Purchased crude oil and products" instead of reportingthe revenues associated with these arrangements as "Salesand other operating revenues" and the costs as"Purchased crude oil and products." While this issuewas under deliberation, the SEC staff directed Eni and other oilcompanies comment letter to disclose on the face of the incomestatement the amounts associated with buy/sell contracts and todiscuss in a footnote to the financial statements the basis forthe underlying accounting.

In Eni’s consolidated income statement,"Net sales from operations" and "Purchases,services and other" for the December 31, 2004 and 2005 werenetted of euro 1,821 million and euro 2,595 million,respectively, for the above described buy/sell contracts.

**Exchange rate differences**

Revenues and costs concerning transactions incurrencies other than functional currency are stated at theexchange rate on the date that the transaction is completed.

Monetary assets and liabilities in currenciesother than functional currency are converted by applying the yearend exchange rate and the effect is stated in the profit and lossaccount. Non-monetary assets and liabilities in currencies otherthan functional currency valued at cost are stated at the initialexchange rate; when they are evaluated at recoverable value orrealizable value, the exchange rate applied is that of the day ofrecognition.

**Dividends**

Dividends are recognized at the date of thegeneral shareholders’ meeting in which they were declared,except when the sale of shares before the ex-dividend date iscertain.

**Income taxes**

Current income taxes are determined on thebasis of estimated taxable income; the estimated liability isrecognized in the item "Income tax liabilities".Current tax assets and liabilities are measured at the amountexpected to be paid to (recovered from) the tax authorities,using the tax rates (and tax laws) that have been enacted orsubstantively enacted at the balance sheet date.

Deferred tax assets or liabilities are providedon temporary differences arising between the carrying amounts ofthe assets and liabilities in the financial statements and theirtax bases. Deferred tax assets are recognized when theirrealization is considered probable.

Deferred tax assets and liabilities arerecorded under non-current assets and liabilities and are offsetat single entity level if related to offsettable taxes. Thebalance of the offset, if positive, is recognized in the item"Deferred tax assets" and if negative in the item"Deferred tax liabilities". When the results oftransactions are recognized directly in the shareholders’equity, current taxes, deferred tax assets and liabilities arealso charged to the shareholders’ equity.

**Derivatives**

Derivatives, including embedded derivativeswhich are separated from the host contract, are assets andliabilities recognized at their fair value.

Derivatives are classified as hedginginstruments when the relationship between the derivative and thesubject of the hedge is formally documented and the effectivenessof the hedge is high and is checked periodically. When hedginginstruments cover the risk of variation of the fair value of thehedged item (fair value hedge; e.g. hedging of the variability onthe fair value of fixed interest rate assets/liabilities), thederivatives are stated at fair value and the effects charged tothe profit and loss account; consistently the hedged items areadjusted to reflect the variability of fair value associated withthe hedged risk. When derivatives hedge the cash flow variationrisk of the hedged item (cash flow hedge; e.g. hedging thevariability on the cash flows of assets/liabilities as a resultof the fluctuations of exchange rate), changes in the fair valueof the derivatives are initially stated in net equity and thenrecognized in the profit and loss account consistent with theeconomic effects produced by the hedged transaction. The changein the fair value of derivatives that do not meet the conditionsrequired to qualify as hedging instruments are shown in theprofit and loss account.

**Use of accounting estimates**

The preparation of these Consolidated FinancialStatements requires Management to apply accounting methods andpolicies that are based on difficult or subjective judgments,estimates based on past experience and assumptions determined tobe reasonable and realistic based on the related circumstances.The application of these estimates and assumptions affects thereported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the balance sheet date andthe reported amounts of income and expenses during the reportingperiod. Key areas where estimates are applied include thedetermination of oil and gas proved reserves and proved developedreserves, accounting for exploratory drilling costs under U.S.GAAP, impairment of fixed assets, intangible assets and goodwill,asset retirement obligations, business combinations, recognitionof environmental liabilities and recognition of revenues in theoilfield services construction and engineering businesses. Actualresults may differ from these estimates given the uncertaintysurrounding the assumptions and conditions upon which theestimates 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 future results.

**Oil and gas activities**

Engineering estimates of the Company’s oiland gas reserves are inherently uncertain. Proved reserves arethe estimated volumes of crude oil, natural gas and gascondensates, liquids and associated substances which geologicaland engineering data demonstrate with reasonable certainty to berecoverable in future years from known reservoirs under existingeconomic and operating conditions. Although there areauthoritative guidelines regarding the engineering criteria thathave to be met before estimated oil and gas reserves can bedesignated as "proved", the accuracy of any reserveestimate is a function of the quality of available data andengineering and geological interpretation and judgment.

Reserves in a field will only be categorized asproved when all the criteria for attribution of proved statushave been met, including an internally imposed requirement forproject sanction that occurs when a final investment decision ismade. At the point of sanction, all booked reserves will becategorized as proved undeveloped. Volumes will subsequently berecategorized from proved undeveloped to proved developed as aconsequence of development activity. The first proved developedbookings will occur at the point of first oil or gas production.Major development projects typically take one to four years fromthe time of initial booking to the start of production.Adjustments may be made to booked reserves due to production,reservoir performance, commercial factors, acquisition anddivestment activity and additional reservoir developmentactivity.

Eni reassesses its estimate of proved reserveson an annual basis. The estimated proved reserves of oil andnatural gas may be subject to future revision and upward anddownward revision may be made to the initial booking of reservesdue to production, reservoir performance, commercial factors,acquisition and divestment activity and additional reservoirdevelopment activity. In particular, changes in oil and naturalgas prices could impact the amount of Eni’s proved reservesas regards the initial estimate and, in the case of ProductionSharing Agreements and buy-back contracts, the share ofproduction and reserves Eni is entitled to. Accordingly, theestimated reserves could be materially different from thequantities of oil and natural gas that ultimately will berecovered.

Oil and natural gas reserves have a directimpact on certain amounts reported in the financial statements.Estimated proved reserves are used in determining depreciationand depletion expenses and impairment expense. Depreciation rateson oil and gas assets using the UOP basis are determined from theratio between the amount of hydrocarbons extracted in the yearand proved developed reserves existing at the year end increasedby the amounts extracted during the year. Assuming all othervariables are held constant, an increase in estimated provedreserves decreases depreciation, depletion and amortizationexpense. On the contrary, a decrease in estimated proved reservesincreases depreciation, depletion and amortization expense. Also,estimated proved reserves are used to calculate future cash flowsfrom oil and gas properties, which serve as an indicator indetermining whether a property impairment is to be carried out ornot. The larger the volumes of estimated reserves, the lesslikely the property is impaired. See "Item 3 – RiskFactors – Uncertainties in Estimates of Oil and Natural GasReserves".

**Accounting for Suspended Well Costs underU.S. GAAP**

Under U.S. GAAP costs for exploratory wells areinitially capitalized pending the determination of whether thewell has found 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 Accounting 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.Determination of whether an exploratory well should remaincapitalized after completion of drilling requires a high degreeof judgment on the part of management in assessing whether theCompany is making sufficient progress assessing the reserves andthe economic and operating viability of a given project. Thecompany evaluates the progress made on the basis of regularproject reviews which take account of the following factors: (i)costs are being incurred to assess the reserves and theirpotential development; (ii) existence (or active negotiations) ofsales contracts with customers for oil and natural gas; and (iii)existence of firm plans, established timetables or contractualcommitments, which may include seismic testing and drilling ofadditional exploratory wells. As of December 31, 2005, an amountof euro 403 million remain capitalized relating to approximately30 exploratory wells for which drilling activities have beencompleted for more than one year, of this capitalized amount euro59 million (or 8 wells) relates to projects progressing towardscompletion of development activities, and the remaining euro 344million (or 22 wells) relates to projects for which additionalexploratory activity is underway or firmly planned. See Note 35to the Consolidated Financial Statements.

**Impairment of Assets**

Eni assesses its fixed assets and intangibleassets, including goodwill, for possible impairment if there areevents or changes in circumstances that indicate the carryingvalues of the assets are not recoverable. Such indicators includechanges in the Group’s business plans, changes in commodityprices leading to unprofitable performance and, for oil and gasproperties, significant downward revisions of estimated provedreserve quantities. Determination as to whether and how much anasset is impaired involves management estimates on highlyuncertain matters such as future commodity prices, the effects ofinflation and technology improvements on operating expenses,production profiles and the outlook for global or regional marketsupply-and-demand conditions for crude oil, natural gas,commodity chemicals and refined products.

Technically, the amount of an impairment chargeis determined by comparing the book value of an asset with itsrecoverable amount. The recoverable amount is the greater of fairvalue net of disposal costs and value in use. The estimated valuein use is usually based on the present values of expected futurecash flows using assumptions commensurate with the risks involvedin the asset group. The expected future cash flows used forimpairment reviews are based on judgmental assessments of futureproduction volumes, prices and costs, considering availableinformation at the date of review and are discounted by using arate related to the activity involved.

For oil and natural gas properties, theexpected future cash flows are estimated based on developed andnon-developed proved reserves including, among other elements,production taxes and the costs to be incurred for the reservesyet to be developed. The estimated future level of production isbased on assumptions about future commodity prices, lifting anddevelopment costs, field decline rates, market demand and supply,economic regulatory climates and other factors.

Under both IFRS and U.S. GAAP, goodwill is notamortized but, like indefinitive lived intangible assets, istested for impairment at least annually. Under IFRS theassessment of goodwill impairment is based on the determinationof the fair value of each cash generating units to which goodwillcan be attributed on a reasonable and consistent basis. A cashgenerating unit is a group of assets that generates cash inflowsthat are largely independent of the cash inflows from othergroups of assets. If the fair value of a cash generating unit islower than the carrying amount, goodwill attributed to that cashgenerating unit is impaired up to that difference, if thecarrying amount of goodwill is less than the amount of impairmentassets of the generating unit are impaired on a pro-rata basisfor the residual difference.

**Asset Retirement Obligation**

Obligations related to the removal of tangibleequipment and to the restoration of land or seabeds requiresignificant estimates in calculating the amount of the obligationand determining the amount required to be recorded in theConsolidated Financial Statements. Estimating the future assetremoval costs is difficult and requires management to makeestimates and judgments because most of the removal obligationsare many years into the future and contracts and regulations areoften unclear as to what constitutes removal. Asset removaltechnologies and costs are constantly changing, as well aspolitical, environmental, safety and public relationsconsiderations. The subjectivity of these estimates is alsoincreased by the accounting method used that requires entities torecord the fair value of a liability for an asset retirementobligations in the period when it is incurred (typically at thetime the asset is installed at the productions location). Whenliabilities are initially recorded, the related fixed assets areincreased by an equal corresponding amount. The liabilities areincreased with the passage of time (interest accretion) and anychange of the estimates following the modification of the futurecash flows and the discount rate adopted. The recognized assetretirement obligations are based upon future retirement costestimates 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 Combinations**

Accounting for the acquisition of a businessrequires the allocation of the purchase price to the variousassets and liabilities of the acquired business at fair value.Any positive residual difference is recognized as"Goodwill". Negative residual differences are chargedagainst profit and loss account. Management uses all availableinformation to make these fair value determinations and, formajor business acquisitions, typically engages an outsideappraisal firm to assist in the fair value determination of theacquired long-lived assets.

**Environmental Liabilities**

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, productions and other activities,including legislation that implements international conventionsor protocols. Environmental costs are recognized when it becomesprobable that a liability has been incurred and the amount can bereasonably estimated.

Although management, considering the actionsalready taken, the insurance policies to cover environmentalrisks and provision for risks accrued, does not expect anymaterial adverse effect on Eni’s consolidated results ofoperations and financial position as a result of such laws andregulations, there can be no assurance that there will not be amaterial adverse impact on Eni’s consolidated results ofoperations and financial position 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 and those that may derive from thelegislative decree that the Italian Government will have to enactin order to implement Directive 2000/60/EC creating a frameworkfor joint European action in the area of water; (iv) the effectof possible technological changes relating to future remediation;and (v) the possibility of litigation and the difficulty ofdetermining Eni’s liability, if any, as against otherpotentially responsible parties with respect to such litigationand the possible insurance recoveries.

**Employees and post-retirement benefits**

Employees benefits (such as pension payments,life insurance payments, medical assistance after retirement,etc.) are evaluated with reference to uncertain events and basedupon actuarial assumptions including among others discount rates,expected rates of return on any plan assets, expected rates ofsalary increases, medical cost trend rates, estimated retirementdates, mortality rates. These assumptions are reviewed annuallyand may change from year to year impacting future results ofoperations. 

The significant assumptions used to account forpensions and other post-retirement benefits are determined asfollows:

| • |   | discount and        inflation rates reflect the rates at which the benefits        could be effectively settled, taking into account the        duration of the obligation. Indications used in selecting        the discount rate include rates of annuity contracts and        rates of return on high-quality fixed-income investments        (such as government bonds). The inflation rates reflect        market conditions observed country by country; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | salary        increase assumptions (when relevant) are determined by        each entity. They reflect an estimate of the actual        future salary levels of the individual employees        involved, including future changes attributed to general        price levels (consistent with inflation rate        assumptions), productivity, seniority, promotion and        other factors;                                                                  |
| • |   | healthcare        cost trend assumptions (when relevant) reflect an        estimate of the actual future changes in the cost of the        healthcare related benefits provided to the plan        participants and are based on past and current healthcare        cost trends including healthcare inflation, changes in        healthcare utilization, and changes in health status of        the participants;                                             |
| • |   | demographic        assumptions such as mortality, disability and turnover        reflect the best estimate of these future events for the        individual employees involved, based principally on        available actuarial data; and                                                                                                                                                                                                                      |
| • |   | determination        of expected rates of return on assets is made through        compound averaging. For each plan, there are taken into        account the distribution of investments among bonds,        equities and cash and the expected rates of return on        bonds, equities and cash. A weighted-average rate is then        calculated.                                                                                                         |

Differences between projected and actual costsand between the projected return and the actual return on planassets routinely occur and are called actuarial gains and losses.

The unrecognized actuarial losses of pensionbenefits as at December 31, 2005 were euro 144 million comparedto euro 41 million in 2004. The euro 103 million increase from2004 reflected primarily changes in assumptions used to accountfor pensions and other post-retirement benefits mainly related tothe decrease in discount rates (4.0% in 2005 compared whit 4.5%in 2004). Pension accounting principles require that suchactuarial losses be deferred and amortized over future periods.Eni applies the corridor method to amortize its actuarial lossesand gains. This method amortizes the net cumulative actuarialgains and losses that exceed 10% of the greater of (i) thepresent value of the defined benefit obligation and (ii) the fairvalue of plan assets, over the average expected remaining workinglives of the employees participating in the plan.

In 2005, Eni recognized a charge of euro 126million (euro 118 million in 2004) in the profit and loss accountin connection with its obligations for employee post-retirementbenefits.

See Note 20 of the Consolidated FinancialStatements for further information about employeespost-retirement benefits.

**Contingencies**

In addition to accruing the estimated costs forasset retirement obligation and environmental liabilities, Eniaccrues for all contingencies that are both probable andestimable. These other contingencies are primarily related toemployee benefits, litigation and tax issues. Determiningappropriate amounts for accrual is a complex estimation processthat includes subjective judgments.

**Revenue recognition in the OilfieldServices, Construction and Engineering segment**

Revenue recognition in the Oilfield Services,Construction and Engineering business segment is based on thestage of completion of a contract as measured on the cost-to-costbasis applied to contractual revenues. Use of the stage ofcompletion method requires estimates of future gross profit on acontract by contract basis. The future gross profit representsthe profit remaining after deducing costs attributable to thecontract from revenues provided for in the contract. The estimateof future gross profit is based on a complex estimation process,that includes identification of risks related to the geographicalregion, market condition in that region and any assessment thatit is necessary to estimate with sufficient precision the totalfuture costs as well as the expected timetable. Variation in thescope of the work, are included in the total amount of revenueswhen it is probable that the customer will approve the variationand claims deriving for additional costs are included in thetotal amount of revenues when it is probable that they willresult in additional revenue.

**Recent accounting principles**

With the regulations No. 1910/2005, 2106/2005and 108/2006 issued between November 2005 and January 2006 theEuropean Commission approved some modifications and integrationsto the international accounting standards.

In particular the mainmodifications/integrations concern the following standards:

*IAS 19 "Employee benefits"*

Amendments to IAS 19 essentially concern theapproval of the option related to the recognition in the periodwhen they incur of the total amount of actuarial gains and losseswith a corresponding entry to a specific reserve inshareholders’ equity.

*IAS 39 "Financial instruments:recognition and measurement"*

In relation to cash flow hedge operations onexchange rate risk, IAS 39 has been integrated with the aim ofqualifying as hedging instruments the intercompany transactionsexpected and with an high probability, on condition that: (i)these transactions are denominated in a functional currency otherthan the currency of the entity that carries out the operation;and (ii) the exposure to the exchange rate risk determines someeffects in consolidated profit and loss account.

Amendments to IAS 39 also concerned therecognition and measurement of financial guarantees. Inparticular, financial guarantees are recorded when they areissued, as liability valued at the market value and, then, inrelation to the execution risk, at the greater between: (i) thebest estimate of the charge to be sustained to fulfill theobligation; and (ii) the initial amount reduced of premiumscollected.

*IFRS 7 "Financial instruments:disclosures" and IAS 1, presentation of financial statements*

IFRS 7 establishes the disclosures to be givenabout financial instruments and the about the exposure andmanagement of financial risks. The requirements of IFRS 7 includesome disclosures currently contained in IAS 32 "Financialinstruments: exposures and additional disclosures".

Also by the amendment of IAS 1, it is requestedto give disclosure of objectives, policies and processes formanaging capital.

*IFRIC 4 "Determining whether anarrangement contains a lease"*

Requirements of IFRIC 4 provide guidance fordetermining whether arrangements that do not take the legal formof a lease but which convey rights to use assets in return for apayment or series of payments should be treated as a lease foraccounting purposes.

In particular, for determining whether anarrangement is, or contains a lease, an entity should considerthe purposes of the operation and verify if the arrangement: (i)provides, explicitly or implicitly, the use of an asset (or agroup of assets) and the fulfillment of the arrangement dependsupon such specific assets; or (ii) transfers the right to usesuch assets.

*IFRIC 5 "Rights to interests arisingfrom decommissioning, restoration and environmental funds"*

Requirements of IFRIC 5 provide guidance fordetermining the recognition and measurement for the contributionto decommissioning, restoration and environmental rehabilitationfunds that have the following features: (i) the assets are heldor administered by a separate legal entity; and (ii)contributor’s right to access the assets of the fund isrestricted.

The contributor recognises its obligation topay decommissioning costs as a liability and its interest in thefund separately. In the case that the interest means havingcontrol, having joint control or significant influence over thefund, the entity contributor must recognize the interest in thefund as an investment in a subsidiary, associate, or a jointlycontrolled.

Modifications and integrations to internationalaccounting principles will be effective starting from January 1,2006 and from January 31, 2007 for IFRS 7.

Eni presently is analyzing the statements and,at the moment, cannot determine if their adoption will have asignificant effect on Eni’s consolidated financial positionor operating results.

 

##### **Tableof Contents**

**Notes to the ConsolidatedFinancial Statements****Current activities**

**1 Cash and cash equivalent**

Cash and cash equivalent of euro 1,333 million(euro 1,003 million at December 31, 2004) include financingreceivables due within 90 days for euro 122 million (euro 167million at December 31, 2004) and include deposits with financialinstitutions with a notice greater than 48 hours and securitiesavailable for sale with a maturity date within 90 days.

**2 Other financial assets for trading or available for sale**

Other financial assets for trading or availablefor sale of euro 1,368 million (euro 1,266 million at December31, 2004) consisted of the following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Listed        Italian treasury bonds                                  |   | 980       |   |   | 1,088     |   |
|-----------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Listed securities issued by Italian and foreign        merchant banks |   | 255       |   |   | 243       |   |
| Not quoted        securities                                          |   | 31        |   |   | 37        |   |
|                                                                  |   | **1,266** |   |   | **1,368** |   |

 

Securities of euro 1,368 million (euro 1,266million at December 31, 2004) are available for sale. At December31, 2004 and December 31, 2005 Eni did not own financial assetsheld for trading.

Valuation at fair value determined an increasefor securities of euro 8 million recorded with a correspondingentry to the shareholders’ equity (euro 6 million) anddeferred tax liabilities (euro 2 million). At January 1, 2005 thefirst application of IAS 32 and 39 determined an increase of euro19 million with a corresponding entry to the shareholders’equity (euro 13 million) and to deferred tax liabilities (euro 6million).

Securities for euro 465 million (euro 474million at December 31, 2004) are made for operating purposes andconcern coverage securities of technical reserves of PadanaAssicurazioni SpA for euro 453 million (euro 474 million atDecember 31, 2004).

**3 Trade and other receivables**

Trade and other receivables of euro 17,902million (euro 13,734 million at December 31, 2004) consisted ofthe following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Trade        receivables |   | 10,525     |   |   | 14,101     |   |
|--------------------------|--------|------------|--------|--------|------------|--------|
| Financing receivables    |   | 521        |   |   | 492        |   |
| Other        receivables |   | 2,688      |   |   | 3,309      |   |
|                     |   | **13,734** |   |   | **17,902** |   |

Receivables are recorded net ofthe allowance for doubtful accounts of euro 891 million (euro 755million at December 31, 2004):

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                   |   |                            |

| Trade receivables        |   |   |   |   | 570     |   |   | 119     |   |   | (22     | )     |   | (24     | )     |   | 643     |   |
|--------------------------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|---------|-------|--------|---------|-------|--------|---------|--------|
| Other        receivables |   |   |   |   | 185     |   |   | 123     |   |   | (10     | )     |   | (50     | )     |   | 248     |   |
|                     |   |   |   |   | **755** |   |   | **242** |   |   | **(32** | **)** |   | **(74** | **)** |   | **891** |   |

Trade receivables of euro 14,101 increased byeuro 3,576 million in 2005 as compared to 2004. This increaserelates primarily to the Gas & Power segment (euro 1,671million), Refining & Marketing (euro 1,010 million) andExploration & Production (euro 806 million) and concernexchange rate differences due to the translation of financialstatements prepared in currencies other than euro for euro 216million. Trade receivables concern advances paid as a guaranteeof contract work in progress for euro 101 million (euro 95million at December 31, 2004).

Financing receivables of euro 492 million (euro521 million) concern receivables made for operating purposes foreuro 480 million (euro 510 million at December 31, 2004) andconcessions, primarily, to consolidated subsidiaries, jointventures and affiliates.

"Other" receivables of euro 3,309million (euro 2,688 million at December 31, 2004) consisted ofthe following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Accounts receivable from:                                      |   |      |   |   |      |   |
|----------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| - joint        venture operators in exploration and production |   | 784       |   |   | 1,123     |   |
| - insurance companies                                          |   | 322       |   |   | 539       |   |
| - Italian        governmental entities                         |   | 216       |   |   | 228       |   |
|                                                           |   | **1,322** |   |   | **1,890** |   |
| Receivables        relating to factoring activities            |   | 347       |   |   | 324       |   |
| Prepayments for services                                       |   | 204       |   |   | 259       |   |
| Other        receivables                                       |   | 815       |   |   | 836       |   |
|                                                           |   | **2,688** |   |   | **3,309** |   |

Receivables relating to factoring activitiesfor euro 324 million (euro 347 million at December 31, 2004)relate to Serfactoring SpA and concern essentially advances forfactoring activities with recourse and receivables for factoringactivities without recourse.

Receivables with related parties are describedin Note 32.

**4 Inventories**

Inventories of euro 3,563 million (euro 2,847million at December 31, 2004) consisted of the following:

|   |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

| (million euro) |   | **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         |   | 303       |   |   | 199     |   |   |    |   |   | 394     |   |   | 896       |   |   | 210       |   |   | 217     |   |   |    |   |   | 645     |   |   | 1,072     |   |
|------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| Products being processed and semi finished        products |   | 37        |   |   | 19      |   |   |    |   |   | 2       |   |   | 58        |   |   | 59        |   |   | 18      |   |   |    |   |   | 1       |   |   | 78        |   |
| Work in        progress long-term contracts                |   |      |   |   |    |   |   | 399     |   |   |    |   |   | 399       |   |   |      |   |   |    |   |   | 418     |   |   |    |   |   | 418       |   |
| Finished products and goods                                |   | 891       |   |   | 482     |   |   |    |   |   | 37      |   |   | 1,410     |   |   | 1,222     |   |   | 572     |   |   |    |   |   | 20      |   |   | 1,814     |   |
| Advances                                                   |   |      |   |   |    |   |   | 84      |   |   |    |   |   | 84        |   |   |      |   |   |    |   |   | 181     |   |   |    |   |   | 181       |   |
|                                                       |   | **1,231** |   |   | **700** |   |   | **483** |   |   | **433** |   |   | **2,847** |   |   | **1,491** |   |   | **807** |   |   | **599** |   |   | **666** |   |   | **3,563** |   |

Inventories were net of the valuation allowanceof euro 93 million (euro 129 million at December 31, 2004):

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                   |   |                            |

|   |   |   |   |   | **129** |   |   | 19 |   |   | (82 | ) |   | 27 |   |   | **93** |   |
|--------|--------|--------|--------|--------|---------|--------|--------|----|--------|--------|-----|---|--------|----|--------|--------|--------|--------|

Work in progress long-term contracts of euro418 million (euro 399 million at December 31, 2004) are net ofthe payments received in advance of euro 5,180 million (euro5,156 million at December 31, 2004).

At January 1, 2005, the date of the firstapplication of IAS 32 and 39, inventories for work in progresslong-term contracts were restated by excluding from the valuationthe effects related to derivatives that do not meet theconditions required to qualify as hedging instruments. Theexclusion of the effects related to derivatives resulted in adecrease for work in progress long-term contracts of euro 38million with a corresponding entry to the shareholders’equity (euro 24 million) and to deferred tax assets (euro 14million).

**5 Income tax receivables**

Income tax receivables of euro 697 million(euro 674 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Italian tax authorities        |   |   |   |   |   |   |   | 466     |   |   | 422     |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Foreign        tax authorities |   |   |   |   |   |   |   | 208     |   |   | 275     |   |
|                           |   |   |   |   |   |   |   | **674** |   |   | **697** |   |

Income tax receivables of euro 697 million(euro 674 million at December 31, 2004) concern value added taxcredits for euro 406 million (euro 459 million at December 31,2004) and excise taxes customs duties natural gas and customsexpenses for euro 60 million (euro 29 million at December 31,2004).

**6 Other assets**

Other assets of euro 369 million (euro 588million at December 31, 2004) consisted of the following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Fair value        of non-hedging derivatives |   |   |   |   |   |   |   |    |   |   | 117     |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Fair value of cash flow hedge derivatives    |   |   |   |   |   |   |   |    |   |   | 32      |   |
| Other        assets                          |   |   |   |   |   |   |   | 588     |   |   | 220     |   |
|                                         |   |   |   |   |   |   |   | **588** |   |   | **369** |   |

At January 1, 2005 the first application of IAS32 and 39 resulted in the accounting at the fair value ofderivatives that do not meet the conditions required to qualifyas hedging instruments for an amount, net of differentials onderivative contracts (Italian GAAP), of euro 76 million with acorresponding entry to the shareholders’ equity (euro 32million) and to deferred tax liabilities (euro 44 million).

At as January 1, 2005, fair value of nonhedging derivative contracts of euro 117 million consisted of thefollowing:

| (million euro) |   | **Fair value** |   | **Commitments** |
|----------------|--------|----------------|--------|-----------------|
|           |   |                |   |                 |

| **Non-hedging        derivatives on exchange rate** |   |    |   |      |
|-----------------------------------------------------|--------|---------|--------|-----------|
| Interest Currency Swap                              |   | 58      |   | 1,277     |
| Currency        Swap                                |   | 15      |   | 2,378     |
| Outright                                            |   |    |   | 9         |
| Options                                             |   |    |   | 17        |
|                                                |   | **73**  |   | **3,681** |
| **Non-hedging        derivatives on interest rate** |   |    |   |      |
| Interest Rate Swap                                  |   | 14      |   | 1,281     |
|                                                |   | **14**  |   | **1,281** |
| **Non-hedging derivatives on commodities**          |   |    |   |      |
| Over the        counter                             |   | 21      |   | 394       |
| Other                                               |   | 9       |   | 11        |
|                                                |   | **30**  |   | **405**   |
|                                                |   | **117** |   | **5,367** |

Commitments concerning non-hedging derivativesamounted to euro 5,367 million and concern commitments onexchange rate for euro 3,681 million (fair value of euro 73million), on interest rate for euro 1,281 million (fair value ofeuro 14 million) and on commodities for euro 405 million (fairvalue of euro 30 million).

Commitments concerning cash flow hedgederivatives amounted to euro 176 million and concern for euro 171million hedging derivatives contracts related to the purchase ofelectricity.

Other assets of euro 220 million (euro 588million at December 31, 2004) include accrued income and prepaidexpenses for anticipated provision of service of euro 49 million(euro 91 million at December 31, 2004), for rentals and fees ofeuro 16 million (euro 22 million at December 31, 2004) and forpremiums due to insurance companies euro 12 million (euro 18million at December 31, 2004).

At December 31, 2004 other assets includedifferentials on derivative contracts for euro 316 million, ofwhich euro 242 million related to financing receivables andliabilities.

**Non-current activities**

**7 Fixed assets**

Fixed assets of euro 45,013 million (euro40,586 million at December 31, 2004) consisted of the following:

| (million        euro) |   | **Net value at the beginning of the year** |   | **Investments** |   | **Depreciation** |   | **Impairment** |   | **Exchange rate differences** |   | **Other changes** |   | **Net value at the end of the year** |   | **Gross value at the end of the year** |   | **Provisions for amortization and        writedown** |
|-----------------------|--------|--------------------------------------------|--------|-----------------|--------|------------------|--------|----------------|--------|-------------------------------|--------|-------------------|--------|--------------------------------------|--------|----------------------------------------|--------|------------------------------------------------------|
|                  |   |                                            |   |                 |   |                  |   |                |   |                               |   |                   |   |                                      |   |                                        |   |                                                      |

| **Dec.        31, 2004**                     |   |       |   |   |      |   |   |       |   |   |     |   |   |       |   |   |     |   |   |       |   |   |       |   |   |       |   |
|----------------------------------------------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|--------|----------|--------|--------|------------|--------|--------|----------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Land                                         |   | 1,185      |   |   | 7         |   |   |       |   |   | (8       | )      |   |       |   |   | (987     | )      |   | 197        |   |   | 274        |   |   | 77         |   |
| Buildings                                    |   | 608        |   |   | 45        |   |   | (97        | )      |   | (4       | )      |   | 5          |   |   | 1,021    |   |   | 1,578      |   |   | 3,159      |   |   | 1,581      |   |
| Plant and machinery                          |   | 28,246     |   |   | 2,878     |   |   | (3,349     | )      |   | (149     | )      |   | (769       | )      |   | 3,992    |   |   | 30,849     |   |   | 66,312     |   |   | 35,463     |   |
| Industrial        and commercial equipment   |   | 517        |   |   | 159       |   |   | (120       | )      |   | (1       | )      |   | (6         | )      |   | (127     | )      |   | 422        |   |   | 1,622      |   |   | 1,200      |   |
| Other assets                                 |   | 286        |   |   | 91        |   |   | (104       | )      |   | (1       | )      |   | (7         | )      |   | 64       |   |   | 329        |   |   | 1,149      |   |   | 820        |   |
| Fixed        assets in progress and advances |   | 8,501      |   |   | 3,605     |   |   |       |   |   | (166     | )      |   | (305       | )      |   | (4,424   | )      |   | 7,211      |   |   | 7,762      |   |   | 551        |   |
|                                         |   | **39,343** |   |   | **6,785** |   |   | **(3,670** | **)**  |   | **(329** | **)**  |   | **(1,082** | **)**  |   | **(461** | **)**  |   | **40,586** |   |   | **80,278** |   |   | **39,692** |   |
| **Dec.        31, 2005**                     |   |       |   |   |      |   |   |       |   |   |     |   |   |       |   |   |     |   |   |       |   |   |       |   |   |       |   |
| Land                                         |   | 197        |   |   | 5         |   |   |       |   |   | (4       | )      |   |       |   |   | 175      |   |   | 373        |   |   | 421        |   |   | 48         |   |
| Buildings                                    |   | 1,578      |   |   | 41        |   |   | (108       | )      |   | (8       | )      |   | 12         |   |   | (62      | )      |   | 1,453      |   |   | 3,152      |   |   | 1,699      |   |
| Plant and machinery                          |   | 30,849     |   |   | 2,443     |   |   | (4,240     | )      |   | (192     | )      |   | 1,827      |   |   | 5,881    |   |   | 36,568     |   |   | 77,806     |   |   | 41,238     |   |
| Industrial        and commercial equipment   |   | 422        |   |   | 113       |   |   | (126       | )      |   |     |   |   | 10         |   |   | (47      | )      |   | 372        |   |   | 1,623      |   |   | 1,251      |   |
| Other assets                                 |   | 329        |   |   | 65        |   |   | (102       | )      |   |     |   |   | 12         |   |   | 14       |   |   | 318        |   |   | 1,182      |   |   | 864        |   |
| Fixed        assets in progress and advances |   | 7,211      |   |   | 3,891     |   |   |       |   |   | (60      | )      |   | 590        |   |   | (5,703   | )      |   | 5,929      |   |   | 6,526      |   |   | 597        |   |
|                                         |   | **40,586** |   |   | **6,558** |   |   | **(4,576** | **)**  |   | **(264** | **)**  |   | **2,451**  |   |   | **258**  |   |   | **45,013** |   |   | **90,710** |   |   | **45,697** |   |

Capital expenditures of euro 6,558 million(euro 6,785 million at December 31, 2004) primarily relate to theExploration & Production segment (euro 4,269 million), Gas& Power segment (euro 1,079 million), Refining &Marketing segment (euro 642 million) and Oilfield Services,Construction and Engineering segment (euro 343 million, of whicheuro 340 million related to construction and drilling activity).Capital expenditures include financial expense for euro 159million essentially relating to the Exploration & Productionsegment (euro 97 million), Refining & Marketing segment (euro31 million) and Gas & Power segment (euro 29 million). Theinterest rate used for the capitalization of finance expense wasbetween 2.2% and 6.1%.

Depreciation rates used, with the exclusion oftangible assets depreciated on a UOP basis, were as follows:

| (%)                                 |   |   |   |   |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Buildings                           |   |   |   |   | 2      |   | -      | 10     |   |
| Plant and machinery                 |   |   |   |   | 2      |   | -      | 10     |   |
| Industrial and commercial equipment |   |   |   |   | 4      |   | -      | 33     |   |
| Other assets                        |   |   |   |   | 6      |   | -      | 33     |   |

Exchange rate differences due to thetranslation of financial statements prepared in currencies otherthan euro of euro 2,451 million relate to companies whosefunctional currency is the U.S. dollar (euro 2,300 million).

Impairments of euro 264 million concernprimarily mineral assets of the Exploration & Productionsegment (euro 156 million) and petrochemical assets of SyndialSpA (euro 75 million). The recoverable amount considered indetermining the impairment was calculated by discounting thefuture cash flows using a rate included between 6.5% and 9.8%.

Other changes of euro 258 million include theinitial recognition and the reviews to the estimate ofdismantling and restoration of sites for euro 576 millionessentially related to the Exploration & Production segment(euro 562 million); this increase was partially offset by thechange in scope of consolidation of euro 122 million followingessentially the sale of Società Azionaria per la Condotta diAcque Potabili SpA (euro 82 million), Acquedotto Vesuviano SpA(euro 20 million) and Acquedotto di Savona SpA (euro 20 million)and the sale of businesses and the elimination of fixed assets ofeuro 97 million primarily related to the Exploration &Production segment (euro 37 million).

The gross carrying amount of fully depreciatedproperty, plant and equipment that is still in use amount to euro11,076 million and primarily concerned the gasline network ofSnam Rete Gas SpA (euro 3,692 million), refineries and oildeposits of Refining & Marketing segment (euro 2,639 million)and petrochemical plants of Polimeri Europa SpA (euro 1,901million) and Syndial SpA (euro 1,598 million).

Government grants recorded as decrease ofproperty, plant and equipment amount to euro 965 million (euro910 million at December 31, 2004).

At December 31, 2005 fixed assets have beenpledged for euro 475 million primarily as collateral on debtincurred by Eni (euro 482 million at December 31, 2004).

Assets acquired under financial lease amount toeuro 134 million and concern euro 72 million for FPSO ships usedby the Exploration & Production segment as support of oilproduction and treatment activities.

**Fixed assets by segment**

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Fixed        assets, gross:                                   |   |       |   |   |       |   |
|---------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| - Exploration & Production                                |   | 40,322     |   |   | 49,120     |   |
| - Gas        & Power                                      |   | 20,680     |   |   | 21,517     |   |
| - Refining & Marketing                                    |   | 8,947      |   |   | 9,420      |   |
| -        Petrochemicals                                       |   | 4,311      |   |   | 4,402      |   |
| - Oilfield Services Construction and Engineering              |   | 3,524      |   |   | 3,878      |   |
| - Other        activities                                     |   | 2,300      |   |   | 2,248      |   |
| - Corporate and financial companies                           |   | 194        |   |   | 213        |   |
| -        Elimination of intra-group profits                   |   |       |   |   | (88        | )      |
|                                                          |   | **80,278** |   |   | **90,710** |   |
| Accumulated        depreciation, amortization and writedowns: |   |       |   |   |       |   |
| - Exploration & Production                                |   | 19,561     |   |   | 24,640     |   |
| - Gas        & Power                                      |   | 7,445      |   |   | 7,757      |   |
| - Refining & Marketing                                    |   | 5,586      |   |   | 5,864      |   |
| -        Petrochemicals                                       |   | 3,130      |   |   | 3,263      |   |
| - Oilfield Services Construction and Engineering              |   | 1,878      |   |   | 2,031      |   |
| - Other        activities                                     |   | 2,007      |   |   | 2,054      |   |
| - Corporate and financial companies                           |   | 85         |   |   | 92         |   |
| -        Elimination of intra-group profits                   |   |       |   |   | (4         | )      |
|                                                          |   | **39,692** |   |   | **45,697** |   |
| Fixed        assets, net:                                     |   |       |   |   |       |   |
| - Exploration & Production                                |   | 20,761     |   |   | 24,480     |   |
| - Gas        & Power                                      |   | 13,235     |   |   | 13,760     |   |
| - Refining & Marketing                                    |   | 3,361      |   |   | 3,556      |   |
| -        Petrochemicals                                       |   | 1,181      |   |   | 1,139      |   |
| - Oilfield Services Construction and Engineering              |   | 1,646      |   |   | 1,847      |   |
| - Other        activities                                     |   | 293        |   |   | 194        |   |
| - Corporate and financial companies                           |   | 109        |   |   | 121        |   |
| -        Elimination of intra-group profits                   |   |       |   |   | (84        | )      |
|                                                          |   | **40,586** |   |   | **45,013** |   |

 

**8 Inventories - compulsory stock**

Inventories - compulsory stocks of euro 2,194million (euro 1,386 million at December 31, 2004) consisted ofthe following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Crude oil and petroleum products |   | 1,229     |   |   | 2,037     |   |
|----------------------------------|--------|-----------|--------|--------|-----------|--------|
| Natural        gas               |   | 157       |   |   | 157       |   |
|                             |   | **1,386** |   |   | **2,194** |   |

Compulsory stocks, are primarily held byItalian companies (euro 1,286 and euro 2,057 million at December31, 2004 and at December 31, 2005, respectively) and representcertain minimum quantities required by Italian law.

 

**9 Intangible assets**

Intangible assets of euro 3,194 million (euro3,313 million at December 31, 2004) consisted of the following:

| (million        euro) |   | **Net value at the beginning of the year** |   | **Investments** |   | **Amortization** |   | **Other changes** |   | **Net value at the end of the year** |   | **Gross value at the end of the year** |   | **Provisions for amortization and        writedown** |
|-----------------------|--------|--------------------------------------------|--------|-----------------|--------|------------------|--------|-------------------|--------|--------------------------------------|--------|----------------------------------------|--------|------------------------------------------------------|
|                  |   |                                            |   |                 |   |                  |   |                   |   |                                      |   |                                        |   |                                                      |

| **Dec.        31, 2004**                                         |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
|------------------------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| **Intangible assets with a definite life**                       |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
| Costs for        research and development                        |   | 167       |   |   | 549     |   |   | (634     | )      |   | 25      |   |   | 107       |   |   | 843       |   |   | 736       |   |
| Industrial patent rights and intellectual        property rights |   | 162       |   |   | 60      |   |   | (137     | )      |   | 89      |   |   | 174       |   |   | 977       |   |   | 803       |   |
| Concessions,        licenses, trademarks and similar items       |   | 934       |   |   | 10      |   |   | (106     | )      |   | (22     | )      |   | 816       |   |   | 2,154     |   |   | 1,338     |   |
| Intangible assets in progress and advances                       |   | 133       |   |   | 71      |   |   |     |   |   | (145    | )      |   | 59        |   |   | 64        |   |   | 5         |   |
| Other        intangible assets                                   |   | 203       |   |   | 11      |   |   | (54      | )      |   | 64      |   |   | 224       |   |   | 549       |   |   | 325       |   |
|                                                             |   | **1,599** |   |   | **701** |   |   | **(931** | **)**  |   | **11**  |   |   | **1,380** |   |   | **4,587** |   |   | **3,207** |   |
| **Intangible        assets with a indefinite life**              |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
| Goodwill                                                         |   | 1,982     |   |   | 13      |   |   |     |   |   | (62     | )      |   | 1,933     |   |   |      |   |   |      |   |
|                                                             |   | **3,581** |   |   | **714** |   |   | **(931** | **)**  |   | **(51** | **)**  |   | **3,313** |   |   |      |   |   |      |   |
| **Dec. 31, 2005**                                                |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
| **Intangible        assets with a definite life**                |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
| Costs for research and development                               |   | 107       |   |   | 699     |   |   | (683     | )      |   | 41      |   |   | 164       |   |   | 1,059     |   |   | 895       |   |
| Industrial        patent rights and intellectual property rights |   | 174       |   |   | 37      |   |   | (122     | )      |   | 48      |   |   | 137       |   |   | 1,056     |   |   | 919       |   |
| Concessions, licenses, trademarks and similar        items       |   | 816       |   |   | 31      |   |   | (101     | )      |   |    |   |   | 746       |   |   | 2,205     |   |   | 1,459     |   |
| Intangible        assets in progress and advances                |   | 59        |   |   | 74      |   |   |     |   |   | (57     | )      |   | 76        |   |   | 81        |   |   | 5         |   |
| Other intangible assets                                          |   | 224       |   |   | 13      |   |   | (30      | )      |   | (50     | )      |   | 157       |   |   | 470       |   |   | 313       |   |
|                                                             |   | **1,380** |   |   | **854** |   |   | **(936** | **)**  |   | **(18** | **)**  |   | **1,280** |   |   | **4,871** |   |   | **3,591** |   |
| **Intangible assets with a indefinite life**                     |   |      |   |   |    |   |   |     |   |   |    |   |   |      |   |   |      |   |   |      |   |
| Goodwill                                                         |   | 1,933     |   |   | 2       |   |   |     |   |   | (21     | )      |   | 1,914     |   |   |      |   |   |      |   |
|                                                             |   | **3,313** |   |   | **856** |   |   | **(936** | **)**  |   | **(39** | **)**  |   | **3,194** |   |   |      |   |   |      |   |

Costs for research and development for euro 164million mainly concern the purchase of mineral rights (euro 157million). This item also includes exploration expendituresamortized in the year 2005 for euro 565 million (euro 491 millionin the year 2004).

Concessions, licenses, trademarks and similaritems for euro 746 million primarily concern the transmissionrights for natural gas imported from Algeria (euro 618 million)and concessions for mineral exploration (euro 67 million).

Other intangible assets with a definite life ofeuro 157 million include royalties for the use of licenses byPolimeri Europa SpA (euro 86 million) and the estimatedexpenditures for social projects to be incurred followingcontractual commitments with the Basilicata Region related tomineral development programs in Val d’Agri (euro 32million).

Depreciation rates used are as follows:

| (%)                                                              |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Costs for research and        development                        |   |   |   |   | 10     |   | -      | 33     |   |
| Industrial patent rights and        intellectual property rights |   |   |   |   | 20     |   | -      | 33     |   |
| Concessions, licenses, trademarks and similar        items       |   |   |   |   | 7      |   | -      | 33     |   |
| Other intangible assets                                          |   |   |   |   | 4      |   | -      | 25     |   |

The gross carrying amount of fully depreciatedintangible assets that is still in use amount to euro 10,340million and primarily concern costs for mineral research ofExploration & Production segment (euro 9,748 million).

Goodwill for euro 1,914 million concernsprimarily the Oilfield Services, Construction and Engineeringsegment (euro 823 million, of which euro 805 million relates tothe purchase of Bouygues Offshore SA, now Saipem SA), the Gas& Power segment (euro 817 million, of which euro 803 millionrelates to the Public Offering for Italgas SpA shares during2003), the Exploration & Production segment (euro 220million, of which euro 215 million relates to the purchase ofLasmo Plc, now Eni Lasmo Plc) and the Refining & Marketingsegment (euro 51 million).

In order to determine the recoverable amount,goodwill related to the acquisition of Bouygues Offshore SA andItalgas SpA has been allocated to the following cash generatingunits:

| (million euro) |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|
|           |   |                   |

| **Bouygues        Offshore SA**                     |   |    |   |
|-----------------------------------------------------|--------|---------|--------|
| Offshore constructions                              |   | 403     |   |
| Onshore        constructions                        |   | 165     |   |
| LNG                                                 |   | 159     |   |
| MMO -        Maintenance Modification and Operation |   | 78      |   |
|                                                |   | **805** |   |
| **Italgas        SpA**                              |   |    |   |
| Domestic gas market                                 |   | 706     |   |
| Foreign        gas market                           |   | 97      |   |
|                                                |   | **803** |   |

The recoverable amount of cash generating unitsis determined based on expected cash flow estimated by using thestrategic market assumptions of Eni’s 2006-2009 plan anddiscounted by using a rate included between 5.6% and 7.7%. Forthe years not included in the strategic, Eni has used anincremental rate included between 0% and 2%. Key assumptions arebased on past experience and take into account the current levelof interest rate.

Other changes of euro 39 million primarilyrelate to the sale of Società Azionaria per la Condotta di AcquePotabili SpA (euro 18 million) and Acquedotto Vesuviano SpA (euro3 million).

**10 Investments**

**Investments accounted for using the equitymethod**

Investments accounted for using the equitymethod of euro 3,890 million (euro 3,156 million at December 31,2004) consisted of the following:

| (million        euro) |   | **Value of the beginning of the year** |   | **Acquisitions and subscriptions** |   | **Gain from the valuation of investments        accounted for using the equity method** |   | **Loss from the valuation of investments        accounted for using the equity method** |   | **Deduction for dividends** |   | **Exchange rate differences** |   | **Other changes** |   | **Value of the end of the year** |
|-----------------------|--------|----------------------------------------|--------|------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|-----------------------------|--------|-------------------------------|--------|-------------------|--------|----------------------------------|
|                  |   |                                        |   |                                    |   |                                                                                         |   |                                                                                         |   |                             |   |                               |   |                   |   |                                  |

| **Dec.        31, 2004**                          |   |      |   |   |    |   |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |      |   |
|---------------------------------------------------|--------|-----------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| Investments in unconsolidated subsidiaries        |   | 106       |   |   | 11      |   |   | 6       |   |   | (6      | )      |   |     |   |   | (4      | )      |   | (4      | )      |   | 109       |   |
| Investments        in joint ventures              |   | 1,851     |   |   | 119     |   |   | 215     |   |   | (6      | )      |   | (276     | )      |   | (47     | )      |   | 90      |   |   | 1,946     |   |
| Investments in affiliates                         |   | 947       |   |   | 119     |   |   | 180     |   |   | (57     | )      |   | (71      | )      |   | (19     | )      |   | 2       |   |   | 1,101     |   |
|                                              |   | **2,904** |   |   | **249** |   |   | **401** |   |   | **(69** | **)**  |   | **(347** | **)**  |   | **(70** | **)**  |   | **88**  |   |   | **3,156** |   |
| **Dec. 31, 2005**                                 |   |      |   |   |    |   |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Investments        in unconsolidated subsidiaries |   | 109       |   |   | 30      |   |   | 6       |   |   | (2      | )      |   | (3       | )      |   | 10      |   |   | (4      | )      |   | 146       |   |
| Investments in joint ventures                     |   | 1,946     |   |   | 12      |   |   | 375     |   |   | (27     | )      |   | (202     | )      |   | 98      |   |   | 120     |   |   | 2,322     |   |
| Investments        in affiliates                  |   | 1,101     |   |   | 6       |   |   | 389     |   |   | (4      | )      |   | (96      | )      |   | 34      |   |   | (8      | )      |   | 1,422     |   |
|                                              |   | **3,156** |   |   | **48**  |   |   | **770** |   |   | **(33** | **)**  |   | **(301** | **)**  |   | **142** |   |   | **108** |   |   | **3,890** |   |

Acquisitions and subscriptions for euro 48million concerned mainly the subscriptions of capital increase ofServizi Porto Marghera Scrl (euro 17 million), Enirepsa Gas Ltd(euro 12 million) and Lasmo Petroleum Development BV (euro 10million) and the acquisition of Acam Clienti SpA by Eni SpA (euro6 million).

Gains from the valuation of investments usingthe equity method of euro 770 million primarily relate to GalpEnergia SGPS SA (euro 280 million), Trans Austria Gasleitung GmbH(euro 54 million), Lipardiz Construçao de Estruturas MaritimasLda (euro 46 million), Unión Fenosa Gas SA (euro 44 million) andBlue Stream Pipeline Co BV (euro 30 million).

Losses from the valuation of investments usingthe equity method of euro 33 million primarily relate toGeopromtrans Llc (euro 11 million) and Enirepsa Gas Ltd (euro 11million).

Deduction following the distribution ofdividends of euro 301 million primarily relates to Galp EnergiaSGPS SA (euro 56 million), Trans Europa Naturgas Pipeline GmbH(euro 29 million) and Trans Austria Gasleitung GmbH (euro 28million) and Supermetanol CA (euro 28 million).

The net carrying value of euro 3,890 million(euro 3,156 million at December 31, 2004) consisted of thefollowing companies:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

|   |   | **Net value** |   |   | **Eni’s interest** |   |   | **Net value** |   |   | **Eni’s interest** |   |
|--------|--------|---------------|--------|--------|-------------------------|--------|--------|---------------|--------|--------|-------------------------|--------|
|   |   |               |   |   |                         |   |   |               |   |   |                         |   |

| Unconsolidated        subsidiaries:                                |   |      |   |   |   |   |   |      |   |   |   |   |
|--------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| - Eni Btc Ltd                                                      |   | 48        |   |   | 100.00 |   |   | 55        |   |   | 100.00 |   |
| - Others (*)                                                       |   | 61        |   |   |   |   |   | 91        |   |   |   |   |
|                                                               |   | **109**   |   |   |   |   |   | **146**   |   |   |   |   |
| Joint        ventures:                                             |   |      |   |   |   |   |   |      |   |   |   |   |
| - Unión Fenosa Gas SA                                         |   | 404       |   |   | 50.00  |   |   | 459       |   |   | 50.00  |   |
| - Blue        Stream Pipeline Co BV                                |   | 116       |   |   | 50.00  |   |   | 280       |   |   | 50.00  |   |
| - Raffineria di Milazzo ScpA                                       |   | 168       |   |   | 50.00  |   |   | 172       |   |   | 50.00  |   |
| - EnBW -        Eni Verwaltungsgesellschaft mbH                    |   | 150       |   |   | 50.00  |   |   | 168       |   |   | 50.00  |   |
| - Azienda Energia e Servizi Torino SpA                             |   | 171       |   |   | 49.00  |   |   | 165       |   |   | 49.00  |   |
| - Eteria        Parohis Aeriou Thessalonikis AE                    |   | 151       |   |   | 49.00  |   |   | 152       |   |   | 49.00  |   |
| - Super Octanos CA                                                 |   | 82        |   |   | 49.00  |   |   | 113       |   |   | 49.00  |   |
| - Trans        Austria Gasleitung GmbH                             |   | 60        |   |   | 89.00  |   |   | 88        |   |   | 89.00  |   |
| - Supermetanol CA                                                  |   | 59        |   |   | 34.51  |   |   | 88        |   |   | 35.20  |   |
| - Unimar        Llc                                                |   | 97        |   |   | 50.00  |   |   | 84        |   |   | 50.00  |   |
| - FPSO Mystras - Produção de Petroleo Lda                |   | 75        |   |   | 50.00  |   |   | 73        |   |   | 50.00  |   |
| - Lipardiz        Construção de Estruturas Maritimas Lda |   | 20        |   |   | 50.00  |   |   | 66        |   |   | 50.00  |   |
| - Transmediterranean Pipeline Co Ltd                               |   | 57        |   |   | 50.00  |   |   | 63        |   |   | 50.00  |   |
| -        Siciliana Gas SpA                                         |   | 52        |   |   | 50.00  |   |   | 60        |   |   | 50.00  |   |
| - Toscana Gas SpA                                                  |   | 56        |   |   | 46.10  |   |   | 55        |   |   | 46.10  |   |
| - Eteria        Parohis Aeriou Thessalias EA                       |   | 41        |   |   | 49.00  |   |   | 39        |   |   | 49.00  |   |
| - Transitgas AG                                                    |   | 32        |   |   | 46.00  |   |   | 32        |   |   | 46.00  |   |
| -        CMS&A Wll                                             |   | 15        |   |   | 20.00  |   |   | 31        |   |   | 20.00  |   |
| - Others (*)                                                       |   | 140       |   |   |   |   |   | 134       |   |   |   |   |
|                                                               |   | **1,946** |   |   |   |   |   | **2,322** |   |   |   |   |
| Affiliates:                                                        |   |      |   |   |   |   |   |      |   |   |   |   |
| - Galp        Energia SGPS SA                                      |   | 670       |   |   | 33.34  |   |   | 896       |   |   | 33.34  |   |
| - United Gas Derivatives Co (UGDG)                                 |   | 97        |   |   | 33.33  |   |   | 128       |   |   | 33.33  |   |
| -        Fertilizantes Nitrogenados de Oriente CEC                 |   | 75        |   |   | 20.00  |   |   | 92        |   |   | 20.00  |   |
| - Haldor Topsøe AS                                            |   | 39        |   |   | 50.00  |   |   | 62        |   |   | 50.00  |   |
| - Acam Gas        SpA                                              |   | 44        |   |   | 49.00  |   |   | 45        |   |   | 49.00  |   |
| - Distribuidora de Gas del Centro SA                               |   | 37        |   |   | 31.35  |   |   | 41        |   |   | 31.35  |   |
| - Termica        Milazzo Srl                                       |   | 27        |   |   | 40.00  |   |   | 21        |   |   | 40.00  |   |
| - Others (*)                                                       |   | 112       |   |   |   |   |   | 137       |   |   |   |   |
|                                                               |   | **1,101** |   |   |   |   |   | **1,422** |   |   |   |   |
|                                                               |   | **3,156** |   |   |   |   |   | **3,890** |   |   |   |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 25        million. |

The net value of investments in unconsolidatedsubsidiaries and affiliates include the differences betweenpurchase price and Eni’s equity in the investments of euro553 million. Such differences relate to Unión Fenosa Gas SA(euro 195 million), EnBW - Eni Verwaltungsgesellschaft mbH (euro180 million), Galp Energia SGPS SA (euro 107 million) and AziendaEnergia e Servizi Torino SpA (euro 71 million).

Provisions for losses related to investments ofeuro 21 million (euro 30 million at December 31, 2004), includedin the provisions for contingencies, relate essentially toGeopromtrans Llc (euro 19 million).

**Other investments**

Other investments of euro 421 million (euro 529million at December 31, 2004) consisted of the following:

| (million        euro) |   | **Net value at the beginning of the year** |   | **Acquisitions and subscriptions** |   | **Sales** |   | **Exchange rate differences** |   | **Other changes** |   | **Net value at the end of the year** |   | **Gross value at the end of the year** |   | **Accumulated impairment charges** |
|-----------------------|--------|--------------------------------------------|--------|------------------------------------|--------|-----------|--------|-------------------------------|--------|-------------------|--------|--------------------------------------|--------|----------------------------------------|--------|------------------------------------|
|                  |   |                                            |   |                                    |   |           |   |                               |   |                   |   |                                      |   |                                        |   |                                    |

| **Dec.        31, 2004**           |   |    |   |   |   |   |   |     |   |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
|------------------------------------|--------|---------|--------|--------|--------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
| Unconsolidated subsidiaries        |   | 79      |   |   |   |   |   |     |   |   |    |   |   | (1      | )      |   | 78      |   |   | 86      |   |   | 8      |   |
| Affiliates                         |   | 106     |   |   | 2      |   |   |     |   |   |    |   |   | (1      | )      |   | 107     |   |   | 117     |   |   | 10     |   |
| Other investments                  |   | 316     |   |   | 65     |   |   | (18      | )      |   | (20     | )      |   | 1       |   |   | 344     |   |   | 398     |   |   | 54     |   |
|                               |   | **501** |   |   | **67** |   |   | **(18**  | **)**  |   | **(20** | **)**  |   | **(1**  | **)**  |   | **529** |   |   | **601** |   |   | **72** |   |
| **Dec. 31, 2005**                  |   |    |   |   |   |   |   |     |   |   |    |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Unconsolidated        subsidiaries |   | 78      |   |   | 1      |   |   |     |   |   |    |   |   | (38     | )      |   | 41      |   |   | 68      |   |   | 27     |   |
| Affiliates                         |   | 107     |   |   |   |   |   | (100     | )      |   |    |   |   | 2       |   |   | 9       |   |   | 9       |   |   |   |   |
| Other        investments           |   | 344     |   |   | 23     |   |   | (30      | )      |   | 41      |   |   | (7      | )      |   | 371     |   |   | 375     |   |   | 4      |   |
|                               |   | **529** |   |   | **24** |   |   | **(130** | **)**  |   | **41**  |   |   | **(43** | **)**  |   | **421** |   |   | **452** |   |   | **31** |   |

Other investments related to unconsolidatedsubsidiaries and affiliates are valued at cost adjusted forimpairment. Investments in other companies are essentially valuedat cost adjusted for impairment, because the fair value cannot bereliably determined.

Acquisitions and subscriptions for euro 24million essentially concern the subscriptions to the capitalincrease of Darwin LNG Pty Ltd (euro 22 million).

Sales of euro 130 million essentially relate tothe sale of Erg Raffinerie Mediterranee SpA (euro 100 million)and Discovery Producer Services Llc (euro 20 million).

The net carrying amount of Other investments ofeuro 421 million (euro 529 million at December 31, 2004)concerned the following companies:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

|   |   | **Net value** |   |   | **Eni’s interest** |   |   | **Net value** |   |   | **Eni’s interest** |   |
|--------|--------|---------------|--------|--------|-------------------------|--------|--------|---------------|--------|--------|-------------------------|--------|
|   |   |               |   |   |                         |   |   |               |   |   |                         |   |

| Unconsolidated        subsidiaries (*)   |   | **78**  |   |   |   |   |   | **41**  |   |   |   |   |
|------------------------------------------|--------|---------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|
| Affiliates:                              |   |    |   |   |   |   |   |    |   |   |   |   |
| - Erg        Raffinerie Mediterranee SpA |   | 100     |   |   | 28.00  |   |   |    |   |   |   |   |
| - Others (*)                             |   | 7       |   |   |   |   |   | 9       |   |   |   |   |
|                                     |   | **107** |   |   |   |   |   | **9**   |   |   |   |   |
| Other investments:                       |   |    |   |   |   |   |   |    |   |   |   |   |
| - Darwin        LNG Pty Ltd              |   | 89      |   |   | 12.04  |   |   | 126     |   |   | 12.04  |   |
| - Nigeria LNG Ltd                        |   | 86      |   |   | 10.40  |   |   | 100     |   |   | 10.40  |   |
| - Ceska        Rafinerska AS             |   | 30      |   |   | 16.33  |   |   | 35      |   |   | 16.33  |   |
| - Discovery Producer Services Llc        |   | 19      |   |   | 16.67  |   |   |    |   |   |   |   |
| -        Interconnector (UK) Ltd         |   | 23      |   |   | 4.62   |   |   | 27      |   |   | 5.00   |   |
| - Others (*)                             |   | 97      |   |   |   |   |   | 83      |   |   |   |   |
|                                     |   | **344** |   |   |   |   |   | **371** |   |   |   |   |
|                                     |   | **529** |   |   |   |   |   | **421** |   |   |   |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 25        million. |

The provisions for losses relatedto investments of euro 64 million (euro 61 million at December31, 2004), included in the provisions for contingencies,concerned the following companies:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Industria        Siciliana Acido Fosforico - ISAF SpA (in liquidation) |   | 39     |   |   | 35     |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Caspian Pipeline Consortium R - Closed Joint        Stock Co           |   | 16     |   |   | 21     |   |
| Other        investments                                               |   | 6      |   |   | 8      |   |
|                                                                   |   | **61** |   |   | **64** |   |

The following are the amounts,according to Eni’s interest, from the last availablefinancial statements of unconsolidated subsidiaries, jointventures and affiliates:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

|   |   | **Unconsolidated subsidiaries** |   | **Joint ventures** |   | **Affiliates** |   | **Unconsolidated subsidiaries** |   | **Joint ventures** |   | **Affiliates** |
|--------|--------|---------------------------------|--------|--------------------|--------|----------------|--------|---------------------------------|--------|--------------------|--------|----------------|
|   |   |                                 |   |                    |   |                |   |                                 |   |                    |   |                |

| Total assets              |   | 1,341 |   |   | 6,699 |   |   | 3,603 |   |   | 1,404 |   |   | 7,423 |   |   | 2,763 |   |
|---------------------------|--------|-------|--------|--------|-------|--------|--------|-------|--------|--------|-------|--------|--------|-------|--------|--------|-------|--------|
| Total        liabilities  |   | 1,227 |   |   | 4,755 |   |   | 2,530 |   |   | 1,263 |   |   | 5,161 |   |   | 1,295 |   |
| Net sales from operations |   | 63    |   |   | 4,361 |   |   | 4,250 |   |   | 63    |   |   | 4,617 |   |   | 1,560 |   |
| Operating        profit   |   | (4    | )      |   | 318   |   |   | 115   |   |   | (1    | )      |   | 609   |   |   | 176   |   |
| Net profit                |   | (1    | )      |   | 172   |   |   | 38    |   |   | (2    | )      |   | 328   |   |   | 371   |   |

Total assets and total liabilities relating tounconsolidated companies of euro 1,404 and euro 1,263 million(euro 1,341 and euro 1,227 million at December 31, 2004) concernfor euro 1,004 and euro 1,004 (euro 935 and euro 935 million atDecember 31, 2004) companies for which the consolidation does notproduce significant effects.

**11 Other financial assets**

Other financial receivables of euro 1,050million (euro 936 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Financial receivables |   | 913     |   |   | 1,001     |   |
|-----------------------|--------|---------|--------|--------|-----------|--------|
| Securities            |   | 23      |   |   | 49        |   |
|                  |   | **936** |   |   | **1,050** |   |

Financial receivables are presented net of animpairment charge of euro 25 million (euro 21 million at December31, 2004).

Financial receivables of euro 1,001 million(euro 913 million at December 31, 2004) concern receivables madefor operating purposes for euro 754 million (euro 673 million atDecember 31, 2004) and non-operating financial receivables foreuro 247 million (euro 240 million at December 31, 2004), ofwhich euro 241 million related to a fixed deposit held by EniLasmo Plc as a guarantee of a debt issue (euro 234 million atDecember 31, 2004). Financial receivables made for operatingpurposes primarily concern the Gas & Power segment (euro 499million) and the Exploration & Production segment (euro 170million). The increase in financial receivables made foroperating purposes of euro 81 million primarily concern theexchange rate differences related to the translation of financialstatements prepared in currencies other than euro (euro 96million).

Receivables in currency other than euro amountto euro 845 million (euro 712 million at December 31, 2004).

Receivables due beyond 5 years amount to euro625 million (euro 402 million at December 31, 2004).

Securities of euro 49 million are consideredheld-to-maturity investments and concern securities issued by theItalian Government for euro 22 million and securities issued byItalian and foreign financial entities for euro 27 million.

At January 1, 2005, the date of the firstapplication of IAS 32 and 39, securities for euro 50 million werereclassified as held-to-maturity.

Securities for euro 21 million concernsecurities made for operating purposes (euro 22 million atDecember 31, 2004).

The valuation at the fair value of otherfinancial assets did not have any significant effect.

**12 Deferred tax assets**

Deferred tax assets of euro 1,861 million (euro1,827 million at December 31, 2004) are net of deferred taxliabilities for which Eni possesses the legal right of offset ofeuro 3,347 million (euro 2,346 million at December 31, 2004).

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Exchange rate differences** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                               |   |                   |   |                            |

|   |   | **1,827** |   |   | 1,778 |   |   | (927 | ) |   | 158 |   |   | (975 | ) |   | **1,861** |   |
|--------|--------|-----------|--------|--------|-------|--------|--------|------|---|--------|-----|--------|--------|------|---|--------|-----------|--------|

Other changes of euro 975 million primarilyconcern the set-off, for each company, of deferred tax assetswith deferred tax liabilities (euro 1,035 million). Such decreasehas been partially offset by provisions to the reserves of theshareholders’ equity following the first application of IAS32 and 39 (euro 60 million).

Deferred tax assets are described in Note 21.

**13 Other non-current assets**

Other non-current assets of euro 995 million(euro 1,008 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Accounts        receivable from:           |   |      |   |   |    |   |
|--------------------------------------------|--------|-----------|--------|--------|---------|--------|
| - Italian tax authorities                  |   |      |   |   |    |   |
|   .        income tax credits    |   | 506       |   |   | 508     |   |
|   . interest on tax credits      |   | 294       |   |   | 309     |   |
|   .        value added tax (VAT) |   | 55        |   |   | 37      |   |
|   . other                        |   | 8         |   |   | 7       |   |
|                                       |   | **863**   |   |   | **861** |   |
| - foreign tax authorities                  |   | 49        |   |   | 44      |   |
|                                       |   | **912**   |   |   | **905** |   |
| Other receivables                          |   | 32        |   |   | 79      |   |
| Other        non-current assets            |   | 64        |   |   | 11      |   |
|                                       |   | **1,008** |   |   | **995** |   |

**Current liabilities**

**14 Current financial liabilities**

Current financial liabilities of euro 4,612million (euro 4,150 million at December 31, 2004) consisted ofthe following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Banks                                                         |   | 2,189     |   |   | 3,894     |   |
|---------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Financial liabilities represented by commercial        papers |   | 1,540     |   |   | 60        |   |
| Other        financing institutions                           |   | 421       |   |   | 658       |   |
|                                                          |   | **4,150** |   |   | **4,612** |   |

The increase of current financial liabilitiesof euro 462 million is primarily due to the exchange ratedifferences related to the translation of financial statementsprepared in currencies other than euro (euro 595 million). Suchincrease has been partially offset by the balance of payments andnew proceeds of liabilities (euro 144 million).

Short-term debt by currency was as follows:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Euro                    |   | 2,393     |   |   | 4,029     |   |
|-------------------------|--------|-----------|--------|--------|-----------|--------|
| U.S.        Dollar      |   | 1,329     |   |   | 323       |   |
| British Pound           |   | 253       |   |   | 4         |   |
| Other        currencies |   | 175       |   |   | 256       |   |
|                    |   | **4,150** |   |   | **4,612** |   |

The weighted average interest rate ofEni’s short-term debt was 2.5% and 2.8% for the years endedDecember 31, 2004 and 2005, respectively.

On December 31, 2005 Eni maintained committedand uncommitted unused lines of credit for euro 5,855 and euro4,783 million, respectively (euro 5,304 million and euro 7,771million, respectively, at December 31, 2004). These agreementsprovide for interest charges based on prevailing marketconditions. Commission fees on unused lines of credit are notsignificant.

**15 Trade and other payables**

Trade and other payables of euro 13,095 million(euro 10,533 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Trade        payables |   | 5,837      |   |   | 8,170      |   |
|-----------------------|--------|------------|--------|--------|------------|--------|
| Advances              |   | 1,211      |   |   | 1,184      |   |
| Other        payables |   | 3,485      |   |   | 3,741      |   |
|                  |   | **10,533** |   |   | **13,095** |   |

Trade payables of euro 8,170 million increasedby euro 2,333 million in 2005 as compared to 2004. Such increaseprimarily concerns the Gas & Power segment (euro 969million), Refining & Marketing segment (euro 577 million) andExploration & Production segment (euro 334 million) andincludes the exchange rate differences related to the translationof financial statements prepared in currencies other than euro(euro 137 million).

Advances of euro 1,184 million (euro 1,211million at December 31, 2004) concern payments received in excessof the value of the work in progress performed for euro 550million (euro 554 million at December 31, 2004), advances oncontract work in progress for euro 309 million (euro 47 millionat December 31, 2004) and other advances for euro 325 million(euro 610 million December 31, 2004). Advances on contract workin progress of euro 859 million (euro 601 million at December 31,2004) concern the Oilfield Services, Construction and Engineeringsegment.

Other payables of euro 3,741 million (euro3,485 million at December 31, 2004) included the following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Payables        due to:                                        |   |      |   |   |      |   |
|----------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| - joint venture operators in exploration and        production |   | 655       |   |   | 1,264     |   |
| -        suppliers in relation to investments                  |   | 996       |   |   | 951       |   |
| - employees                                                    |   | 264       |   |   | 314       |   |
| - Italian        governmental entities                         |   | 240       |   |   | 313       |   |
| - social security entities                                     |   | 232       |   |   | 229       |   |
|                                                           |   | **2,387** |   |   | **3,071** |   |
| Cautionary deposit                                             |   | 20        |   |   | 6         |   |
| Other        payables                                          |   | 1,078     |   |   | 664       |   |
|                                                           |   | **3,485** |   |   | **3,741** |   |

Payables with related parties are described inNote 32.

**16 Taxes payable**

Taxes payable of euro 3,430 million (euro 2,498million at December 31, 2004) consisted of the following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Income        taxes payable |   | 1,200     |   |   | 1,742     |   |
|-----------------------------|--------|-----------|--------|--------|-----------|--------|
| Customs and excise duties   |   | 793       |   |   | 896       |   |
| Other                       |   | 505       |   |   | 792       |   |
|                        |   | **2,498** |   |   | **3,430** |   |

Taxes payable of euro 1,742 million increasedby euro 542 million. The increase resulted primarily from foreigncompanies for euro 622 million following the increase of profitbefore income taxes and the exchange rate differences related tothe translation of financial statements prepared in currenciesother than euro (euro 73 million); such increase was partiallyoffset by the decrease of the income taxes of Italian companies(euro 80 million).

**17 Other current liabilities**

Other current liabilities of euro 613 million(euro 505 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Fair value        of non-hedging derivatives |   |    |   |   | 378     |   |
|----------------------------------------------|--------|---------|--------|--------|---------|--------|
| Fair value of cash flow hedge derivatives    |   |    |   |   | 5       |   |
| Other        liabilities                     |   | 505     |   |   | 230     |   |
|                                         |   | **505** |   |   | **613** |   |

At January 1, 2005, the first application ofIAS 32 and 39, resulted in the accounting at the fair value ofderivatives that do not meet the conditions required to qualifyas hedging instruments for an amount, net of differentials onderivative contracts, of euro 82 million with a correspondingentry to the shareholders’ equity (euro 36 million) and todeferred tax assets (euro 46 million).

Fair value of non-hedging derivative contractsof euro 378 million consisted of the following:

| (million euro) |   | **Fair value** |   | **Commitments** |
|----------------|--------|----------------|--------|-----------------|
|           |   |                |   |                 |

| **Non-hedging derivatives on exchange rate**        |   |    |   |       |
|-----------------------------------------------------|--------|---------|--------|------------|
| Currency        Swap                                |   | 139     |   | 6,370      |
| Interest Currency Swap                              |   | 73      |   | 2,316      |
| Other                                               |   | 2       |   | 57         |
|                                                |   | **214** |   | **8,743**  |
| **Non-hedging        derivatives on interest rate** |   |    |   |       |
| Interest Rate Swap                                  |   | 101     |   | 5,145      |
|                                                |   | **101** |   | **5,145**  |
| **Non-hedging derivatives on commodities**          |   |    |   |       |
| Options                                             |   | 23      |   | 17         |
| Over the counter                                    |   | 21      |   | 323        |
| Future                                              |   | 5       |   | 67         |
| Other                                               |   | 14      |   | 10         |
|                                                |   | **63**  |   | **417**    |
|                                                |   | **378** |   | **14,305** |

Commitments concerning cash flow hedgederivatives amounted to euro 42 million and concerned commitmentson exchange rate derivatives.

At December 31, 2004 other liabilities of euro505 million included differentials on derivative contracts foreuro 141 million, of which euro 46 million related to financingreceivables and liabilities.

**Non-current liabilities**

**18 Long-term debt and current portion of long-term debt**

Long-term debt and the current portion oflong-term debt, including the relevant expiration dates, were asfollows:

| (million euro) |   | **December 31,** |   |   |   | **Long-term maturity** |
|----------------|--------|------------------|--------|--------|--------|------------------------|
|           |   |                  |   |   |   |                        |

| Type of debt instrument             |   | Maturity range |   | 2004      |   | 2005      |   | Current maturity 2006 |   | 2007      |   | 2008    |   | 2009    |   | 2010      |   | After     |   | Total     |
|-------------------------------------|--------|----------------|--------|-----------|--------|-----------|--------|-----------------------|--------|-----------|--------|---------|--------|---------|--------|-----------|--------|-----------|--------|-----------|
|                                |   |                |   |           |   |           |   |                       |   |           |   |         |   |         |   |           |   |           |   |           |
| Banks:                              |   |           |   |      |   |      |   |                  |   |      |   |    |   |    |   |      |   |      |   |      |
| - ordinary        loans             |   | **2006-2017**  |   | 2,166     |   | 2,174     |   | 261                   |   | 493       |   | 150     |   | 272     |   | 248       |   | 750       |   | 1,913     |
| - interest rate assisted loans      |   | **2006-2013**  |   | 101       |   | 45        |   | 32                    |   | 4         |   | 3       |   | 2       |   | 2         |   | 2         |   | 13        |
| - other        financings           |   | **2006**       |   | 9         |   | 3         |   | 3                     |   |      |   |    |   |    |   |      |   |      |   |      |
| Ordinary bonds                      |   | **2006-2027**  |   | 5,331     |   | 5,339     |   | 391                   |   | 705       |   | 471     |   | 126     |   | 939       |   | 2,707     |   | 4,948     |
| Other        financing institutions |   | **2006-2019**  |   | 927       |   | 825       |   | 46                    |   | 137       |   | 37      |   | 124     |   | 181       |   | 300       |   | 779       |
|                                |   |           |   | **8,534** |   | **8,386** |   | **733**               |   | **1,339** |   | **661** |   | **524** |   | **1,370** |   | **3,759** |   | **7,653** |

Long-term debt of euro 8,386 million includingthe current portion of long-term debt, decreased by euro 148million. Such decrease is primarily due to the balance ofpayments and new proceeds of liabilities (euro 376 million) andto the effect of exchange rate differences on the alignment tothe year end exchange rate of debts denominated in currenciesother than functional currency (euro 309 million) and, asincrease, to the effect of exchange rate differences on thetranslation of financial statements prepared in currencies otherthan euro (euro 478 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 Statementsor of a rating notinferior to A - (S&P) and A3 (Moodys). At December 31, 2004and 2005, the amount of short and long-term debt subject torestrictive covenants was euro 1,104 million and euro 1,258million, respectively. Furthermore, Saipem SpA entered intofinancing arrangements with banks for euro 275 million (euro 300million), that require maintenance of certain financial ratiosgenerally based on Saipem’s Consolidated FinancialStatements. Eni and Saipem are in compliance with the covenantscontained in its financing arrangements.

Bonds of euro 5,339 million concern bondsissued within the Medium Term Notes Program for a total of euro4,365 million and other bonds for a total of euro 974 million.

Bonds as of December 31, 2005, including theissuing entity, the expiration dates and the interest rates, bycurrency, were as follows:

|   |   | **Amount** |   | **Discount on bond issue and accrued        expense** |   | **Total** |   | **Value** |   | **Maturity** |   | **% rate** |
|--------|--------|------------|--------|-------------------------------------------------------|--------|-----------|--------|-----------|--------|--------------|--------|------------|
|   |   |       |   |                                                  |   |      |   |      |   |              |   |            |

| (million        euro) |   |   |   |   |   |   |   |   |   | **from** |   | **to** |   | **from** |   | **to** |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|--------|----------|--------|--------|
|                  |   |        |   |        |   |        |   |        |   |          |   |        |   |          |   |        |

| **Issuing        entity**           |   |      |   |   |   |   |   |      |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |
|-------------------------------------|--------|-----------|--------|--------|--------|--------|--------|-----------|--------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|--------|--------|
| *Euro Medium Term Notes:*           |   |      |   |   |   |   |   |      |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |
| - Eni SpA                           |   | 1,500     |   |   | 41     |   |   | 1,541     |   |   | Euro          |   |   |   |   |   | 2013   |   |   |     |   |   | 4.625  |   |
| - Eni Coordination Center SA        |   | 876       |   |   | (2     | )      |   | 874       |   |   | British pound |   |   | 2007   |   |   | 2019   |   |   | 4.875    |   |   | 5.250  |   |
| - Eni        Coordination Center SA |   | 516       |   |   | 5      |   |   | 521       |   |   | Euro          |   |   | 2007   |   |   | 2015   |   |   | variable |   |   |   |   |
| - Eni SpA                           |   | 500       |   |   | 16     |   |   | 516       |   |   | Euro          |   |   |   |   |   | 2010   |   |   |     |   |   | 6.125  |   |
| - Eni        Coordination Center SA |   | 274       |   |   | 5      |   |   | 279       |   |   | Euro          |   |   | 2008   |   |   | 2024   |   |   | 2.876    |   |   | 5.050  |   |
| - Eni Coordination Center SA        |   | 216       |   |   | 3      |   |   | 219       |   |   | U.S. dollar   |   |   | 2013   |   |   | 2015   |   |   | 4.450    |   |   | 4.800  |   |
| - Eni        Coordination Center SA |   | 161       |   |   | 4      |   |   | 165       |   |   | U.S. dollar   |   |   | 2006   |   |   | 2007   |   |   | variable |   |   |   |   |
| - Eni Coordination Center SA        |   | 152       |   |   |   |   |   | 152       |   |   | Japanese yen  |   |   | 2008   |   |   | 2021   |   |   | 0.810    |   |   | 2.320  |   |
| - Eni        Coordination Center SA |   | 83        |   |   | 1      |   |   | 84        |   |   | Swiss franc   |   |   | 2006   |   |   | 2010   |   |   | 1.750    |   |   | 2.043  |   |
| - Eni Coordination Center SA        |   | 14        |   |   |   |   |   | 14        |   |   | Swiss franc   |   |   |   |   |   | 2007   |   |   | variable |   |   |   |   |
|                                |   | **4,292** |   |   | **73** |   |   | **4,365** |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |
| *Other bonds:*                      |   |      |   |   |   |   |   |      |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |
| - Eni USA        Inc                |   | 339       |   |   | 2      |   |   | 341       |   |   | U.S. dollar   |   |   |   |   |   | 2027   |   |   |     |   |   | 7.300  |   |
| - Eni USA Inc                       |   | 254       |   |   | 1      |   |   | 255       |   |   | U.S. dollar   |   |   |   |   |   | 2006   |   |   |     |   |   | 7.500  |   |
| - Eni        Lasmo Plc (*)          |   | 219       |   |   | (11    | )      |   | 208       |   |   | British pound |   |   |   |   |   | 2009   |   |   |     |   |   | 10.375 |   |
| - Eni USA Inc                       |   | 170       |   |   |   |   |   | 170       |   |   | U.S. dollar   |   |   |   |   |   | 2007   |   |   |     |   |   | 6.750  |   |
|                                |   | **982**   |   |   | **(8** | **)**  |   | **974**   |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |
|                                |   | **5,274** |   |   | **65** |   |   | **5,339** |   |   |          |   |   |   |   |   |   |   |   |     |   |   |   |   |

|   |   |                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|
| (*)    |   | The bond is        guaranteed by a fixed deposit recorded under non-current        financial assets (euro 241 million). |

Bonds due within 18 months amount to euro 435million and concern Eni USA Inc (euro 255 million) and EniCoordination Center SA (euro 180 million). During 2005 Eni issuedbonds for euro 441 million through Eni Coordination Center SA.

Long-term debt and the current portion oflong-term debt, including the weighted average interest rates, bycurrency, was as follows:

|   |   | **Dec. 31, 2004**(million euro) |   | **Average rate** |   | **Dec. 31, 2005**(million euro) |   | **Average rate** |
|--------|--------|---------------------------------|--------|------------------|--------|---------------------------------|--------|------------------|
|   |   |                                 |   |                  |   |                                 |   |                  |

| Euro                    |   | 5,704     |   |   | 3.3    |   |   | 5,344     |   |   | 3.6    |   |
|-------------------------|--------|-----------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| U.S.        dollar      |   | 1,476     |   |   | 6.4    |   |   | 1,709     |   |   | 7.0    |   |
| British pound           |   | 1,082     |   |   | 6.1    |   |   | 1,082     |   |   | 5.3    |   |
| Japanese        yen     |   | 96        |   |   | 1.4    |   |   | 153       |   |   | 1.4    |   |
| Swiss franc             |   | 146       |   |   | 1.1    |   |   | 98        |   |   | 2.6    |   |
| Other        currencies |   | 30        |   |   | 8.7    |   |   |      |   |   |   |   |
|                    |   | **8,534** |   |   |   |   |   | **8,386** |   |   |   |   |

On December 31, 2005 Eni maintained committedunused lines of credit for euro 1,070 million (euro 710 millionat December 31, 2004). These agreements provide for interestcharges based on prevailing market conditions. Commission fees onunused lines of credit are not significant.

Financial liabilities for euro 251 million areguaranteed by mortgages and liens on fixed assets of consolidatedcompanies and by pledges on securities and fixed deposits (euro274 million at December 31, 2004).

Fair value of long-term debt, including thecurrent portion of long-term debt, amounts to euro 8,732 million(euro 8,748 million at December 31, 2004) and consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Banks                               |   | 2,276     |   | 2,222     |
|-------------------------------------|--------|-----------|--------|-----------|
| Ordinary bonds                      |   | 5,509     |   | 5,633     |
| Other        financing institutions |   | 963       |   | 877       |
|                                |   | **8,748** |   | **8,732** |

Fair value was calculated by discounting thefuture cash flows using rates between 2.8% and 5% (2.4% and 5.2%at December 31, 2004).

**19 Provisions for contingencies**

Provisions for contingencies of euro 7,679million (euro 5,736 million at December 31, 2004) consisted ofthe following:

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                   |   |                            |

| Provisions for site restoration and abandonment                                     |   | 1,967     |   |   | 694       |   |   | (108     | )      |   | 95     |   |   | 2,648     |   |
|-------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|----------|--------|--------|--------|--------|--------|-----------|--------|
| Provisions        for environmental risks                                           |   | 1,649     |   |   | 522       |   |   | (157     | )      |   | 89     |   |   | 2,103     |   |
| Loss adjustments and actuarial provisions for        Eni’s insurance companies |   | 573       |   |   | 100       |   |   | (18      | )      |   | 52     |   |   | 707       |   |
| Provisions        for contract penalties and disputes                               |   | 208       |   |   | 359       |   |   | (36      | )      |   | 3      |   |   | 534       |   |
| Provisions for revision of selling prices                                           |   |      |   |   | 321       |   |   |     |   |   |   |   |   | 321       |   |
| Provisions        for taxes                                                         |   | 235       |   |   | 87        |   |   | (38      | )      |   | 25     |   |   | 309       |   |
| Provisions for restructuring or decommissioning        of production facilities     |   | 214       |   |   | 94        |   |   | (113     | )      |   |   |   |   | 195       |   |
| Provisions        for OIL insurance                                                 |   | 91        |   |   | 36        |   |   |     |   |   |   |   |   | 127       |   |
| Provisions for losses related to investments                                        |   | 91        |   |   | 24        |   |   | (3       | )      |   | (27    | )      |   | 85        |   |
| Provisions        for onerous contracts                                             |   |      |   |   | 71        |   |   | (6       | )      |   | 15     |   |   | 80        |   |
| Provisions for prize promotion                                                      |   | 63        |   |   | 52        |   |   | (57      | )      |   | (6     | )      |   | 52        |   |
| Other        (*)                                                                    |   | 645       |   |   | 264       |   |   | (173     | )      |   | (218   | )      |   | 518       |   |
|                                                                                |   | **5,736** |   |   | **2,624** |   |   | **(709** | **)**  |   | **28** |   |   | **7,679** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 50        million. |

Provisions for site restoration and abandonmentof euro 2,648 million represent primarily the estimated costs forwell-plugging, abandonment and site restoration (euro 2,613million). The provisions of the year of euro 694 million includethe initial recognition and the reviews to the estimate ofdismantling and restoration of sites recognized as a balancingentry to the asset to which they refers (euro 592 million) andfinancial expense due to the passage of time charged to theprofit and loss account (euro 102 million); the discount rateused is included between 3% and 5.4%. Other changes of euro 95million include exchange rate differences on the translation offinancial statements prepared in currencies other than euro (euro109 million).

Provisions for environmental risks of euro2,103 million represent, primarily, the estimated costs ofremediation in accordance with existing laws and regulations, ofactive production facilities for Syndial SpA (euro 1,445million), the Refining & Marketing segment (euro 405million), the Corporate and financial companies aggregate,relating to guarantees issued in relation to properties sold(euro 122 million) and the Gas & Power segment (euro 61million). Provisions in 2005 of euro 522 million primarilyconcern the Refining & Marketing segment (euro 282 million),Syndial SpA (euro 170 million) and the Corporate and financialcompanies aggregate (euro 50 million).

Loss adjustments and actuarial provisions forEni’s insurance companies of euro 707 million represent theliabilities accrued for claims on insurance policies underwrittenby Eni’s captive insurance company. Deductions of euro 18million concern deductions not corresponding to cash expendituresas regards to the reported accidents.

Provisions for contract penalties and disputesof euro 534 million are based on Eni’s best estimate of theexpected probable liability. Provisions of the year for euro 359million primarily concern the fine imposed on February 15, 2006by the Antitrust Authority on Eni (euro 290 million). Deductionsof euro 36 million concern deductions not corresponding to cashexpenditures for euro 23 million.

Provisions for the revision of selling pricesof euro 321 million primarily concern the provision for theestimated adverse impact of the application of Decision 248/2004by the Italian Authority for Electricity and Gas from January 1,2005 affecting the parameters for the upgrading of the rawmaterial component in price formulas for end users (euro 225million).

Provisions for taxes of euro 309 millionprimarily include charges for unsettled tax claims to uncertainapplication of the tax regulation for foreign companies of theExploration & Production segment (euro 268 million).Deductions of euro 38 million concern deductions notcorresponding to cash expenditures for euro 30 million.

Provisions for restructuring or decommissioningof production facilities of euro 195 million mainly represent theestimated costs related to divestments and facilities closures ofthe Refining & Marketing segment (euro 156 million).Deductions of euro 113 million concern deductions notcorresponding to cash expenditures for euro 28 million.

Provisions for OIL insurance of euro 127million include the provisions related to the increase of chargesthat will be paid in the next 5 years period, due by Eni forparticipation in the mutual insurance of Oil Insurance Ltd,following to the greater number of accidents occurred in 2004 and2005.

Provisions for losses on investments of euro 85million represent losses incurred to date in excess of thecarrying value of investments (see Note 10).

Provisions for onerous contracts of euro 80million concern Syndial SpA and relate to contracts for which thetermination or execution costs exceed the benefits arising fromthat contract.

Provisions for prize promotion of euro 52million include the provisions of the Refining & Marketingsegment in relation to promotions directed towards the attainmentof an increase on sales volumes on the Agip branded network andintended for station operators, for truckers and motorists thatperform the fuel fill-up at the "Isole Fai da Te".

Deductions of other provisions of euro 173million include deductions not corresponding to cash expendituresfor euro 53 million, of which euro 27 million concern provisionsfor long-term construction contracts.

Other changes of euro 28 million includeexchange differences due to the translation of financialstatements prepared in currencies other than euro of euro 159million; such increase has been partially offset byreclassifications essentially to social projects and financialreceivables (euro 140 million).

**20 Provisions for employee benefits**

Provisions for employee benefits of Eni Groupconcern indemnities upon termination of employment, pension planswith benefits measured in consideration of the employee’syear compensation preceding the retirement and other benefits.

Provisions for indemnities upon termination ofemployment essentially concern the provisions for employeetermination indemnities ("TFR"), regulated by article2120 of the Italian Civil Code. The indemnity is paid out ascapital and is determined by the total of the provisions setaside, calculated in consideration of the employee’scompensation during the service period, and revalued until theretirement. Provisions to TFR, considered for the determinationof liabilities and costs, are net of the amounts paid to pensionfunds.

Pension funds concern defined benefit plans offoreign companies located, primarily, in United Kingdom, Nigeriaand Germany. Benefits consist of a return on capital determinedon the basis of the length of service and the compensation paidin the last year of service or an average annual compensationpaid in a determined period preceding the retirement.

Other benefits essentially concern thesupplementary medical reserve for Eni managers (FISDE) andjubilee awards. Liability and costs related to FISDE arecalculated on the basis of the contributions paid by the companyfor the retired managers. Jubilee awards are benefits duefollowing the attainment of a minimum period of service and,regarding to the Italian companies, they consist of aremuneration in kind.

The value of employee benefits for the periodsindicated consisted of the following:

|   | **Foreign pension plans** |   |
|--------|---------------------------|--------|
|   |                           |   |

| (million        euro) |   | **TFR** |   | **Gross liability** |   | **Plan assets** |   | **Net liability** |   | **Other benefits** |   | **Total** |
|-----------------------|--------|---------|--------|---------------------|--------|-----------------|--------|-------------------|--------|--------------------|--------|-----------|
|                  |   |         |   |                     |   |                 |   |                   |   |                    |   |           |

| **Dec. 31, 2004**                                                   |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |      |   |
|---------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| **Current        value of benefit obligation at beginning of year** |   | **521** |   |   | **483** |   |   | **(224** | **)**  |   | **259** |   |   | **130** |   |   | **910**   |   |
| Current cost                                                        |   | 54      |   |   | 17      |   |   |     |   |   | 17      |   |   | 3       |   |   | 74        |   |
| Interest        cost                                                |   | 25      |   |   | 25      |   |   |     |   |   | 25      |   |   | 6       |   |   | 56        |   |
| Expected return on plan assets                                      |   |    |   |   |    |   |   | (14      | )      |   | (14     | )      |   |    |   |   | (14       | )      |
| Contributions        paid                                           |   |    |   |   | 1       |   |   | (21      | )      |   | (20     | )      |   |    |   |   | (20       | )      |
| Actuarial gains/losses                                              |   | 29      |   |   | 46      |   |   | (7       | )      |   | 39      |   |   | 8       |   |   | 76        |   |
| Benefits        paid                                                |   | (52     | )      |   | (18     | )      |   | 11       |   |   | (7      | )      |   | (9      | )      |   | (68       | )      |
| Amendments                                                          |   |    |   |   | 11      |   |   |     |   |   | 11      |   |   |    |   |   | 11        |   |
| Exchange        rate differences and other changes                  |   |    |   |   | 11      |   |   | (2       | )      |   | 9       |   |   |    |   |   | 9         |   |
| **Current value of benefit obligation at        end of year**       |   | **577** |   |   | **576** |   |   | **(257** | **)**  |   | **319** |   |   | **138** |   |   | **1.034** |   |
| **Dec.        31, 2005**                                            |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |      |   |
| **Current value of benefit obligation at        beginning of year** |   | **577** |   |   | **576** |   |   | **(257** | **)**  |   | **319** |   |   | **138** |   |   | **1.034** |   |
| Current        cost                                                 |   | 59      |   |   | 18      |   |   |     |   |   | 18      |   |   | 5       |   |   | 82        |   |
| Interest cost                                                       |   | 25      |   |   | 30      |   |   |     |   |   | 30      |   |   | 6       |   |   | 61        |   |
| Expected        return on plan assets                               |   |    |   |   |    |   |   | (16      | )      |   | (16     | )      |   |    |   |   | (16       | )      |
| Contributions paid                                                  |   |    |   |   | 1       |   |   | (46      | )      |   | (45     | )      |   |    |   |   | (45       | )      |
| Actuarial        gains/losses                                       |   | 47      |   |   | 66      |   |   | (24      | )      |   | 42      |   |   | (6      | )      |   | 83        |   |
| Benefits paid                                                       |   | (49     | )      |   | (19     | )      |   | 11       |   |   | (8      | )      |   | (10     | )      |   | (67       | )      |
| Amendments                                                          |   |    |   |   | 3       |   |   |     |   |   | 3       |   |   |    |   |   | 3         |   |
| Economic effect of curtailment or settlement of        the plan     |   | (6      | )      |   | (5      | )      |   |     |   |   | (5      | )      |   |    |   |   | (11       | )      |
| Exchange        rate differences and other changes                  |   |    |   |   | 87      |   |   | (27      | )      |   | 60      |   |   |    |   |   | 60        |   |
| **Current value of benefit obligation at end of        year**       |   | **653** |   |   | **757** |   |   | **(359** | **)**  |   | **398** |   |   | **133** |   |   | **1,184** |   |

Gross liability relating foreign pension plansof euro 757 million (euro 576 million at December 31, 2004)includes pension plans with no plan assets for euro 180 million(euro 166 million at December 31, 2004).

Current value of benefit obligation of foreignpension plans includes liabilities of joint ventures operating inexploration and production activities.

Current value of the obligation relating otherbenefits of euro 133 million (euro 138 million at December 31,2004) concern primarily FISDE for euro 96 million and jubileeawards for euro 29 million (euro 106 million and euro 26 millionat December 31, 2004, respectively). 

Reconciliation of net liabilities for benefitsrecorded in the balance sheets was as follows:

| (million        euro) |   | **TFR** |   | **Foreign pension plans** |   | **Other benefits** |   | **Total** |
|-----------------------|--------|---------|--------|---------------------------|--------|--------------------|--------|-----------|
|                  |   |         |   |                           |   |                    |   |           |

| **Dec.        31, 2004**                           |   |    |   |   |    |   |   |    |   |   |      |   |
|----------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| **Current value of the benefit obligation**        |   | **577** |   |   | **319** |   |   | **138** |   |   | **1,034** |   |
| Actuarial        gains/losses not recognized       |   | (18     | )      |   | (16     | )      |   | (7      | )      |   | (41       | )      |
| Past service cost not recognized                   |   |    |   |   | (11     | )      |   |    |   |   | (11       | )      |
| **Provisions        for employee benefits**        |   | **559** |   |   | **292** |   |   | **131** |   |   | **982**   |   |
| **Dec. 31, 2005**                                  |   |    |   |   |    |   |   |    |   |   |      |   |
| **Current        value of the benefit obligation** |   | **653** |   |   | **398** |   |   | **133** |   |   | **1,184** |   |
| Actuarial gains/losses not recognized              |   | (76     | )      |   | (71     | )      |   | 3       |   |   | (144      | )      |
| Past        service cost not recognized            |   |    |   |   | (9      | )      |   |    |   |   | (9        | )      |
| **Provisions for employee benefits**               |   | **577** |   |   | **318** |   |   | **136** |   |   | **1,031** |   |

Fund for employee benefits of foreign pensionsplan of euro 318 million (euro 292 million at December 31, 2004)includes liabilities of joint ventures operating in explorationand production activities for euro 95 million and euro 130million at December 31, 2004 and 2005, respectively; a receivablewas recorded against such liability.

Fund for other benefits of euro 136 million(euro 131 million at December 31, 2004) concern primarily FISDEfor euro 99 million and jubilee awards for euro 29 million (euro99 million and euro 26 million at December 31, 2004,respectively).

Costs for employee benefits recorded in theprofit and loss account consisted of the following:

| (million        euro) |   | **TFR** |   | **Foreign pension plans** |   | **Other benefits** |   | **Total** |
|-----------------------|--------|---------|--------|---------------------------|--------|--------------------|--------|-----------|
|                  |   |         |   |                           |   |                    |   |           |

| **2004**                                                        |   |   |   |   |   |   |   |   |   |   |    |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
| Current        cost                                             |   | 54     |   |   | 17     |   |   | 3      |   |   | 74      |   |
| Interest cost                                                   |   | 25     |   |   | 25     |   |   | 6      |   |   | 56      |   |
| Expected        return rate on plan assets                      |   |   |   |   | (14    | )      |   |   |   |   | (14     | )      |
| Amortization of past service cost                               |   |   |   |   | 1      |   |   |   |   |   | 1       |   |
| Amortization        of actuarial gains/losses                   |   |   |   |   |   |   |   | 1      |   |   | 1       |   |
| **Total cost**                                                  |   | **79** |   |   | **29** |   |   | **10** |   |   | **118** |   |
| **2005**                                                        |   |   |   |   |   |   |   |   |   |   |    |   |
| Current cost                                                    |   | 59     |   |   | 18     |   |   | 5      |   |   | 82      |   |
| Interest        cost                                            |   | 25     |   |   | 30     |   |   | 6      |   |   | 61      |   |
| Expected return rate on plan assets                             |   |   |   |   | (16    | )      |   |   |   |   | (16     | )      |
| Amortization        of past service cost                        |   |   |   |   | 3      |   |   | 1      |   |   | 4       |   |
| Amortization of actuarial gains/losses                          |   |   |   |   |   |   |   | 6      |   |   | 6       |   |
| Economic        effect of curtailment or settlement of the plan |   | (6     | )      |   | (4     | )      |   | (1     | )      |   | (11     | )      |
| **Total cost**                                                  |   | **78** |   |   | **31** |   |   | **17** |   |   | **126** |   |

Costs for other benefits of euro 17 million(euro 10 million at December 31, 2004) concern FISDE for euro 7million and jubilee awards for euro 7 million (euro 6 million andeuro 3 million at December 31, 2004, respectively).

Principal actuarial assumptions used for thevaluation of employee benefits consisted of the following:

| (%)    |   | **TFR** |   | **Foreign pension plans** |   | **Other benefits** |
|--------|--------|---------|--------|---------------------------|--------|--------------------|
|   |   |         |   |                           |   |                    |

| **2004**                                   |   |    |   |   |    |   |   |    |   |
|--------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| **Principal actuarial assumptions**        |   |    |   |   |    |   |   |    |   |
| Discount        rate                       |   | 4.5     |   |   | 6.0-7.9 |   |   | 4.0-5.0 |   |
| Rate of compensation increase              |   | 2.7-4.5 |   |   | 3.0-6.8 |   |   |    |   |
| Expected        return rate on plan assets |   |    |   |   | 7.0     |   |   |    |   |
| Rate of price inflation                    |   | 2.3     |   |   | 2.0-4.6 |   |   | 2.0-2.3 |   |
| **2005**                                   |   |    |   |   |    |   |   |    |   |
| **Principal actuarial assumptions**        |   |    |   |   |    |   |   |    |   |
| Discount        rate                       |   | 4.0     |   |   | 4.5-7.3 |   |   | 4.5-4.7 |   |
| Rate of compensation increase              |   | 2.7-4.5 |   |   | 3.0-5.8 |   |   | 3.5     |   |
| Expected        return rate on plan assets |   |    |   |   | 7.2     |   |   |    |   |
| Rate of price inflation                    |   | 2.0     |   |   | 2.0-4.9 |   |   | 2.3-2.4 |   |

Foreign plan assets consisted ofthe following:

| (%)    |   | **Plan assets** |   | **Expected return** |
|--------|--------|-----------------|--------|---------------------|
|   |   |                 |   |                     |

| **Dec.        31, 2005** |   |      |   |   |   |   |
|--------------------------|--------|-----------|--------|--------|--------|--------|
| Securities               |   | 50.2      |   |   | 7.4    |   |
| Bonds                    |   | 35.0      |   |   | 4.9    |   |
| Investment property      |   | 1.7       |   |   | 8.1    |   |
| Other                    |   | 13.1      |   |   | 10.5   |   |
| **Total**                |   | **100.0** |   |   |   |   |

**21 Deferred tax liabilities**

Deferred tax liabilities of euro 4,890 million(euro 3,948 million at December 31, 2004) are net of deferred taxassets for which Eni possesses the legal right of offset.

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Exchange rate differences** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                               |   |                   |   |                            |

|   |   | **3,948** |   |   | 2,136 |   |   | (484 | ) |   | 331 |   |   | (1,041 | ) |   | **4,890** |   |
|--------|--------|-----------|--------|--------|-------|--------|--------|------|---|--------|-----|--------|--------|--------|---|--------|-----------|--------|

 

Other changes of euro 1,041 million primarilyconcern the set-off, for each company, of tax assets and deferredtax liabilities (euro 1,035 million). Such change has beenpartially offset by provisions to the reserves of theshareholders’ equity following the first application of IAS32 and 39 (euro 50 million) and valuation at fair value offinancial instruments (euro 2 million).

Deferred tax liabilities consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Deferred income taxes                                   |   | 6,002     |   |   | 8,237     |   |
|---------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Deferred        income taxes available to be offset     |   | (2,054    | )      |   | (3,347    | )      |
|                                                    |   | **3,948** |   |   | **4,890** |   |
| Deferred        income taxes not available to be offset |   | (1,827    | )      |   | (1,861    | )      |
| **Net deferred tax liabilities**                        |   | **2,121** |   |   | **3,029** |   |

The most significant temporary differencesgiving rise to net deferred tax liabilities were as follows:

| (million        euro) |   | **Value at Dec. 31, 2004** |   | **Additions** |   | **Deductions** |   | **Exchange rate differences** |   | **Other changes** |   | **Value at Dec. 31, 2005** |
|-----------------------|--------|----------------------------|--------|---------------|--------|----------------|--------|-------------------------------|--------|-------------------|--------|----------------------------|
|                  |   |                            |   |               |   |                |   |                               |   |                   |   |                            |

| Deferred tax liabilities:                                                             |   |       |   |   |       |   |   |     |   |   |     |   |   |     |   |   |       |   |
|---------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|------------|--------|
| -        accelerated tax depreciation on fixed assets                                 |   | 3,885      |   |   | 1,378      |   |   | (235     | )      |   | 274      |   |   | 553      |   |   | 5,855      |   |
| - application of the weighted average cost        method in evaluation of inventories |   | 300        |   |   | 351        |   |   | (2       | )      |   |     |   |   |     |   |   | 649        |   |
| - site        restoration and abandonment (fixed assets)                              |   | 104        |   |   | 234        |   |   | (35      | )      |   | 8        |   |   | 38       |   |   | 349        |   |
| - capitalized interest expense                                                        |   | 219        |   |   | 12         |   |   | (12      | )      |   |     |   |   | 26       |   |   | 245        |   |
| - other                                                                               |   | 1,494      |   |   | 161        |   |   | (200     | )      |   | 49       |   |   | (365     | )      |   | 1,139      |   |
|                                                                                  |   | **6,002**  |   |   | **2,136**  |   |   | **(484** | **)**  |   | **331**  |   |   | **252**  |   |   | **8,237**  |   |
| Deferred        tax assets:                                                           |   |       |   |   |       |   |   |     |   |   |     |   |   |     |   |   |       |   |
| - assets revaluation as per Law 342/2000 and        448/2001                          |   | (1,177     | )      |   |       |   |   | 79       |   |   |     |   |   | 2        |   |   | (1,038     | )      |
| - site        restoration and abandonment (provisions for        contingencies)       |   | (870       | )      |   | (355       | )      |   | 130      |   |   | (37      | )      |   | 94       |   |   | (1,096     | )      |
| - non deductible amortization                                                         |   | (324       | )      |   | (401       | )      |   | 178      |   |   | (77      | )      |   | (244     | )      |   | (868       | )      |
| - accruals        for doubtful accounts and provisions for contingencies              |   | (513       | )      |   | (487       | )      |   | 159      |   |   |     |   |   | 2        |   |   | (839       | )      |
| - tax loss carryforwards                                                              |   | (102       | )      |   | (59        | )      |   | 58       |   |   | (15      | )      |   | (42      | )      |   | (160       | )      |
| - other                                                                               |   | (895       | )      |   | (476       | )      |   | 323      |   |   | (29      | )      |   | (130     | )      |   | (1,207     | )      |
|                                                                                  |   | **(3,881** | **)**  |   | **(1,778** | **)**  |   | **927**  |   |   | **(158** | **)**  |   | **(318** | **)**  |   | **(5,208** | **)**  |
| **Net        deferred tax liabilities**                                               |   | **2,121**  |   |   | **358**    |   |   | **443**  |   |   | **173**  |   |   | **(66**  | **)**  |   | **3,029**  |   |

Deferred tax assets are recognized to theextent that expected future fiscal profits are consideredsufficient for the utilization of these assets.

No deferred tax liabilities have beenrecognized in relation to the reserves of consolidatedsubsidiaries because such reserves are not expected to bedistributed (euro 269 million).

Under the Italian fiscal laws, tax losses canbe carried forward in the five subsequent periods, exceptinglosses suffered in the first three periods of life of the companythat can be carried forward without limit. Tax losses of foreigncompanies can be carry forward on average for more than fiveperiods and for a considerable part can be carried forwardwithout limit. Tax recover correspond to a tax rate of 33% forItalian companies and to an average tax rate of 30% for foreigncompanies.

Tax losses amount to euro 1,818 million and canbe used in the following periods:

| (million euro) |   | **Italian        companies** |   | **Foreign        companies** |
|----------------|--------|------------------------------|--------|------------------------------|
|           |   |                              |   |                              |

| 2006                 |   |   |   |   | 10        |   |
|----------------------|--------|--------|--------|--------|-----------|--------|
| 2007                 |   |   |   |   | 7         |   |
| 2008                 |   | 11     |   |   | 66        |   |
| 2009                 |   | 8      |   |   | 43        |   |
| 2010                 |   |   |   |   | 46        |   |
| Over 2010            |   |   |   |   | 234       |   |
| Without        limit |   |   |   |   | 1,393     |   |
|                 |   | **19** |   |   | **1,799** |   |

Tax losses for which is expected theutilization amount to euro 547 million and essentially concernforeign companies (euro 536 million); the relevant deferred taxassets amount to euro 160 million, of which euro 158 millionconcern foreign companies.

**22 Other non-current liabilities**

Other non-current liabilities of euro 897million (euro 427 million at December 31, 2004) consisted of thefollowing:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Income tax        liabilities |   | 23      |   |   |    |   |
|-------------------------------|--------|---------|--------|--------|---------|--------|
| Other payables                |   | 204     |   |   | 767     |   |
| Other        liabilities      |   | 200     |   |   | 130     |   |
|                          |   | **427** |   |   | **897** |   |

Other payables of euro 767 million (euro 204million at December 31, 2004) concern payables related to capitalexpenditures for euro 597 million.

Other liabilities at December 31, 2004 of euro200 million include the fair value of fixed interest ratefinancial liabilities of Lasmo Plc (now Eni Lasmo Plc) for euro 2million.

**23 Shareholders’ equity**

**Minority interest**

Minority interest in profit andshareholders’ equity relate to the following consolidatedsubsidiaries:

| (million euro) |   | **Net profit** |   | **Shareholders’        equity** |
|----------------|--------|----------------|--------|--------------------------------------|
|           |   |                |   |                                      |

|   |   | **2004** |   | **2005** |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|--------|--------|----------|--------|----------|--------|-------------------|--------|-------------------|
|   |   |          |   |          |   |                   |   |                   |

| Snam Rete Gas SpA                                                                                         |   | 331     |   |   | 321     |   |   | 2,025     |   |   | 1,158     |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|
| Saipem SpA                                                                                                |   | 133     |   |   | 115     |   |   | 846       |   |   | 915       |   |
| Tigáz Tiszántúli Gázszolgáltató        Részvénytársaság |   | 4       |   |   | 6       |   |   | 78        |   |   | 82        |   |
| Others                                                                                                    |   | 14      |   |   | 17      |   |   | 217       |   |   | 194       |   |
|                                                                                                      |   | **482** |   |   | **459** |   |   | **3,166** |   |   | **2,349** |   |

The decrease in the shareholders’ equityof Snam Rete Gas SpA of euro 867 million concern the distributionof an extraordinary dividend of which euro 1,171 million was paidto minority interest.

**Eni shareholders’ equity**

| (million euro) |   | **Value at Dec. 31, 2004** |   | **Value at Dec. 31, 2005** |
|----------------|--------|----------------------------|--------|----------------------------|
|           |   |                            |   |                            |

| Share        capital                             |   | 4,004      |   |   | 4,005      |   |
|--------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Legal reserve                                    |   | 959        |   |   | 959        |   |
| Cumulative        translation adjustment reserve |   | (687       | )      |   | 941        |   |
| Reserve for treasury shares                      |   | 5,392      |   |   | 5,345      |   |
| Treasury        shares                           |   | (3,229     | )      |   | (4,216     | )      |
| Other reserves                                   |   | 3,965      |   |   | 5,351      |   |
| Retained        earnings                         |   | 14,911     |   |   | 17,381     |   |
| Net profit for the period                        |   | 7,059      |   |   | 8,788      |   |
| Interim        dividend                          |   |       |   |   | (1,686     | )      |
|                                             |   | **32,374** |   |   | **36,868** |   |

**Share capital**

At December 31, 2005 Eni SpA had 4,005,358,876shares (nominal value euro 1 each) fully paid-up (4,004,424,476shares at December 31, 2004). The increase concerns the issuingunder the stock grant plan of 934,400 shares with a nominal valueof euro 1 each subscribed by managers following the expiration ofthe plan issued in 2002 (883,300 shares) and the agreedtermination of employment (51,100 shares). On May 27, 2005Eni’s Shareholders Meeting decided a dividend distributionof euro 0.90 per share, with the exclusion of treasury shares.The cash dividend was made available for payment on June 23, 2005and the ex-dividend date was June 20, 2005.

**Legal reserve**

The legal reserve of Eni SpA representsearnings restricted from the payment of dividends pursuant toArticle 2430 of the Civil Code.

**Cumulative translation adjustment reserve**

The cumulative translation adjustment reserverepresents exchange differences due to the translation offinancial statements prepared in currencies other than euro.

**Reserve for treasury shares**

The reserve for treasury shares of euro 5,345million (euro 5,392 million at December 31, 2004) containsearnings destined to purchase shares in accordance with thedecisions of Eni’s Shareholders’ Meetings. The decreaseof euro 47 million concern the sale and the grant of treasuryshares to the Group managers following the stock option and stockgrant plans.

**Treasury shares**

Treasury shares amount to euro 4,216 million(euro 3,229 million at December 31, 2004) and consist of278,013,975 ordinary shares nominal value euro 1 owned by Eni SpA(234,394,888 ordinary shares nominal value euro 1 at December 31,2004). Treasury shares of euro 237 million (euro 286 million atDecember 31, 2004), are represented by 17,428,300 shares(21,006,600 shares at December 31, 2004) and are destined to2002-2004 and 2005 stock option plans (14,004,500 shares) and2003-2005 stock grant plans (3,423,800 shares). The decrease of3,578,300 shares consisted of the following:

| (million        euro) |   | **Stock option** |   | **Stock grant** |   | **Total** |
|-----------------------|--------|------------------|--------|-----------------|--------|-----------|
|                  |   |                  |   |                 |   |           |

| **Number of shares at December 31, 2004** |   | **14,574,000** |   |   | **6,432,600** |   |   | **21,006,600** |   |
|-------------------------------------------|--------|----------------|--------|--------|---------------|--------|--------|----------------|--------|
| -        reclassifications (*)            |   | 2,658,400      |   |   | (2,658,400    | )      |   |           |   |
|                                      |   | **17,232,400** |   |   | **3,774,200** |   |   | **21,006,600** |   |
| - rights        exercised                 |   | (3,106,400     | )      |   | (339,100      | )      |   | (3,445,500     | )      |
| - rights cancelled                        |   | (121,500       | )      |   | (11,300       | )      |   | (132,800       | )      |
|                                      |   | **(3,227,900** | **)**  |   | **(350,400**  | **)**  |   | **(3,578,300** | **)**  |
| **Number of shares at December 31, 2005** |   | **14,004,500** |   |   | **3,423,800** |   |   | **17,428,300** |   |

|   |   |                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (*)    |   | The        reclassifications have been decided in accordance with        the decision of Eni’s Shareholders’ Meeting of        May 27, 2005. |

At December 31, 2005 options and grantsoutstanding were 13,379,600 shares and 3,127,200 shares,respectively. Options refer to the 2002 stock plan for 903,100shares with an exercise price of euro 15.216 per share, to the2003 stock plan for 4,106,500 shares with an exercise price ofeuro 13.743 per share, to the 2004 stock plan for 3,659,000shares with an exercise price of euro 16.576 per share and to the2005 stock plan for 4,711,000 shares with an exercise price ofeuro 22.512 per share.

**Other reserves**

Other reserves of euro 5,351 million (euro3,965 million at December 31, 2004) refer to Eni distributablereserve for euro 5,219 million (euro 3,896 million at December31, 2004) and for euro 35 million to the reserve for thevaluation at fair value of securities available for sale and cashflow hedge derivatives. The increase of Eni distribuitablereserve of euro 1,323 million primarily concern the destinationof the residual income for 2004 (euro 1,300 million), inaccordance with the decisions of Eni’s Shareholders’Meetings of May 27, 2005. The valuation at fair value ofsecurities available for sale and cash flow hedge derivativesconsists of the following:

|   |   | **Securities available for sale** |   | **Cash flow hedge derivatives** |   | **Total** |
|--------|--------|-----------------------------------|--------|---------------------------------|--------|-----------|
|   |   |                                   |   |                                 |   |           |

| (million        euro) |   | **Gross reserve** |   | **Deferred tax liabilities** |   | **Net reserve** |   | **Gross reserve** |   | **Deferred tax liabilities** |   | **Net reserve** |   | **Gross reserve** |   | **Deferred tax liabilities** |   | **Net reserve** |
|-----------------------|--------|-------------------|--------|------------------------------|--------|-----------------|--------|-------------------|--------|------------------------------|--------|-----------------|--------|-------------------|--------|------------------------------|--------|-----------------|
|                  |   |                   |   |                              |   |                 |   |                   |   |                              |   |                 |   |                   |   |                              |   |                 |

| Reserve as of January 1, 2005      |   | 19     |   |   | (6     | )     |   | 13     |   |   |   |   |   |    |   |   |   |   |   | 19     |   |   | (6      | )     |   | 13     |   |
|------------------------------------|--------|--------|--------|--------|--------|-------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|---------|-------|--------|--------|--------|
| Changes of        the year         |   | 8      |   |   | (2     | )     |   | 6      |   |   | 27     |   |   | (11     | )      |   | 16     |   |   | 35     |   |   | (13     | )     |   | 22     |   |
| **Reserve as of December 1, 2005** |   | **27** |   |   | **(8** | **)** |   | **19** |   |   | **27** |   |   | **(11** | **)**  |   | **16** |   |   | **54** |   |   | **(19** | **)** |   | **35** |   |

**Interim dividend**

Interim dividend of euro 1,686 millionconcerned the interim dividend for the year 2005 for euro 0.45per share, with the exclusion of treasury shares, as decided byEni’s Shareholders’ Meetings in accordance with article2433-bis, paragraph 5 of the Italian Civil Code; the dividend waspaid on October 27, 2005.

**Distributable reserves**

At December 31, 2005 Eni shareholders’equity included distributable reserves for approximately euro36,000 million, a portion of which is subjected to taxation upondistribution. Deferred tax liabilities have been recorded inrelation to the reserves expected to be distributed (euro 32million).

**Reconciliation of statutory net profitand shareholders’ equity to consolidated net profit andshareholders’ equity**

| (million euro) |   | **Net profit** |   | **Shareholders’        equity** |
|----------------|--------|----------------|--------|--------------------------------------|
|           |   |                |   |                                      |

|   |   | **2004** |   | **2005** |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|--------|--------|----------|--------|----------|--------|-------------------|--------|-------------------|
|   |   |          |   |          |   |                   |   |                   |

| **As        recorded in Eni SpA’s financial statements (Italian        GAAP)**                                                                                                                             |   | **4,684** |   |   | **5,288** |   |   | **29,433** |   |   | **29,656** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|
| Treasury shares                                                                                                                                                                                                 |   |      |   |   |      |   |   | (3,229     | )      |   | (4,216     | )      |
| 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 |   | 4,444     |   |   | 2,718     |   |   | 9,470      |   |   | 13,483     |   |
| Consolidation adjustments:                                                                                                                                                                                      |   |      |   |   |      |   |   |       |   |   |       |   |
| -        difference between cost and underlying value of equity                                                                                                                                                 |   | (112      | )      |   | (44       | )      |   | 2,592      |   |   | 2,558      |   |
| - elimination of tax adjustments and compliance        with accounting policies                                                                                                                                 |   | (2,197    | )      |   | 1,617     |   |   | (244       | )      |   | 313        |   |
| -        elimination of unrealized intercompany profits                                                                                                                                                         |   | (235      | )      |   | (40       | )      |   | (2,498     | )      |   | (2,677     | )      |
| - deferred taxation                                                                                                                                                                                             |   | 612       |   |   | (313      | )      |   | (133       | )      |   | 2          |   |
| - other        adjustments                                                                                                                                                                                      |   | 345       |   |   | 21        |   |   | 149        |   |   | 98         |   |
|                                                                                                                                                                                                            |   | **7,541** |   |   | **9,247** |   |   | **35,540** |   |   | **39,217** |   |
| Minority        interest                                                                                                                                                                                        |   | (482      | )      |   | (459      | )      |   | (3,166     | )      |   | (2,349     | )      |
| **As recorded in Consolidated Financial        Statements (IFRS)**                                                                                                                                              |   | **7,059** |   |   | **8,788** |   |   | **32,374** |   |   | **36,868** |   |

 

**24 Guarantees, commitments and risks**

**Guarantees**

Guarantees of euro 12,862 million (euro 12,667million at December 31, 2004) consisted of the following:

|   |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

| (million euro) |   | **Unsecured guarantees** |   | **Other guarantees** |   | **Secured guarantees** |   | **Total** |   | **Unsecured guarantees** |   | **Other guarantees** |   | **Secured guarantees** |   | **Total** |
|----------------|--------|--------------------------|--------|----------------------|--------|------------------------|--------|-----------|--------|--------------------------|--------|----------------------|--------|------------------------|--------|-----------|
|           |   |                          |   |                      |   |                        |   |           |   |                          |   |                      |   |                        |   |           |

| Consolidated companies                  |   |      |   | 3,228     |   |   |   | 3,228      |   |      |   | 5,839     |   |   |   | 5,839      |
|-----------------------------------------|--------|-----------|--------|-----------|--------|--------|--------|------------|--------|-----------|--------|-----------|--------|--------|--------|------------|
| Unconsolidated        subsidiaries      |   | 7         |   | 532       |   |   |   | 539        |   | 4         |   | 203       |   |   |   | 207        |
| Affiliated companies and Joint Ventures |   | 4,901     |   | 1,922     |   | 40     |   | 6,863      |   | 4,900     |   | 1,772     |   | 40     |   | 6,712      |
| Others                                  |   | 70        |   | 169       |   |   |   | 239        |   | 64        |   | 40        |   |   |   | 104        |
|                                    |   | **4,978** |   | **5,851** |   | **40** |   | **10,869** |   | **4,968** |   | **7,854** |   | **40** |   | **12,862** |

Guarantees given on behalf of consolidatedcompanies of euro 5,839 million (euro 5,026 million at December31, 2004) consist primarily of: (i) guarantees given to thirdparties relating to bid bonds and performance bonds for euro3,057 million (euro 2,929 million at December 31, 2004), of whicheuro 2,397 million related to the Oilfield Services Constructionand Engineering segment (euro 2,296 million at December 31,2004); (ii) VAT recoverable from tax authorities for euro 1,386million (euro 1,156 million at December 31, 2004); and (iii)insurance risk for euro 298 million reinsured by Eni (euro 396million at December 31, 2004). At December 31, 2005 theunderlying commitment covered by such guarantees was euro 5,491million (euro 4,818 million at December 31, 2004).

Unsecured guarantees, other guarantees andsecured guarantees given on behalf of unconsolidated subsidiariesof euro 207 million (euro 539 million at December 31, 2004)consisted of unsecured guarantees and letters of patronage givento commissioning entities relating to bid bonds and performancebonds for euro 165 million (euro 144 million at December 31,2004). The decrease of euro 332 million essentially concerned thereclassification to consolidated subsidiaries of the guaranteesgiven on behalf of Eni Middle East BV (euro 367 million atDecember 31, 2004). At December 31, 2005, the underlyingcommitment covered by such guarantees was euro 145 million (euro467 million at December 31, 2004).

Unsecured guarantees, other guarantees andsecured guarantees given on behalf of joint ventures andaffiliated companies of euro 6,712 million (euro 6,863 million atDecember 31, 2004) primarily concerned: (i) a guarantee of euro4,894 million (the same amount as of December 31, 2004) given byEni SpA to Treno Alta Velocità - TAV - SpA for the proper andtimely completion of a project relating to the Milano-Bolognatrain link by the Consorzio Eni per l’Alta Velocità - CepavUno (Eni 50.4%); consortium members, excluding unconsolidatedsubsidiaries, gave Eni liability of surety letters and bankguarantees amounting to 10% of their respective portion of thework; (ii) unsecured guarantees, letters of patronage andother given to banks in relation to loans and lines of creditreceived for euro 1,360 million (euro 1,633 million at December31, 2004), of which euro 844 million related to a contractreleased by Snam SpA (now merged into Eni SpA) on behalf of BlueStream Pipeline Co BV (Eni 50%) to a consortium of financinginstitutions (euro 731 million at December 31, 2004). Thedecrease of euro 273 million primarily concerned theextinguishing of a guarantee of euro 250 million given on behalfof EnBW - Eni Verwaltungsgesellschaft mbH (Eni 50%) and AlbacomSpA (euro 88 million), partially offset by the increase of theguarantee given on behalf of Blue Stream Pipeline Co BV (euro 113million); (iii) unsecured guarantees, letters of patronage andother given to commissioning entities relating to bid bonds andperformance bonds for euro 274 million (euro 118 million atDecember 31, 2004). The increase of euro 156 million essentiallyregarded guarantees on behalf of the Oilfield ServicesConstruction and Engineering segment; (iv) performance guaranteesof euro 62 million given on behalf of Unión Fenosa SA and UniónFenosa Gas SA (Eni 50%) in relation to contractual commitmentsrelated to the results of operations of subsidiaries of UniónFenosa Gas SA (euro 111 million at December 31, 2004); and (v)secured guarantees of euro 40 million (the same amount as ofDecember 31, 2004), relate to mortgages, liens and privilegesgranted to banks in connection with loans. At December 31, 2005,the underlying commitment covered by such guarantees was euro2,938 million (euro 3,500 million at December 31, 2004).

Other guarantees given on behalf of thirdparties of euro 104 million (euro 239 million at December 31,2004) consist primarily of guarantees given by Eni SpA to banksand other financing institutions in relation to loans and linesof credit for euro 92 million on behalf of minor investments orcompanies sold (euro 160 million at December 31, 2004). AtDecember 31, 2005 the underlying commitment covered by suchguarantees was euro 75 million (euro 103 million at December 31,2004).

**Commitments and contingencies**

Commitments and contingencies euro 1,655million (euro 1,620 million at December 31, 2004) consisted ofthe following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| **Commitments**           |   |      |   |   |      |   |
|---------------------------|--------|-----------|--------|--------|-----------|--------|
| Purchase        of assets |   | 200       |   |   | 219       |   |
| Sale of assets            |   | 124       |   |   |      |   |
| Other                     |   | 319       |   |   | 220       |   |
|                      |   | **643**   |   |   | **439**   |   |
| **Risks**                 |   | **977**   |   |   | **1,216** |   |
|                      |   | **1,620** |   |   | **1,655** |   |

Obligations for purchases and sales of assetsof euro 219 million (euro 324 million at December 31, 2004)concern securities for euro 116 million (euro 183 million atDecember 31, 2004) and investments for euro 103 million (euro 141million at December 31, 2004). Obligations relating to marketablesecurities concern the placement on the market of securitiesmanaged by Sofid Sim SpA. This company sold Italian Governmentbonds to investors, primarily employees, and simultaneouslyentered into interest rate swaps with such investors wherein itreceived the rate of interest on such Italian Government bondsand paid a floating rate of interest linked to Euribor. Suchinvestors could sell their securities back to Sofid Sim SpA atany time at par value plus related interest with the simultaneouscancellation of the related swaps. Against the commitment relatedto interest rate swaps Sofid Sim SpA entered into derivatives forwhich Sofid Sim SpA receives a variable rate more profitable thanthe one renown by the shareholders. The operation ended onJanuary 1, 2006 following the expiry of the government bonds. Thedecrease in obligations related to investments of euro 38 millionprimarily concerns the exercise by Erg SpA of a call option forthe purchase of a 28% shares of Erg Raffinerie Mediterranee SpA(euro 100 million) and the expiry of obligations for purchasesand sales of the shares of Nuovo Pignone SpA following the saleof the investment (euro 31 million); such decrease was partiallyoffset by the obligation assumed by Eni SpA related to theacquisition from ESPI - Ente Siciliano per la PromozioneIndustriale (in liquidation) of 50% of the capital share ofSiciliana Gas SpA and 1 share of Siciliana Gas Vendite SpA (euro98 million).

Other commitments of euro 220 million (euro 319million at December 31, 2004) are essentially related to amemorandum of intent signed with the Basilicata Region, wherebyEni has agreed to invest, also on account of Shell Italia E&PSpA, euro 193 million in the future in connection with Eni’sdevelopment plan of oil fields in Val d’Agri (euro 206million at December 31, 2004). The agreements between Syndial SpAand various government entities, employee and trade groupswhereby Syndial SpA, in order to further develop the chemicalsegment and protect the environment with respect to the PortoMarghera plant of euro 90 million at December 31, 2004, expiredfollowing the subscription of a new agreement that determined aspecific provision.

Risks of euro 1,216 million (euro 977 millionat December 31, 2004) primarily concern potential risksassociated with the value of assets of third parties under thecustody of Eni for euro 794 million (euro 551 million at December31, 2004) and contractual assurances given to acquirors ofcertain investments and businesses of Eni for euro 402 million(euro 406 million at December 31, 2004).

**Management of risks**

*Foreword*

The main risks identified and managed by Eniwere the following:

| (i)   |   | market risks        deriving from the exposure to the fluctuations of        interest rates, of exchange rates between the euro and        the U.S. dollar and the other currencies used by the        Company, as wells as the volatility of commodity prices; |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | the credit        risk deriving from the possible default of a        counterparty;                                                                                                                                                                             |
| (iii) |   | the liquidity        risk deriving from the lack of financial resources to        face short time commitments;                                                                                                                                                  |
| (iv)  |   | the operation        risk deriving from the occurrence of accidents,        malfunctioning, failures with damage to persons and the        environment affecting operating and financial results;        and                                                    |
| (v)   |   | country risk        in oil & gas activities.                                                                                                                                                                                                                |

*Market risk*

Market risks include exchange rate risk,interest rate risk and commodity risk. Their management follows aset of guidelines and procedures that concentrate the treasuryfunction in two captive finance companies operating in theItalian and international financial markets.

In particular, the financial company operatingon the domestic market (Enifin) manages all the transactionsconcerning currency exchange and derivatives. The risk ofcommodity prices is managed by each business unit while Enifinmanages the negotiation of hedging derivatives. In order tominimize market risk related to changes in interest rates,exchange rates and commodity prices, Eni enters into financialand commodity hedging contracts for the purpose of reducing itsexposure to market risk. Eni does not enter into derivativetransactions on a speculative basis.

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. Eni’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’s operatingsubsidiaries are required to reduce foreign exchange rate risk toa minimum level by coordinating their operations with suchfinance companies.

As far as interest rate and foreign exchangerate risks are concerned, the calculation and measurementtechniques followed by Eni’s finance companies are inaccordance with established banking standards (such standards areestablished by the Basel Committee). However, the tolerable levelof risk adopted by such companies is more conservative than thatdefined by the Basel Committee.

Eni’s guidelines for the management ofcommodity risk contain maximum limits to the price risk derivingfrom trading activities. Directions in this area are entrusted toa commodity risk assessment team, while the treasury departmentcontrols the respect of said limits and the development andupdating of methodologies followed.

*Exchange rate risk*

Exchange rate risk derives from the fact thatEni’s operations are conducted in currencies other than theeuro (in particular the U.S. dollar) and by the time lag existingbetween the recording of costs and revenues denominated incurrencies other than the functional currency and theirrealization (transaction exchange rate risk). An appreciation ofthe U.S. dollar versus the euro generally has a positive impacton Eni’s results of operations.

*Interest rate risk*

Variations in interest rates affect the marketvalue of assets and liabilities of the company and its netborrowings.

*Commodity risk*

Eni’s results of operations are affectedby changes in the prices of products and services sold. Adecrease in oil prices generally has a negative impact onEni’s results of operations and vice versa.

*Credit risk*

Credit risk is the potential exposure of theGroup to loss in the event of non-performance by a counterparty.The credit risk arising from the Group’s normal commercialoperations is controlled by individual operating units withinGroup-approved guidelines. Eni’s financial companies followguidelines approved by Eni’s treasury department on thechoice of highly credit-rated counterparties in their use offinancial and commodity instruments, including derivatives. Enihas not experienced material non-performance by any counterparty.As of December 31, 2005 Eni had no significant concentrations ofcredit risk.

*Liquidity risk*

Liquidity risk is the risk that suitablesources of funding for the Group’s business activities maynot be available. The Group has access to a wide range of fundingat competitive rates through the capital markets and banks. TheGroup believes it has access to sufficient funding and has alsoboth committed and uncommitted borrowing facilities to meetcurrently foreseeable borrowing requirements.

*Operation risks*

Eni’s activities present industrial andenvironmental risks and are therefore subject to extensivegovernment regulations concerning environmental protection andindustrial security in most countries. For example, in Europe,Eni operates industrial plants such as refineries andpetrochemical complexes that meet the criteria of the EuropeanUnion Seveso II directive for classification as high risk sites.

The broad scope of Eni’s activitiesinvolves a wide range of operational risks such as those ofexplosion, fire or leakage of toxic products, production of nonbiodegradable waste.

All these events could possibly damage or evendestroy wells as well as related equipment and other property,cause injury or even death to persons or cause environmentaldamage. In addition, since exploration and production activitiesmay take place on sites that are ecologically sensitive (tropicalforest, marine environment, etc.), each site requires a specificapproach to minimize the impact on the related ecosystem,biodiversity and human health.

Eni adopted the most stringent standards forthe evaluation and management of industrial and environmentalrisks, complying with local and international rules andstandards. Business units evaluate through specific proceduresthe related industrial and environmental risks in addition totaking account the regulatory requirements of the countries wherethese activities are located.

Since 2003, Eni has introduced a model ofmanagement system, a general procedure to be applied in all itsoperating sites, based on an annual cycle of planning,implementation, control, review of results and definition of newobjectives. The model is directed towards the prevention ofrisks, the systematic monitoring and control of HSE performancein a continuous improvement cycle subject also to audits byinternal and independent experts. At December 31, 2005 six systemaudits had been performed and four are planned for 2006.

Any environmental emergency is managed bybusiness units locally with their own organization under presetreaction plans to foreseeable events aimed at limiting damage andat activating adequate responses.

Eni has two emergency rooms (at Milan and Rome)provided with real time monitoring systems for the collection ofdata on georeferenced maps for all Eni sites and logisticsworldwide. In addition to its own emergency teams, Eni enteredagreements with international agencies in order to maximize itsability to react in all its operating sites.

At year end 2005 Eni employed over 2,000 fulltime equivalent employees in HSE activities, prevention ofenvironmental risk, safety and health.

*Country risk*

Substantial portions of Eni’s hydrocarbonreserves are located in countries outside the EU and NorthAmerica, certain of which may be politically or economically lessstable than EU or North American countries.

At December 31, 2005, approximately 73% ofEni’s proved hydrocarbon reserves were located in suchcountries. Similarly, a substantial portion of Eni’s naturalgas supply comes from countries outside the EU and North America.In 2005, approximately 60% of Eni’s domestic supply ofnatural gas came from such countries. Negative developments inthe economic and political framework of these countries cancompromise temporarily or permanently Eni’s ability tooperate economically and to have access to said reserves.

Eni monitors constantly the political, socialand economic risk of the approximately 100 countries where itinvested or intends to invest with special attention to theevaluation of upstream investments. Country risks are mitigatedby means of appropriate guidelines for risk management that Enidefined in its procedure for project risk assessment andmanagement.

**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 provisions, 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 can not beestimated reliably.

**Environment**

ENI SPAIn 1999, the public prosecutor of Gela started an investigationin order to ascertain alleged soil and sea pollution caused bythe discharge of pollutants by Eni’s Gela refinery. InNovember 2002, "Italia Nostra" and the association"Amici della Terra" filed civil claims related to thisproceeding and requested the payment of damage claims for a totalof euro 15,050 million. In July 2003, the relevant Court decidedfor the transmission of the inquiries to the public prosecutor,recognizing a violation of Article 440 of the penal code (waterand food substances corruption). Three environmentalorganizations act as plaintiffs and requested damage payment foreuro 551 million. Two of these organizations are also actingagainst the Gela refinery.

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 that have occurred since 1997. TheMunicipality of Gela, the Province of Caltanissetta and othersfiled civil claims in this proceeding and requested the paymentof compensatory damages for a total of euro 878 million. Thejudgment of first degree 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. Somelocal public entities, environmental NGOs and landowners areacting as plaintiffs. On January 17, 2005, a second inquiry phaseaimed at ascertaining which sort of emissions had eventuallyproduced the alleged pollution caused by the refinery of Gela,was completed. On February 3, 2006 the notice of the conclusionof preliminary investigations was filed conclusion of thepreliminary inquiry.

In June 2002, in connection with a fire in therefinery of Gela, a criminal investigation began concerningarson, environmental crimes and crimes against natural heritage.On May 12, 2004 the first hearing was held. 

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. The investigation concerns the environmental rulesabout the pollution of water and soil and illegal disposal ofliquid and solid waste materials. On November 7, 2003 the judgefor preliminary investigations accepted to continue the inquiriesas requested by the public prosecutor to ascertain the state ofthe refinery’s storage tanks and the presence ofinfiltrations of refinery products into the deep water-bearingstratum, due to a breakage in some tanks. With a decision ofNovember 3, 2003, the Court for preliminary investigation, inagreement with a request of the public prosecutor of Gela,ordered the preventive seizure of 92 storage tanks, laterreopened except for nine tanks that remained under seizure but donot prevent full operations at the refinery. The report filed byexperts of the public prosecutor is currently under review.

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. A qualified company has been given the taskto verify the cause, the origin and the extension of the allegedinfiltration. 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 areafarther from and higher than the industrial site; and (iii)install a purification system for drinkable water. With adecision of June 1, 2004 the seizure was lifted on the storagetanks that had been seized on April 17, 2003, except for fivestorage tanks that are still under seizure. The report of expertshas been filed and its findings can be opposed to defendants.

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 Court of Cassation confirmed this decision. 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. On May 11, 2006 the Court of Rovigo accepted asplaintiffs the Veneto Region, the Ente Parco della Provincia delPo, the Ferrara Province, the Venice Province, the city ofVenice, the city of Comacchio, the Rovigo Province and twoprivate entities. Eni was accepted as a defendant. The Court ofRovigo rejected the accusation of environmental disaster andtherefore transferred the proceeding to the Court of Adria, wherethe first hearing has been scheduled for October 31, 2006.

ENIPOWER SPAIn autumn 2004 the Public Prosecutor of Rovigo started aninvestigation for alleged crimes related to unauthorized wastemanagement activities in Loreo relating to samples of the soilused in the construction of the new EniPower’s power stationin Mantova. EniPower requested the closing of the investigation.

POLIMERI EUROPA SPABefore the Court of Gela one criminal action took place relationto the alleged violation on part of Eni of environmentalregulations on waste management concerning the ACN plant and thedisposal of FOK residue deriving from the steam cracking process.The defendant was found guilty and a damage payment in firstinstance was recognized to an environmental association acting asplaintiff. The sentence was passed to the civil court for thequantification of any further damage and claim. Eni appealed theCourt’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. Edison agreed on a settlementthat quantified damage to be paid covering also Syndial. Theproceeding continues for the alleged damage in the 1989-1990period.

In 2000, the Public Prosecutor of Brindisistarted a criminal action against 68 persons who are employees orformer employees of companies that owned and managed plants forthe manufacture of dichloroethane, vinyl chloride monomer andvinyl polychloride from the early 1960s to date, some of whichwere managed by EniChem from 1983 to 1993. At the end of thepreliminary investigation phase, the Public Prosecutor asked forthe dismissal of the case in respect of the employees and themanagers of EniChem. Plaintiffs presented oppositions while theprosecutor confirmed his request for dismissal of the case.

On December 18, 2002 EniChem SpA, jointly withAmbiente SpA (now merged in Syndial SpA) and European VinylsCorporation Italia SpA, was summoned before the Court of Veniceby the Province of Venice. The province requested compensationfor environmental damages, not quantified, caused to the lagoonof Venice by the Porto Marghera plants, which were already thesubject of two previous proceedings against employees andmanagers. In a related action, European Vinyls Corporation Italiapresented an action for recourse against EniChem and Ambiente.The requests for damage of the Province of Venice and that of EVCItalia to EniChem and Ambiente have not been quantified. Thefinal judgment is pending.

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, will act as plaintiffs. Thecollection of evidence effected before the hearing starts inCourt has been concluded and preliminary investigations haveended with the confirmation of accusations. During the inquiriestraces of mercury were found in the sea. The Public Prosecutor ofSiracusa started an inquiry for ascertaining the conditions ofsediments and marine fauna in the bay of Augusta. According tothe plaintiffs, mercury would have been spilled into the sea andpoisoned the marine fauna and therefore resulted in fetalmalformations and abortions due to the consumption ofcontaminated seafood fished in this area. The chlorine sodaplant, built in the late 50s was conferred to Syndial in 1989when the Enimont joint venture was formed. It was therefore easyto prove that Eni holds no responsibility for the crimes it wasaccused of. On March 15, 2006 the judge for preliminaryinvestigations decided the dismissal of the case against Syndialemployees.

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 approximatelyeuro 129 million and to financial and non-financial damages foreuro 250 million (plus interest and compensation) allegedlycaused by Pertusola Sud SpA (merged into EniChem) in the area ofCrotone. On June 6, 2003 EniChem appeared before the court andrequested the rejection of the damages and, as counterclaim, thepayment of the total costs for the remediation works alreadyunderway. The Province of Crotone entered the proceeding,claiming environmental damages for euro 300 million. Technicalaspects concerning the role of the delegated commissioner make itnecessary to decide on this aspect. Syndial was notified onOctober 21, 2004 of the request of the Calabria Region to appearbefore the Court of Milan in order to obtain a preliminary damagepayment, in anticipation of the expiration of the special officefor managing emergency events in Calabria. The Region requestedpayments for over euro 800 million.

On February 28, 2006 the Council of Ministers,the Ministry for the Environment and the Delegated Commissionerfor environmental emergency in the Calabria Region represented bythe State Lawyer requested Syndial to appear before the Court ofMilan in order to obtain the ascertainment, quantification andpayment of damage (in the form of pollution of land, air andwater and therefore of the general condition of the population)caused by the operations of Pertusola Sud SpA in the municipalityof Crotone and in surrounding municipalities. The localauthorities request the ascertainment of Syndial’sresponsibility as concerns expenses borne and to be borne for thecleanup and reclamation of sites, currently quantified at euro129 million. This proceeding concerns the same company anddamages as indicated in the previous paragraph.

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.

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 March 1, 2006 the State Lawyer in an attemptto settle the case proposed that Syndial pay 10% of the requesteddamage corresponding to euro 239 million. This attempt to settlefailed.

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 that 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. The judge requested an expertreport to be prepared in order to ascertain what damage has beenremediated and what remains to be cleaned up after theinterventions started by Agricoltura and continued byEniChem/Syndial. The expert report quantifies the damage still tobe remediated in euro 15 million. 

**Tax Proceedings**

ENI SPAWith a decree dated December 6, 2000 the Lombardia Region decidedthat natural gas used for electricity generation is subject to anadditional regional excise tax in relation to which Snam SpA(merged into Eni SpA in 2002) should substitute for the taxauthorities in its collection from customers. Given interpretiveuncertainties, the same decree provides the terms within whichdistributing companies are expected to pay this excise taxwithout paying any penalty. Snam SpA and the other distributingcompanies of Eni believe that natural gas used for electricitygeneration is not subject to this additional excise tax. For thisreason, an official interpretation was requested from theMinistry of Finance and Economy. With a decision of May 29, 2001,the Ministry confirmed that this additional excise tax cannot beapplied. The Region decided not to revoke its decree and Snamtook appropriate legal action. On the basis of action carried outby Snam, the Council of State decided on March 18, 2002 that thejurisdiction of the Administrative court did not apply to thiscase. In case the Region should request payment, Eni willchallenge this request in the relevant Court. The LombardiaRegion decided with regional Law No. 27/2001 that no additionaltax is due from January 1, 2002 onwards, but still requested thepayment of the additional taxes due before that date.

With a formal assessment presented by themunicipality of Pineto (Teramo) Eni SpA has been accused of nothaving paid a municipal tax on real estate for the period from1993 to 1998 on four oil platforms located in the Adriatic Seaterritorial waters in front of the coast of Pineto. Eni has beenrequested to pay a total of approximately euro 17 million alsoincluding interest and a fine for lacking declaration. Eni fileda claim against this request stating that the sea where theplatforms are located is not part of the municipal territory andthe application of the tax at requested by the municipalitylacked objective fundamentals. The claim has been accepted in thefirst two degrees of judgment at the Provincial and Regional TaxCommissions. But the Court of Cassation cancelled both judgmentsdeclaring that a municipality can consider requesting a tax onreal estate also in the sea facing its territory and with adecision of February 21, 2005 sent the proceeding to anothersection of the Regional Tax Commission in order to judge on theother reason opposed by Eni. On December 28, 2005 themunicipality of Pineto presented the same request for the sameplatforms for the years 1999 to 2004. The total amount requestedto Eni is of euro 24 million. Eni filed a claim against thisrequest.

AGIP KARACHAGANAK BVIn July 2004 relevant Kazakh authorities informed AgipKarachaganak BV and Agip Karachaganak Petroleum Operating BV,shareholder and operator of the Karachaganak contract,respectively, on the final outcome of the tax audits performedfor fiscal years 2000 to 2003. Claims by the Kazakh authoritiesconcern unpaid taxes for a total of $43 million, net to Eni, andthe anticipated offsetting of VAT credits for $140 million, netto Eni, as well as the payment of interest and penalties for atotal of $128 million. Both companies filed a counterclaim. Withan agreement reached on November 18, 2004, the original amountswere reduced to $26 million net to Eni that includes taxes,surcharges and interest. Meetings continue regarding residualmatters. Eni recorded a specific provision for this matter.

SNAM RETE GAS SPAWith 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.With the ruling of December 20, 2002, the Court judged the tax atvariance with European rules. In December 2002, Snam Rete Gassuspended payments based on the above Court ruling. Paymentseffected until November 2002 totaled euro 86.1 million. InJanuary 2003 the Sicilia Region presented an appeal to theCouncil of State against the ruling of the RegionalAdministrative Court of Lombardia for the part that states thevariance of the regional law with European rules. On December 16,2003, the European Commission judged the tax instituted by theRepublic of Italy, through the Sicilia Region, to be in contrastwith European rules and with the cooperation agreement betweenthe European Economic Community and the Peoples’ DemocraticRepublic of Algeria; the European Commission also stated thatsuch environmental tax is in contrast with the common customstariff because it modifies the equality of customs expenses oncommodities imported from third countries and could create adeviation in trade with such countries and a distortion in accessand competition rules. The Commission with its opinion presentedon July 7, 2004 formally requested Italy to cancel the tax. TheItalian Government must conform within two months from thereception of the opinion. As it did not conform, on December 20,2004 the European Commission passed the case to the Court ofJustice requesting a ruling. With a decision dated January 5,2004, and confirmed on March 4, 2005 by the Regional TaxCommission, the Provincial Tax Commission of Palermo declared theenvironmental tax of the Sicilia Region illegitimate because itis in contrast with European rules and therefore accepted SnamRete Gas’s claim for the repayment of the first installmentof euro 10.8 million, already paid in April 2002 to the SiciliaRegion. On May 4, 2004, the Sicilia Region repaid the firstinstallment. As for the seven remaining installments paid afterApril 2002 (euro 75.3 million) the Provincial Tax Commission ofPalermo with decision of January 5, 2005 confirmed theillegitimacy of the tax condemning the Region to repay theamounts paid and interest accrued to Snam Rete Gas. The SiciliaRegion presented recourse to the Regional Tax Commission atPalermo, a hearing has been scheduled for April 5, 2006. OnNovember 3, 2003, the Sicilia Region, following the procedurepresented by Snam Rete Gas concerning the yearly liquidation ofthe tax for 2002, requested liquidation of tax, fines andinterest (euro 14.2 million) relating to the unpaid December 2002installment. On December 30, 2003 Snam Rete Gas filed a claimwith request of suspension of payment as a result of theliquidation notice received from the Sicilia Region with theProvincial Tax Commission of Palermo, that, on June 25, 2004accepted Snam Rete Gas’s claim and decided the cancellationof the liquidation notice served by the Sicilia Region, confirmedby the Regional Tax Commission on March 7, 2005. In any case SnamRete Gas will not have to pay the tax: if the tax is consideredillegitimate in other Courts of law, the company will have theright to the restitution of the money. If, to the contrary, thetax is considered legitimate by the other Courts, the Authorityfor Electricity and Gas will include the tax (Decision No.146/2002 and No. 71/2003) in tariff with automatic andretroactive effects.

**Other judicial or arbitration proceedings**

SYNDIAL SPA (FORMER ENICHEM SPA) - SERFACTORINGSPAIn 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 -in liquidation), that has been merged into EniChem SpA (nowSyndial SpA). Such receivables were transferred by Agricolturaand Terni Industrie Chimiche to Serfactoring, which appointedAgrifactoring as its agent to collect payments. Agrifactoringguaranteed to pay the amount of such receivables to Serfactoring,regardless of whether or not it received payment at the due date.Following payment by Agrifactoring to Serfactoring, Agrifactoringwas placed 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 pendingwas set to be discussed in a hearing set for March 16, 2007 butwas rescheduled for October 27, 2006 upon request ofAgrifactoring. The judge of the Court of Rome, responsible forthe 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. Against this suspension Serfactoring and Syndialrequested to the Court of Cassation the cancellation of thesuspension and the return of the case to its original court.

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. With ajudgment of October 11, 2005 the Court rejected ICR’srequest and order that ICR pay all expenses. ICR filed a claimagainst this decision.

**Antitrust, EU Proceedings, actions of theAuthority for Electricity and Gas and of other regulatoryAuthorities**

ENI SPAIn 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/EC, 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, 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. On December 22, 2005, theAuthority notified the preliminary results of the inquiryconcerning: (i) information flows to oil companies related to thefunctioning of shared storage and uploading companies; (ii)barriers to the entrance of new competitors; and (iii) the priceof jet fuel is higher than on other European markets. On June 20,2006, the Antitrust notified Eni the final decision of thisproceeding and fined Eni by an amount of euro 117 million. TheAntitrust fined other oil companies involved in the matter. Eniis evaluating this decision in order to file a claim against itdecision before an administrative court.

On April 28, 2005 the Commission of theEuropean Communities started a formal assessment to evaluate thealleged participation of Eni and its subsidiaries to activitieslimiting competition in the field of paraffin. The allegedviolation of competition would have consisted in: (i) thedetermination of and increase in prices; (ii) the subdivision ofcustomers; (iii) exchange of trade secrets, such as productioncapacity and sales volumes. On November 3, the Commissionrequested information on Eni’s activities in the field ofparaffins. On November 29, 2005 Eni filed the requestedinformation. On April 21, 2006 the Antitrust Authority requestedinformation on the processing of raw paraffin, which Eni suppliedin a letter dated May 25, 2006.

The Department of Justice of the United Statesof America - Antitrust Division, notified Eni Petroleum Co Inc ofa subpoena requesting information and documents relating toactivities in the field of wax to be filed before June 20, 2005.The Company informed the department that it does not produce norimport wax in the United States of America.

POLIMERI EUROPA SPA AND SYNDIAL SPAIn 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 from 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 Syndialthe relevant charges to that effect on March 8, 2005. At ahearing held on July 27, 2005 the two companies presentedmemoranda and confirmed their position. The parties await for adecision of the Commission.

EP(D)M manufacture is also under scrutiny inthe United States, where the Department of Justice of SanFrancisco requested information and documents to Polimeri EuropaAmericas Inc, a U.S. subsidiary of Polimeri Europa and to itsdeputy chairman and sales manager. Class actions were filedclaiming damages in relation to the alleged violation. In July2005 Syndial signed a settlement agreement for the civil classaction which entails the payment of approximately dollar 3.2million, approved by the federal court.

The investigation was also extended to thefollowing products: NBR, CR, BR, SSBR and SBR.

The European Commission started aninvestigation regarding BR, SBR, SSBR. On January 26, 2005 theCommission dropped the charges in relation to SSBR, while for theother two products the Commission started an infraction procedureby notifying Eni, Polimeri Europa and Syndial the relevantcharges. The companies presented a written memorandum and theCommission decided to open an inquiry, as a consequence of whichthe Commission sent a new description of the charges. Thecompanies are preparing a new memorandum.

With regard to NBR an inquiry is underway inEurope and the USA, where class actions also have been started.The class action at federal level was abandoned by theplaintiffs. The federal judge acknowledged this abandonment. 

With regard to CR, as part of an investigationcarried out in the USA, Syndial entered into a plea agreementwith the Department of Justice pursuant to which Syndial wouldagree to pay a fine of U.S. dollar 9 million, while theDepartment of Justice would agree that it will not bring furthercriminal charges against Syndial or against its affiliatecompanies. On June 27, 2005 the plea agreement was approved. ForCR the civil class action was closed with a settlement agreementapproved by the federal judge on July 8, 2005 whereby the companywill pay dollar 5 million. The European Commission requested Eni,Polimeri Europa and Syndial to provide information about CR. Thetwo companies decided to cooperate with the Commission.

Eni recorded a provision for these matters.

STOCCAGGI GAS ITALIA SPAWith 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 decisions with theRegional Administrative Court of Lombardia requesting theircancellation. With a decision dated September 29, 2003, thatCourt rejected the appeal presented by Stogit. Stogit filed anappeal to the Council of State against the sentence which wasrejected by the Council of State on January 6, 2006.

DISTRIBUIDORA DE GAS CUYANA SAThe 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. On April 28,2006, the Company filed a formal request for examining thedocuments used as evidence of the alleged violation.

**Settled Legal Proceedings**

In August 2005, the internal revenue service ofVenezuela served to Eni Dación BV four formal assessment onincome taxes for the years 2001 to 2004 that, by excluding thedeductibility of certain costs: (i) annul the losses recorded forthe periods amounting to a total of bolivar 910 billion(corresponding to $425 million); (ii) determine for the sameperiods a taxable income amounting to a total of bolivar 115billion (corresponding to $54 million); and (iii) request a taxamounting to bolivar 52 billion (corresponding to $24 million)determined by applying a 50% tax rate rather than the 34% rateapplied to other companies performing activities analogous tothose of Eni Dación BV. In particular it excluded thedeductibility of: (i) interest charges due to other Eni Groupcompanies that provided loans denominated in U.S. dollars; and(ii) exchange rate losses recorded in the Financial Statementsand related to such loans resulting from the devaluation of theVenezuelan currency. The formal assessments served have apreliminary nature and do not request immediate payment nor dothey specify the amount of a fine (from 10 to 250%) and ofinterest (average rate for the period approximately 23%). EniDación filed a claim for the cancellation of the assessment. Inthe 2005 accounts, Eni recorded a specific provision for thismatter. In April 2006 the appeal was rejected and the final taxassessment was issued. The final tax assessment:(i) substantially confirmed the preliminary assessments,although reducing the originally assessed income tax liability tobolivar 39 billion ($18 million); and (ii) imposed fines and latepayment interests of bolivar 109 billion ($51 million). EniDación BV presented a further administrative appeal before theexpiration of the time limit for filing a judicial tax appeal,thereby obtaining a reduction of the overall amount from bolivar148 billion ($69 million) to bolivar 52 billion ($24 million)including taxes in the amount of bolivar 12.5 billion ($6million) and fines and late payment interest in the amount ofbolivar 39.5 billion ($18 million). In order to avoid furthercharges deriving from the increase of the corresponding fines andlate payment interest, Eni Dación BV paid the newly assessedamount in May 2006, thereby reaching a settlement. Consistently,Eni Dación BV filed an integrative income tax return for year2005, considering the new tax bases for years 2001 to 2004, andpaid accordingly bolivar 128 billion ($60 million) of incometaxes and bolivar 4.4 billion ($2 million) of fines and latepayment interest.

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 did 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 was based on the fact that the company didnot 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 canceling the 147formal assessments. On March 12, 2004 the Comando NucleoRegionale Polizia Tributaria 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. The notification was based on the same lack ofadministrative authorization, already contested by the CustomsDistrict of Taranto, that was concluded in favor of Eni by theRegional Director. On January 26, 2006 the judge for preliminaryinvestigation of the Court of Taranto dismissed the accusationsand closed the assessment.

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 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 that agreed to pay 13% of the remediation costs. The firstaction promoted by Grifil before the Court of La Spezia remainedpending. 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 fulfill its obligation. The judgeclosed the inquiry phase and stated that the judgment can bebrought to an end. 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. On September 6, 2005 Eni and ImmobiliareHelios SpA (that acquired all of Grifil’s share capital)reached a settlement that: (i) concluded all disputes outstandingwith Grifil and constitutes a waiver to any possible future claimdirectly or indirectly related to the sale of the land parcel;(ii) passed to the acquirer all residual expense to be incurredfor the reclamation of the land parcel with the explicit approvalof the municipality of La Spezia; (iii) provided for Eni topay to the new owner of Grifil a lump sum of euro 15.1 millionthat will be paid when the new owner provides confirmation ofworks performed for the reclamation; the sum is covered byprovisions in the risk reserve.

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.Defendants included certain employees of Eni which has beenmanaging the Porto Marghera plant since the beginning of theeighties. On November 2, 2001, the Court of Venice acquitted alldefendants. The appeal against the decision was presented by thepublic prosecutor, the State Attorney on behalf of the Ministryof Environment and the Council of Ministers, 5 public entities,12 associations 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, the Court of Appeals decided not toproceed due to the statute of limitations for some crimes, whileit confirmed the preceding judgment for the other matters. On May19, 2006, the Court of final instance, before which plaintiffsappealed the decision of the Court of Appeals, acquitted alldefendants stating that pollution and mismanagement of the plantoccurred before the eighties and consequently Eni and itsemployees could not be deemed responsible for that. In January2006 Eni settled this matter with the Council of Ministers andthe Ministry for the Environment paying an amount of euro 40million. Under terms of the settlement, the latter will abstainfrom the recourse to the Court of final instance and will not acton any other environmental damage concerning the management ofPorto Marghera until the date of the settlement. Eni had alreadyrecorded a provision for this matter which was sufficient tocover the amount of the settlement.

**Other commitments and risks not included inthe balance sheet**

Commitments regarding long-term natural gassupply contracts stipulated by Eni, which contain take-or-payclauses, are included in "Operating Review - Gas &Power" in the Report of the Directors in the ConsolidatedFinancial Statement, which is considered an integral part ofthese Notes.

Parent company guarantees given relating tocontractual commitments for hydrocarbon exploration andproduction activities, quantified on the basis of the capitalexpenditures to be made, amount to euro 5,052 million (euro 3,192million at December 31, 2004).

With effective date April 1, 2006, theVenezuelan State oil company Petróleos de Venezuela SA (PDVSA)unilaterally terminated the service contract governing activitiesat the Dación oil field where Eni acted as a contractor, holdinga 100% working interest. As a consequence, starting on the sameday, operations at the Dación oil field are conducted by PDVSAwhich replaced Eni Dación BV, Eni’s wholly-owned subsidiarythat had been operating the field until that date.

Eni believes that it is entitled to a marketvalue compensation for the expropriation of the Dación field. Onthese basis, Eni is available to reach an agreement with theVenezuelan authorities. In case an amicable settlement is notpossible, Eni will take any other action in order to protect itsinterest in Venezuela. Based on internal and external independentevaluation, Eni is confident that a fair market compensation willnot be lower than the book value of the Dación related assets.Accordingly, management decided not to impair the book value ofEni’s Dación assets. In 2005 and in the first quarter 2006,the Dación field production rate was about 60 KBBL/d. Managementexpects Eni’s proved reserves of hydrocarbons to be reducedby an amount of approximately 175 mmBBL corresponding toEni’s net proved reserves of the Dación field as ofDecember 31, 2005 as a consequence of the loss of Eni’stitle to the field.

Under the convention signed on October 15, 2001by TAV SpA and CEPAV Due, Eni committed to guarantee theexecution of design and construction of the works assigned to theCEPAV Consortium (to which it is a party) and guaranteed to TAVthe correct and timely execution of all obligations indicated inthe convention in a subsequent integration deed and in anyfurther addendum or change or integration to the same. Theregulation of CEPAV Due contains the same obligations andguarantees contained in the CEPAV Uno agreement.

A guarantee for euro 282 million to Cameron LNGprovided on behalf of Eni USA Gas Marketing Llc (Eni’sinterest 100%) for the regasification contract entered into onAugust 1, 2005. This guarantee is subject to a suspension clauseand will come in force when the regasification service starts ina period included between October 1, 2008 and June 30, 2009.

Non-quantifiable risks related to contractualassurances given to acquirors of investments against certainunforeseeable liabilities attributable to tax, state welfarecontributions and environmental matters applicable to periodsduring which such investments were owned by Eni. Eni believessuch matters will not have a material adverse effect on itsConsolidated Financial Statements.

**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, 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 substantialimpact on Eni’s operations. Some risk of environmental costsand liabilities is inherent in particular operations and productsof Eni, as it is with other companies engaged in similarbusinesses, and there can be no assurance that material costs andliabilities will not be incurred. Although management,considering the actions already taken with the insurance policiesto cover environmental risks and the provision for risks accrued,does not currently expect any material adverse effect uponEni’s Consolidated Financial Statements as a result of itscompliance with such laws and regulations, there can be noassurance that there will not be a material adverse impact onEni’s Consolidated Financial Statements due to: (i) thepossibility of as yet unknown contamination; (ii) the results ofthe on-going surveys and the other possible effects of statementsrequired by Decree No. 471/1999 of the Ministry of Environment;(iii) the possible effect of future environmental legislation andrules, such as: (a) the decree of the Ministry of Environment No.367 published on January 8, 2004, that regards the fixing of newquality standards for aquatic environment and dangeroussubstances and Legislative Decree No. 59/2005 concerning theintegrated environmental authorization (IPPC), (b) theapplication of European directive 2004/35/EC concerningenvironmental responsibility for prevention and reclamation ofenvironmental damage, referred to in paragraph 439 of the singlearticle of Law No. 266/2005 (budget law for 2006), (c) alegislative decree to be issued in implementation of Law No. 308of December 15, 2004 that delegated to the Government therestructuring of regulations concerning waste disposal andreclamation of polluted areas, protection of waters frompollution and management of water resources, payment ofenvironmental damage, procedures for the evaluation ofenvironmental impact and for the strategic environmental impactas well as protection from emission into the atmosphere within 18months. The draft law approved by the Council of Ministers onFebruary 10, 2006 is currently being examined by the President ofthe Republic. The also implements European directive 2000/60/ECthat established a European action framework for the protectionof waters; (iv) the effect of possible technological changesrelating to future remediation; and (v) the possibility oflitigation and the difficulty of determining Eni’sliability, if any, as against other potentially responsibleparties with respect to such litigation and the possibleinsurance recoveries.

**Emission trading**

Law No. 316 of December 30, 2004 converted LawDecree No. 237/2004 implementing European directive 2003/87/ECwhich established a system for emission trading. From January 1,2005 this European emission trading scheme has been in force andon this matter on February 24, 2006 the Ministry of theEnvironment published a decree defining emission permits for the2005-2007 period. In particular Eni was assigned permitscorresponding to 65.2 million tonnes of carbon dioxide (of which22.4 for 2005, 21.4 for 2006 and 21.4 for 2007). In 2005emissions of carbon dioxide from Eni’s plants were lowerthan permits assigned.

**Subsequent events**

The main significant events that occurred afterthe balance sheet date are as follows:

| • |   | On May 5,        2006 the European Commission started an inquiry in order        to verify an alleged abuse of dominant position on the        part of Eni in violation of article 82 of the EEC Treaty        and article 54 of the CES Agreement in the activities of        international gas transport and wholesale and retail        supply of gas. According to the European Commission Eni        might have adopted commercial practices that constitute        barriers to access to the Italian market for the        wholesale supply of natural gas, in particular taking        account of Eni long-term purchase contracts. In addition        Eni also entered into long-term transport contracts which        award Eni a majority share of transport capacity of        certain international gaslines and, as a consequence, Eni        may have prevented others access to infrastructure.        Officials from the European Commission have conducted        inspections at Eni’s headquarters and of certain of        Eni’s subsidiaries and collected documents.        If the existence of the alleged anti-competitive        practices is confirmed, the European Commission could        fine Eni. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | On May 25,        2006, Eni’s Annual General Shareholders Meeting        approved a euro 2 billion increase in Eni’s ongoing        share repurchase program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

**25 Revenues**

The following is a summary of the maincomponents of "Revenues". More information aboutchanges in revenues is included in the "Financialreview" of the "Report of the Directors".

Net sales from operations were as follows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Net sales from operations                  |   | 57,413     |   |   | 73,679     |   |
|--------------------------------------------|--------|------------|--------|--------|------------|--------|
| Change in        contract work in progress |   | 132        |   |   | 49         |   |
|                                       |   | **57,545** |   |   | **73,728** |   |

Net sales from operations were netof the following items:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Excise tax                                                                                 |   | 14,060     |   |   | 14,140     |   |
|--------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Exchanges of oil sales (excluding excise tax)                                              |   | 1,735      |   |   | 2,487      |   |
| Exchanges        of other products                                                         |   | 86         |   |   | 108        |   |
| Services billed to joint venture partners                                                  |   | 1,175      |   |   | 1,331      |   |
| Sales to        service station managers for sales billed to holders of        credit card |   | 1,122      |   |   | 1,326      |   |
|                                                                                       |   | **18,178** |   |   | **19,392** |   |

Net sales from operations by industry segmentand geographic area of destination are presented in Note 31.

**Other income and revenues**

Other income and revenues were as follows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Contract        penalties and other trade revenues |   | 43        |   |   | 114     |   |
|----------------------------------------------------|--------|-----------|--------|--------|---------|--------|
| Lease and rental income                            |   | 93        |   |   | 102     |   |
| Compensation        for damages                    |   | 87        |   |   | 89      |   |
| Gains from sale of assets                          |   | 407       |   |   | 71      |   |
| Other        proceeds (*)                          |   | 747       |   |   | 422     |   |
|                                               |   | **1,377** |   |   | **798** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 25        million. |

Other income of 2004 included differentials oncommodity derivatives for euro 61 million.

**26 Operating expenses**

The following is a summary of the maincomponents of "Operating expenses". More informationabout changes in operating expenses is included in the"Financial review" of the "Report of theDirectors".

**Purchases, services and other**

Purchases, services and other included thefollowing:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Production costs-raw, ancillary and consumable        materials and goods |   | 27,010     |   |   | 35,318     |   |
|---------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Production costs-services                                                 |   | 9,148      |   |   | 9,405      |   |
| Operating leases and other                                                |   | 1,609      |   |   | 1,929      |   |
| Net provisions for contingencies                                          |   | 553        |   |   | 1,643      |   |
| Other expenses                                                            |   | 1,066      |   |   | 1,100      |   |
|                                                                      |   | **39,386** |   |   | **49,395** |   |

| less:                                                                            |   |       |   |   |       |   |
|----------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| -        capitalized direct costs associated with self-constructed        assets |   | (1,039     | )      |   | (828       | )      |
|                                                                             |   | **38,347** |   |   | **48,567** |   |

Production costs-services brokerage includefees for euro 24 million (euro 26 million at December 31, 2004).

Costs for research and development that do notmeet the requirements to be capitalized amount to euro 202million (euro 210 million in 2004).

Operating leases and other include royalties onhydrocarbons extracted for euro 965 million (euro 741 million in2004).

Provisions for contingencies are net ofdeductions not corresponding to cash expenditures and concern inparticular provisions for environmental risks for euro 515million (euro 145 million in 2004), provisions for contractpenalties and disputes for euro 336 million (euro 23 million2004), provisions for the revision of selling prices for euro 321million and loss adjustments and actuarial provisions for euro 82million (euro 13 million in 2004).

**Payroll and related costs**

Payroll and related costs were as follows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Wages and        salaries                                                        |   | 2,402     |   |   | 2,484     |   |
|----------------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| Social security contributions                                                    |   | 658       |   |   | 662       |   |
| Cost        related to defined benefit plans                                     |   | 118       |   |   | 126       |   |
| Other costs                                                                      |   | 218       |   |   | 255       |   |
|                                                                             |   | **3,396** |   |   | **3,527** |   |
| less:                                                                            |   |      |   |   |      |   |
| -        capitalized direct costs associated with self-constructed        assets |   | (151      | )      |   | (176      | )      |
|                                                                             |   | **3,245** |   |   | **3,351** |   |

Cost related to defined benefit plans ispresented in Note 20.

**Stock compensation**

*Stock grant*

With the aim of improving motivation andloyalty of the managers of Eni SpA and its subsidiaries asdefined in Article 2359 of the Civil Code14 through thelinking of compensation to the attainment of preset individualand corporate objectives, making management participate incorporate risk and motivating them towards the creation ofshareholder value and increasing at the same time theircontribution to the management of the Company, Eni offers its ownshares purchased along its buy-back program (treasury shares) forno consideration to those managers of Eni who have achievedcorporate and individual objectives. Assignments vest within 45days after the end of the third year from the date of the offer.

At December 31, 2005, 3,127,200 of ordinaryshares with nominal value euro 1 were outstanding and concernedthe 2003 stock grant plan for a total of 1,018,400 shares with afair value of euro 11.20 per share, the 2004 stock grant plan fora total of 912,400 shares with a fair value of euro 14.57 pershare and the 2005 stock grant plan for a total of 1,196,400shares with a fair value of euro 20.08 per share.

Changes in the 2003, 2004 and 2005 stock grantplans consisted of the following (regarding stock grants, noexercise prices are provided for):

|   |   | **2003** |   | **2004** |   | **2005** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| (euro) |   | **Number of shares** |   | **Market price**(a) |   | **Number of shares** |   | **Market price**(a) |   | **Number of shares** |   | **Market price**(a) |
|--------|--------|----------------------|--------|---------------------|--------|----------------------|--------|---------------------|--------|----------------------|--------|---------------------|
|   |   |                      |   |                     |   |                      |   |                     |   |                      |   |                     |

| **Stock        grants as of January 1**                |   | **3,551,900** |   |   | **15.150** |   |   | **3,635,050** |   |   | **15.101** |   |   | **3,112,200** |   |   | **18.461** |   |
|--------------------------------------------------------|--------|---------------|--------|--------|------------|--------|--------|---------------|--------|--------|------------|--------|--------|---------------|--------|--------|------------|--------|
| New rights granted                                     |   | 1,206,000     |   |   | 13.764     |   |   | 1,035,600     |   |   | 17.035     |   |   | 1,303,400     |   |   | 21.336     |   |
| Rights        exercised in the period                  |   | (1,122,150    | )      |   | 13.751     |   |   | (1,552,9100   | )      |   | 16.766     |   |   | (1,273,500    | )      |   | 23.097     |   |
| Rights cancelled in the period                         |   | (700          | )      |   | 13.604     |   |   | (6,350        | )      |   | 16.618     |   |   | (14,900       | )      |   | 22.390     |   |
| **Stock        grants outstanding as of December 31,** |   | **3,635,050** |   |   | **15.101** |   |   | **3,112,200** |   |   | **18.461** |   |   | **3,127,200** |   |   | **23.460** |   |
| **of which exercisable at December 31,**               |   | **-**         |   |   | **-**      |   |   | **-**         |   |   | **-**      |   |   | **38,700**    |   |   | **23.460** |   |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Market price        relating to new rights granted, rights exercised in the        period and rights cancelled in the period corresponds to        the average market value (arithmetic average of official        prices recorded on Mercato Telematico Azionario in the        month preceding: (i) the date of the resolution of the        Board of Directors regarding the stock grants assignment;        (ii) the date of the recording in the grantee’s        securities account of the emission/transfer of the shares        granted; and (iii) the date of the unilateral termination        of employment for rights cancelled), weighted with the        number of shares. Market price of stock grants at the        beginning and at the end of the year is the price        recorded at December 31. |

*Stock option*

With the aim of improving motivation andloyalty of the managers of Eni SpA and its subsidiaries asdefined in Article 2359 of the Civil Code15 that holdsignificant positions of managerial responsibility or that areconsidered as strategic managers for the Group, Eni approvedstock compensation plans that provide the assignment for noconsideration of purchase rights of Eni treasury shares(options).

Stock options provides the right for thepurchase of treasury share in a 1 to 1 ratio after the end of thethird year from the date of the grant, with a strike pricecalculated as arithmetic average of official prices registered onthe Mercato Telematico Azionario in the month precedingassignment or (starting from 2003), if greater, as average costof treasury shares registered in the day preceding assignment.Strike price for the 2005 stock option grant was euro 22.512.Stock option grantees can obtain advances by the Group financialcompany for the payment of shares acquired on condition that thegrantees contemporaneously underwrite an irrevocable warrant ofsale to the above-mentioned financial company, regarding theshares acquired.

At December 31, 2005 a total of 13,379,600options have been granted for the purchase of 13,379,600 ordinaryshares with a nominal value of euro 1 of Eni SpA. Options referto the 2002 stock plan for 903,100 shares with an exercise priceof euro 15.216 per share, to the 2003 stock plan for 4,106,500shares with an exercise price of euro 13.743 per share, to the2004 stock plan for 3,659,000 shares with an exercise price ofeuro 16.576 per share and to the 2005 stock plan for 4,711,000shares with an exercise price of euro 22.512 per share.

At December 31, 2005 the weighted-averageremaining contractual life of the options outstanding at December2002, 2003, 2004 and 2005 was 4 years and 7 months, 5 years and 7months, 6 years and 7 months, and 7 years and 7 months,respectively.

Changes in the 2003, 2004 and 2005 stock optionplans consisted of the following:

|   |   | **2003** |   | **2004** |   | **2005** |
|--------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |

| (euro) |   | **Number of shares** |   | **Weighted average exercise price** |   | **Number of shares** |   | **Weighted average exercise price** |   | **Number of shares** |   | **Weighted average exercise price** |
|--------|--------|----------------------|--------|-------------------------------------|--------|----------------------|--------|-------------------------------------|--------|----------------------|--------|-------------------------------------|
|   |   |                      |   |                                     |   |                      |   |                                     |   |                      |   |                                     |

| **Options        as of January 1**                |   | **3,518,500** |   |   | **15.216** |   |   | **8,162,000**  |   |   | **14.367** |   |   | **11,789,000** |   |   | **15.111** |   |
|---------------------------------------------------|--------|---------------|--------|--------|------------|--------|--------|----------------|--------|--------|------------|--------|--------|----------------|--------|--------|------------|--------|
| New options granted                               |   | 4,703,000     |   |   | 13.743     |   |   | 3,993,500      |   |   | 16.576     |   |   | 4,818,500      |   |   | 22.512     |   |
| Options        exercised in the period            |   |          |   |   |       |   |   | (354,000       | )      |   | 14.511     |   |   | (3,106,400     | )      |   | 15.364     |   |
| Options cancelled in the period                   |   | (59,500       | )      |   | 15.216     |   |   | (12,500        | )      |   | 14.45      |   |   | (121,500       | )      |   | 16.530     |   |
| **Options        outstanding as of December 31,** |   | **8,162,000** |   |   | **14.367** |   |   | **11,789,000** |   |   | **15.111** |   |   | **13,379,600** |   |   | **17.705** |   |
| **of which exercisable at December 31,**          |   | **73,000**    |   |   | **14.802** |   |   |           |   |   |       |   |   | **1,540,600**  |   |   | **16.104** |   |

The fair value of stock optionsgranted during the years 2002, 2003, 2004 and 2005 was euro 5.39,euro 1.50, euro 2.01 and euro 3.33 for share, respectively, andwas calculated applying the Black-Scholes method using thefollowing assumptions:

|   |   | **2002** |   | **2003** |   | **2004** |   | **2005** |
|--------|--------|----------|--------|----------|--------|----------|--------|----------|
|   |   |          |   |          |   |          |   |          |

| Risk-free        interest rate |   |   |   |   | (%)    |   |   | 3.5 |   |   | 3.16 |   |   | 3.21 |   |   | 2.51 |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|-----|--------|--------|------|--------|--------|------|--------|--------|------|--------|
| Expected life                  |   |   |   |   | (year) |   |   | 8   |   |   | 8    |   |   | 8    |   |   | 8    |   |
| Expected        volatility     |   |   |   |   | (%)    |   |   | 43  |   |   | 22   |   |   | 19   |   |   | 21   |   |
| Expected dividends             |   |   |   |   | (%)    |   |   | 4.5 |   |   | 5.35 |   |   | 4.5  |   |   | 3.98 |   |

Costs of the year related to stock grant andstock option plans amount to euro 35 million (euro 18 million atDecember 31, 2004).

**Compensation of key management personnel**

Compensation of persons responsible of keypositions in planning, direction and control functions of EniGroup companies, including executive officers (key managementpersonnel) amounted to euro 14 and euro 15 million for 2004 and2005, respectively, and consisted of the following:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Wages and salaries                             |   | 12     |   |   | 11     |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Post-employment        benefits                |   | 1      |   |   | 1      |   |
| Indemnities due upon termination of employment |   |   |   |   | 1      |   |
| Stock        grant/option                      |   | 1      |   |   | 2      |   |
|                                           |   | **14** |   |   | **15** |   |

**Compensation of Directors, StatutoryAuditors and General Managers**

Compensation of Directors, Statutory Auditorsand General Managers amount to euro 4.5 million and euro 19.2million in 2004 and 2005, respectively. Compensation of StatutoryAuditors amounted to euro 0.688 and euro 0.785 million in 2004and 2005, respectively.

Compensation of Directors, Statutory Auditorsand General Managers include emoluments and all other retributiveand social security compensations due for the function of manageror statutory auditor assumed in Eni SpA or in other companiesincluded in the scope of consolidation, that are a cost for Eni.

The average number of employees of thecompanies included in the scope of consolidation by type was asfollows:

| (units) |   | **2004** |   | **2005** |
|---------|--------|----------|--------|----------|
|    |   |          |   |          |

| Senior managers        |   |   |   |   |   |   |   | 1,746      |   |   | 1,754      |   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| Junior        managers |   |   |   |   |   |   |   | 10,449     |   |   | 10,747     |   |
| Employees              |   |   |   |   |   |   |   | 35,393     |   |   | 34,457     |   |
| Workers                |   |   |   |   |   |   |   | 25,623     |   |   | 24,345     |   |
|                   |   |   |   |   |   |   |   | **73,211** |   |   | **71,303** |   |

The average number of employers is calculatedas half of the total of the number of employees at the beginningand at the end of the period. The average number of seniormanagers includes managers employed and operating in foreigncountries, whose position is comparable to a senior managerstatus.

**Depreciation, amortization and impairments**

Depreciation, amortization and impairmentsconsisted of the following:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Depreciation and amortization:                                |   |   |   |   |   |   |   |      |   |   |      |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|
| - tangible        assets                                      |   |   |   |   |   |   |   | 3,670     |   |   | 4,576     |   |
| - intangible assets                                           |   |   |   |   |   |   |   | 931       |   |   | 936       |   |
|                                                          |   |   |   |   |   |   |   | **4,601** |   |   | **5,512** |   |
| Impairments:                                                  |   |   |   |   |   |   |   |      |   |   |      |   |
| - tangible        assets                                      |   |   |   |   |   |   |   | 329       |   |   | 264       |   |
| - intangible assets                                           |   |   |   |   |   |   |   | 4         |   |   | 8         |   |
|                                                          |   |   |   |   |   |   |   | **333**   |   |   | **272**   |   |
| less:                                                         |   |   |   |   |   |   |   |      |   |   |      |   |
| - direct        costs associated with self-constructed assets |   |   |   |   |   |   |   | (3        | )      |   | (3        | )      |
|                                                          |   |   |   |   |   |   |   | **4,931** |   |   | **5,781** |   |

**27 Financial income (expense)**

Financial income (expense) consisted of thefollowing:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Exchange differences, net                                     |   |   |   |   |   |   |   |     |   |   | 169      |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
| Financial        expense capitalized                          |   |   |   |   |   |   |   | 202      |   |   | 159      |   |
| Income from financial receivables                             |   |   |   |   |   |   |   | 95       |   |   | 95       |   |
| Net income        from securities                             |   |   |   |   |   |   |   | 31       |   |   | 36       |   |
| Interest on tax credits                                       |   |   |   |   |   |   |   | 17       |   |   | 17       |   |
| Net        interest due to banks                              |   |   |   |   |   |   |   | (110     | )      |   | (38      | )      |
| Financial expense due to the passage of time (1)              |   |   |   |   |   |   |   | (109     | )      |   | (109     | )      |
| Interest        and other financial expense on ordinary bonds |   |   |   |   |   |   |   | (247     | )      |   | (265     | )      |
| Income (expense) on derivatives                               |   |   |   |   |   |   |   | 34       |   |   | (386     | )      |
| Other        financial expense, net                           |   |   |   |   |   |   |   | (69      | )      |   | (44      | )      |
|                                                          |   |   |   |   |   |   |   | **(156** | **)**  |   | **(366** | **)**  |

|   |   |                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    |   | The item        concerned the increase of provisions for contingencies        that are indicated at an actualized value in non-current        liabilities. |

The decrease in income (expense) fromderivatives of euro 420 million is primarily due to theapplication from January 1, 2005 of IAS 39 which requires thatderivatives be stated at fair value and the effects charged tothe profit and loss account, instead of being connected with theeconomic effects of the hedged transactions as recorded in 2004.Such derivatives, in fact, do not meet the conditions required byIFRS to be qualified as hedging instruments. Also the increase innet exchange differences of euro 169 million is primarily due tothe application of IAS 39, because the effect of the translationat period end of assets and liabilities denominated in currenciesother than functional currency is not compensated by the effectof the translation at period end of the commitments forderivatives contracts.

**28 Income (expense) from investments**

**Effects of investments accounted for usingthe equity method**

Effects of investments accounted for using theequity method consisted of the following:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Gains from investments accounted for using the        equity method  |   |   |   |   |   |   |   | 401     |   |   | 770     |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Losses        from investments accounted for using the equity method |   |   |   |   |   |   |   | (69     | )      |   | (33     | )      |
|                                                                 |   |   |   |   |   |   |   | **332** |   |   | **737** |   |

More information about gains and losses frominvestments accounted for using the equity method is presented inNote 10.

**Other income (expense) from investments**

Other income (expense) from investmentsconsisted of the following:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Gains on disposals                 |   |   |   |   |   |   |   | 130     |   |   | 179     |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Dividends                          |   |   |   |   |   |   |   | 72      |   |   | 33      |   |
| Losses on disposals                |   |   |   |   |   |   |   | (1      | )      |   | (8      | )      |
| Other        income (expense), net |   |   |   |   |   |   |   | 287     |   |   | (27     | )      |
|                               |   |   |   |   |   |   |   | **488** |   |   | **177** |   |

The gains on disposals of euro 179 millionconcern the sale of 100% of the share capital of Italiana PetroliSpA (euro 132 million) and 2.33% of Nuovo Pignone Holding SpA(euro 24 million). Other net income from investments concern thegain recorded in the Consolidated Financial Statements due to thesale of 9.054% of the share capital of Snam Rete Gas SpA toMediobanca SpA (euro 308 million).

**29 Income tax expense**

Income tax expense consisted of the following:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Current        taxes:                                                                     |   |   |   |   |   |   |   |      |   |   |      |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|
| - Italian subsidiaries                                                                    |   |   |   |   |   |   |   | 1,098     |   |   | 1,872     |   |
| - foreign        subsidiaries of the Exploration & Production segment                 |   |   |   |   |   |   |   | 3,116     |   |   | 5,116     |   |
| - foreign subsidiaries                                                                    |   |   |   |   |   |   |   | 278       |   |   | 373       |   |
|                                                                                      |   |   |   |   |   |   |   | **4,492** |   |   | **7,361** |   |
| Less:                                                                                     |   |   |   |   |   |   |   |      |   |   |      |   |
| - tax        credits on dividend distributions not offset with current        tax payment |   |   |   |   |   |   |   | (39       | )      |   | (34       | )      |
|                                                                                      |   |   |   |   |   |   |   | **4,453** |   |   | **7,327** |   |
| Net        deferred taxes:                                                                |   |   |   |   |   |   |   |      |   |   |      |   |
| - Italian subsidiaries                                                                    |   |   |   |   |   |   |   | 843       |   |   | 334       |   |
| - foreign        subsidiaries of the Exploration & Production segment                 |   |   |   |   |   |   |   | 215       |   |   | 464       |   |
| - foreign subsidiaries                                                                    |   |   |   |   |   |   |   | 11        |   |   | 3         |   |
|                                                                                      |   |   |   |   |   |   |   | **1,069** |   |   | **801**   |   |
|                                                                                      |   |   |   |   |   |   |   | **5,522** |   |   | **8,128** |   |

Current taxes of the year relate to Italiancompanies for euro 1,872 million and concern Ires for euro 1,489and Irap for euro 359 million, and foreign companies for euro 24million.

The effective tax rate is 46.8% (42.3% in the2004) compared with a statutory tax rate of 38.1% (38.2% in the2004), calculated by applying a 33% tax rate (Ires) to profitbefore income taxes and 4.25% tax rate (Irap) to the net value ofproduction as provided for by Italian laws.

The difference between the statutory andeffective tax rate was due to the following factors:

| (%)    |   | **2004** |   | **2005** |
|--------|--------|----------|--------|----------|
|   |   |          |   |          |

| **Statutory tax rate**                                   |   |   |   |   |   |   |   | **38.2** |   |   | **38.1** |   |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
| Items        increasing (decreasing) statutory tax rate: |   |   |   |   |   |   |   |     |   |   |     |   |
| - higher foreign subsidiaries tax rate                   |   |   |   |   |   |   |   | 5.2      |   |   | 8.8      |   |
| -        permanent differences                           |   |   |   |   |   |   |   | (0.7     | )      |   | 0.8      |   |
| - other                                                  |   |   |   |   |   |   |   | (0.4     | )      |   | (0.9     | )      |
|                                                     |   |   |   |   |   |   |   | **4.1**  |   |   | **8.7**  |   |
|                                                     |   |   |   |   |   |   |   | **42.3** |   |   | **46.8** |   |

Permanent differences in 2004 mainly concernthe gain recorded in the Consolidated Financial Statements due tothe sale of 9.054% of the share capital of Snam Rete Gas SpA(0.7%) to Mediobanca SpA. Permanent differences in 2005 mainlyconcerned the undeductibility from taxable income of the additionin provisions for contingencies following the fine imposed onFebruary 15, 2006 by the Antitrust Authority on Eni SpA (0.6%).

**30 Earnings per share**

Basic earnings per share is calculated bydividing "Net profit" of the year by theweighted-average number of shares issued and outstanding duringthe year, excluding treasury shares.

The number of shares outstanding used for thecalculation of the basic earnings per share was 3,771,692,584 and3,758,519,603 in 2004 and 2005, respectively.

Diluted earnings per share is calculated bydividing "Net profit" of the year by theweighted-average number of shares issued and outstanding duringthe year, excluding treasury shares, including shares that couldbe issued potentially.

At December 31, 2004 and 2005, shares thatcould be issued potentially concern essentially shares grantedunder stock grant and stock option plan. The number of sharesoutstanding used for the calculation of the diluted earnings pershare was 3,774,953,710 and 3,763,375,140 in 2004 and 2005,respectively.

Reconciliation of the average number sharesoutstanding used for the calculation of the basic and dilutedearning per share is as follows:

|   |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|--------|--------|-------------------|--------|-------------------|
|   |   |                   |   |                   |

| **Average number of shares used for the        calculation of the basic earnings per share**          |   |             |   | **3,771,692,584** |   | **3,758,519,603** |
|-------------------------------------------------------------------------------------------------------|--------|------------------|--------|-------------------|--------|-------------------|
| Number of        potential shares following stock grant plans                                         |   |             |   | 1,953,518         |   | 2,268,265         |
| Number of potential shares following stock        options plans                                       |   |             |   | 1,307,608         |   | 2,587,272         |
| **Average        number of shares used for the calculation of the diluted        earnings per share** |   |             |   | **3,774,953,710** |   | **3,763,375,140** |
| **Eni’s net profit**                                                                             |   | (million euro)   |   | **7,059**         |   | **8,788**         |
| **Basic        earning per share**                                                                    |   | (euro per share) |   | **1.87**          |   | **2.34**          |
| **Diluted earning per share**                                                                         |   | (euro per share) |   | **1.87**          |   | **2.34**          |

 

**31 Information by industry segment and geographic financialinformation**

**Information by industry segment**

| (million euro) |   | **Exploration &        Production** |   | **Gas & Power** |   | **Refining & Marketing** |   | **Petrochemicals** |   | **Oilfield Services        Construction and Engineering** |   | **Other activities** |   | **Corporate and financial        companies** |   | **Elimination** |   | **Total** |
|----------------|--------|-----------------------------------------|--------|---------------------|--------|------------------------------|--------|--------------------|--------|-----------------------------------------------------------|--------|----------------------|--------|----------------------------------------------|--------|-----------------|--------|-----------|
|           |   |                                         |   |                     |   |                              |   |                    |   |                                                           |   |                      |   |                                              |   |                 |   |           |

| **2004**                                                            |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Net sales from operations (a)                                       |   | 15,346  |   |   | 17,302 |   |   | 26,089 |   |   | 5,331  |   |   | 5,696  |   |   | 1,279  |   |   | 851    |   |   |   |   |   |   |   |
| Less:        intersegment sales                                     |   | (10,216 | )      |   | (493   | )      |   | (753   | )      |   | (499   | )      |   | (903   | )      |   | (754   | )      |   | (731   | )      |   |   |   |   |   |   |
| Net sales to customers                                              |   | 5,130   |   |   | 16,809 |   |   | 25,336 |   |   | 4,832  |   |   | 4,793  |   |   | 525    |   |   | 120    |   |   |   |   |   | 57,545 |   |
| Operating        profit                                             |   | 8,185   |   |   | 3,428  |   |   | 1,080  |   |   | 320    |   |   | 203    |   |   | (395   | )      |   | (363   | )      |   | (59    | )      |   | 12,399 |   |
| Provisions for contingencies                                        |   | 2       |   |   | 53     |   |   | 309    |   |   | 3      |   |   | 20     |   |   | 16     |   |   | 150    |   |   |   |   |   | 553    |   |
| Depreciation,        amortization and writedowns                    |   | 3,335   |   |   | 644    |   |   | 476    |   |   | 116    |   |   | 184    |   |   | 70     |   |   | 106    |   |   |   |   |   | 4,931  |   |
| Effects of investments accounted for using the        equity method |   | 7       |   |   | 164    |   |   | 89     |   |   | (4     | )      |   | 117    |   |   |   |   |   | (41    | )      |   |   |   |   | 332    |   |
| Identifiable        assets (b)                                      |   | 23,866  |   |   | 19,852 |   |   | 9,118  |   |   | 2,821  |   |   | 4,706  |   |   | 708    |   |   | 1,182  |   |   |   |   |   | 62,253 |   |
| Investments accounted for using the equity        method            |   | 273     |   |   | 1,773  |   |   | 745    |   |   | 5      |   |   | 328    |   |   | 30     |   |   | 2      |   |   |   |   |   | 3,156  |   |
| Identifiable        liabilities (c)                                 |   | 4,798   |   |   | 3,394  |   |   | 3,848  |   |   | 621    |   |   | 2,825  |   |   | 1,976  |   |   | 1,589  |   |   |   |   |   | 19,051 |   |
| Capital expenditures                                                |   | 4,853   |   |   | 1,451  |   |   | 693    |   |   | 148    |   |   | 186    |   |   | 49     |   |   | 119    |   |   |   |   |   | 7,499  |   |
| **2005**                                                            |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales from operations (a)                                       |   | 22,477  |   |   | 22,969 |   |   | 33,732 |   |   | 6,255  |   |   | 5,733  |   |   | 1,358  |   |   | 977    |   |   |   |   |   |   |   |
| Less:        intersegment sales                                     |   | (14,761 | )      |   | (572   | )      |   | (1,092 | )      |   | (683   | )      |   | (925   | )      |   | (905   | )      |   | (835   | )      |   |   |   |   |   |   |
| Net sales to customers                                              |   | 7,716   |   |   | 22,397 |   |   | 32,640 |   |   | 5,572  |   |   | 4,808  |   |   | 453    |   |   | 142    |   |   |   |   |   | 73,728 |   |
| Operating        profit                                             |   | 12,574  |   |   | 3,321  |   |   | 1,857  |   |   | 202    |   |   | 307    |   |   | (902   | )      |   | (391   | )      |   | (141   | )      |   | 16,827 |   |
| Provisions for contingencies                                        |   | 50      |   |   | 703    |   |   | 420    |   |   | 47     |   |   | 32     |   |   | 287    |   |   | 104    |   |   |   |   |   | 1,643  |   |
| Depreciation,        amortization and writedowns                    |   | 4,100   |   |   | 685    |   |   | 467    |   |   | 147    |   |   | 180    |   |   | 106    |   |   | 100    |   |   | (4     | )      |   | 5,781  |   |
| Effects of investments accounted for using the        equity method |   | 14      |   |   | 359    |   |   | 221    |   |   | 3      |   |   | 140    |   |   |   |   |   |   |   |   |   |   |   | 737    |   |
| Identifiable        assets (b)                                      |   | 28,982  |   |   | 21,928 |   |   | 11,787 |   |   | 2,905  |   |   | 5,248  |   |   | 612    |   |   | 1,377  |   |   | (534   | )      |   | 72,305 |   |
| Investments accountedfor using the equity method                    |   | 292     |   |   | 2,155  |   |   | 936    |   |   | 19     |   |   | 457    |   |   | 31     |   |   |   |   |   |   |   |   | 3,890  |   |
| Identifiable        liabilities (c)                                 |   | 6,762   |   |   | 5,097  |   |   | 4,542  |   |   | 702    |   |   | 3,204  |   |   | 2,249  |   |   | 1,975  |   |   |   |   |   | 24,531 |   |
| Capital expenditures                                                |   | 4,964   |   |   | 1,152  |   |   | 656    |   |   | 112    |   |   | 349    |   |   | 69     |   |   | 112    |   |   |   |   |   | 7,414  |   |

|   |   |                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------|
| (a)    |   | Before        elimination of intersegment sales.                                           |
| (b)    |   | Includes        assets directly related to the generation of operating        profit.      |
| (c)    |   | Includes        liabilities directly related to the generation of        operating profit. |

Intersegment sales are conducted on anarm’s length basis.

**Geographic financial information**

*Assets and investments by geographic areaof origin*

| (million euro) |   |   |   | **Italy** |   | **Other EU** |   | **Rest of Europe** |   | **Americas** |   | **Asia** |   | **Africa** |   | **Other areas** |   | **Total** |
|----------------|--------|--------|--------|-----------|--------|--------------|--------|--------------------|--------|--------------|--------|----------|--------|------------|--------|-----------------|--------|-----------|
|           |   |   |   |           |   |              |   |                    |   |              |   |          |   |            |   |                 |   |           |

| **2004**                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Identifiable assets (a)        |   |   |   |   | 33,812 |   |   | 9,096  |   |   | 2,598  |   |   | 2,011  |   |   | 4,499  |   |   | 9,942  |   |   | 295    |   |   | 62,253 |   |
| Capital        expenditures    |   |   |   |   | 2,655  |   |   | 337    |   |   | 387    |   |   | 357    |   |   | 1,066  |   |   | 2,622  |   |   | 75     |   |   | 7,499  |   |
| **2005**                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Identifiable        assets (a) |   |   |   |   | 38,229 |   |   | 8,768  |   |   | 3,085  |   |   | 2,670  |   |   | 5,864  |   |   | 13,445 |   |   | 244    |   |   | 72,305 |   |
| Capital expenditures           |   |   |   |   | 2,442  |   |   | 545    |   |   | 415    |   |   | 507    |   |   | 1,181  |   |   | 2,233  |   |   | 91     |   |   | 7,414  |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (a)    |   | Includes        assets directly related to the generation of operating        profit. |
|   |   |                                                                                  |

*Sales from operations by geographic area ofdestination*

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Italy                 |   |   |   |   |   |   |   | 27,100     |   |   | 32,846     |   |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| Other European Union  |   |   |   |   |   |   |   | 13,095     |   |   | 19,601     |   |
| Rest of        Europe |   |   |   |   |   |   |   | 3,769      |   |   | 5,123      |   |
| Americas              |   |   |   |   |   |   |   | 5,790      |   |   | 6,103      |   |
| Asia                  |   |   |   |   |   |   |   | 3,088      |   |   | 4,399      |   |
| Africa                |   |   |   |   |   |   |   | 4,148      |   |   | 5,259      |   |
| Other        areas    |   |   |   |   |   |   |   | 555        |   |   | 397        |   |
|                  |   |   |   |   |   |   |   | **57,545** |   |   | **73,728** |   |

 

**32 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 directlyand indirectly owned or controlled by the Government. All suchtransactions are mainly conducted on an arm’s length basisin the interest of Eni companies.

The following is a description of trade andfinancing transactions with related parties. Relevanttransactions carried out with entities controlled by the Italiangovernment are only those with Enel, the Italian NationalElectric Company.

**Trade and other transactions**

Trade and other transactions for the year 2004consisted of the following:

| (million euro) |   | **Dec. 31, 2004** |   | **2004** |
|----------------|--------|-------------------|--------|----------|
|           |   |                   |   |          |

|   | **Costs** |   | **Revenues** |
|--------|-----------|--------|--------------|
|   |           |   |              |

| **Name** |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Commitments** |   | **Goods** |   | **Services** |   | **Goods** |   | **Services** |
|----------|--------|-----------------|--------|--------------|--------|----------------|--------|-----------------|--------|-----------|--------|--------------|--------|-----------|--------|--------------|
|          |   |                 |   |              |   |                |   |                 |   |           |   |              |   |           |   |              |

| **Joint ventures and affiliated companies**                    |   |    |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |      |   |
|----------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Albacom        SpA                                             |   | 8       |   |   | 14      |   |   |      |   |   |    |   |   | 3         |   |   | 35        |   |   |      |   |   | 8         |   |
| ASG Scarl                                                      |   | 51      |   |   | 88      |   |   | 33        |   |   |    |   |   |      |   |   | 203       |   |   | 1         |   |   | 7         |   |
| 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 und Gilg & Schweiger GmbH  |   | 13      |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   | 141       |   |   |      |   |
| Cam Petroli Srl                                                |   | 1       |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   | 6         |   |   |      |   |
| CEPAV        (Consorzio Eni per l’Alta velocità) Uno |   | 167     |   |   | 165     |   |   | 4,894     |   |   |    |   |   |      |   |   |      |   |   |      |   |   | 531       |   |
| Eni Oil Co Ltd                                                 |   | 4       |   |   | 163     |   |   |      |   |   |    |   |   |      |   |   | 53        |   |   |      |   |   |      |   |
| Erg        Raffinerie Mediterranee SpA                         |   | 30      |   |   | 30      |   |   |      |   |   | 100     |   |   | 1,043     |   |   | 10        |   |   | 412       |   |   | 9         |   |
| Gruppo Distribuzione Petroli Srl                               |   | 16      |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   | 45        |   |   |      |   |
| Karachaganak        Petroleum Operating BV                     |   | 21      |   |   | 12      |   |   |      |   |   |    |   |   |      |   |   | 104       |   |   |      |   |   | 42        |   |
| Modena Scarl                                                   |   | 6       |   |   | 37      |   |   | 43        |   |   |    |   |   |      |   |   | 134       |   |   |      |   |   | 1         |   |
| Petrobel        Belayim Petroleum Co                           |   |    |   |   | 83      |   |   |      |   |   |    |   |   |      |   |   | 240       |   |   |      |   |   |      |   |
| Promgas SpA                                                    |   | 27      |   |   | 23      |   |   |      |   |   |    |   |   | 230       |   |   |      |   |   | 259       |   |   |      |   |
| Raffineria        di Milazzo ScpA                              |   | 6       |   |   | 4       |   |   |      |   |   |    |   |   |      |   |   | 245       |   |   | 62        |   |   |      |   |
| Rodano Consortile Scarl                                        |   | 3       |   |   | 22      |   |   | 1         |   |   |    |   |   |      |   |   | 79        |   |   |      |   |   | 1         |   |
| Siciliana        Gas Vendite SpA                               |   | 9       |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   | 36        |   |   |      |   |
| Supermetanol CA                                                |   |    |   |   | 24      |   |   |      |   |   |    |   |   | 79        |   |   | 10        |   |   |      |   |   |      |   |
| Super        Octanos 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 Comercializadora SA               |   |    |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   | 7         |   |   |      |   |
| Unión Fenosa Gas SA                                       |   |    |   |   |    |   |   | 111       |   |   |    |   |   |      |   |   |      |   |   |      |   |   | 1         |   |
| Other (*)                                                      |   | 84      |   |   | 74      |   |   | 109       |   |   |    |   |   | 23        |   |   | 108       |   |   | 56        |   |   | 18        |   |
|                                                           |   | **500** |   |   | **887** |   |   | **5,191** |   |   | **100** |   |   | **1,592** |   |   | **2,489** |   |   | **1,134** |   |   | **630**   |   |
| **Unconsolidated        subsidiaries**                         |   |    |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |      |   |
| Agip Kazakhstan North Caspian Operating Co NV                  |   | 2       |   |   |    |   |   |      |   |   |    |   |   | 1         |   |   | 14        |   |   |      |   |   | 9         |   |
| 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 (*)                                                      |   | 30      |   |   | 4       |   |   | 10        |   |   |    |   |   | 4         |   |   | 8         |   |   | 2         |   |   | 11        |   |
|                                                           |   | **63**  |   |   | **45**  |   |   | **537**   |   |   |    |   |   | **5**     |   |   | **117**   |   |   | **2**     |   |   | **21**    |   |
|                                                           |   | **563** |   |   | **932** |   |   | **5,728** |   |   | **100** |   |   | **1,597** |   |   | **2,606** |   |   | **1,136** |   |   | **651**   |   |
| **Entities owned or controlledby the Government**              |   |    |   |   |    |   |   |      |   |   |    |   |   |      |   |   |      |   |   |      |   |   |      |   |
| Enel                                                           |   | 234     |   |   | 3       |   |   |      |   |   |    |   |   | 2         |   |   | 20        |   |   | 1,287     |   |   | 350       |   |
|                                                           |   | **797** |   |   | **935** |   |   | **5,728** |   |   | **100** |   |   | **1,599** |   |   | **2,626** |   |   | **2,423** |   |   | **1,001** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 50        million. |

 

Trade and other transactions for the year 2005consisted of the following:

| (million euro) |   | **Dec. 31, 2005** |   | **2005** |
|----------------|--------|-------------------|--------|----------|
|           |   |                   |   |          |

|   | **Costs** |   | **Revenues** |
|--------|-----------|--------|--------------|
|   |           |   |              |

| **Name** |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Goods** |   | **Services** |   | **Goods** |   | **Services** |
|----------|--------|-----------------|--------|--------------|--------|----------------|--------|-----------|--------|--------------|--------|-----------|--------|--------------|
|          |   |                 |   |              |   |                |   |           |   |              |   |           |   |              |

| **Joint        ventures and affiliated companies**             |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |   |    |   |
|----------------------------------------------------------------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|--------|
| ASG Scarl                                                      |   | 13      |   |   | 66        |   |   | 72        |   |   |    |   |   | 173       |   |   |      |   |   | 6       |   |
| Azienda        Energia e Servizi Torino SpA                    |   | 2       |   |   | 24        |   |   |      |   |   |    |   |   | 56        |   |   |      |   |   | 2       |   |
| Bayernoil Raffineriegesellschaft mbH                           |   |    |   |   | 49        |   |   | 1         |   |   |    |   |   | 814       |   |   |      |   |   |    |   |
| Bernhard        Rosa Inh. Ingeborg Plochinger GmbH             |   | 10      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 172       |   |   |    |   |
| Blue Stream Pipeline Co BV                                     |   | 45      |   |   | 12        |   |   |      |   |   |    |   |   | 177       |   |   |      |   |   | 4       |   |
| Bronberger        & Kessler und Gilg & Schweiger GmbH  |   | 12      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 207       |   |   |    |   |
| Cam Petroli Srl                                                |   | 85      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 593       |   |   |    |   |
| CEPAV        (Consorzio Eni per l’Alta Velocità) Uno |   | 105     |   |   | 107       |   |   | 4,894     |   |   |    |   |   |      |   |   |      |   |   | 411     |   |
| Eni Gas BV                                                     |   | 16      |   |   | 149       |   |   |      |   |   |    |   |   | 47        |   |   |      |   |   |    |   |
| Eni Oil Co        Ltd                                          |   |    |   |   | 84        |   |   |      |   |   |    |   |   | 50        |   |   |      |   |   |    |   |
| Fox Energy Srl                                                 |   | 22      |   |   |      |   |   |      |   |   | 4       |   |   |      |   |   | 240       |   |   |    |   |
| Gruppo        Distribuzione Petroli Srl                        |   | 22      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 89        |   |   |    |   |
| Karachaganak Petroleum Operating BV                            |   | 13      |   |   | 46        |   |   |      |   |   | 6       |   |   | 99        |   |   |      |   |   | 4       |   |
| Mangrove        Gas Netherlands BV                             |   |    |   |   |      |   |   | 55        |   |   |    |   |   |      |   |   |      |   |   |    |   |
| Modena Scarl                                                   |   | 2       |   |   | 12        |   |   | 61        |   |   |    |   |   | 56        |   |   | 1         |   |   | 1       |   |
| Petrobel        Belayim Petroleum Co                           |   |    |   |   | 138       |   |   |      |   |   |    |   |   | 248       |   |   |      |   |   |    |   |
| Promgas SpA                                                    |   | 44      |   |   | 45        |   |   |      |   |   | 307     |   |   |      |   |   | 355       |   |   |    |   |
| Raffineria        di Milazzo ScpA                              |   | 10      |   |   | 10        |   |   |      |   |   |    |   |   | 204       |   |   | 94        |   |   |    |   |
| Rodano Consortile Scarl                                        |   | 2       |   |   | 20        |   |   |      |   |   |    |   |   | 80        |   |   |      |   |   | 2       |   |
| RPCO        Enterprise Ltd                                     |   |    |   |   |      |   |   | 55        |   |   |    |   |   |      |   |   |      |   |   |    |   |
| Siciliana Gas Vendite SpA                                      |   | 13      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 48        |   |   |    |   |
| Supermetanol        CA                                         |   |    |   |   | 8         |   |   |      |   |   | 65      |   |   |      |   |   |      |   |   |    |   |
| Super Octanos CA                                               |   | 1       |   |   | 14        |   |   |      |   |   | 265     |   |   |      |   |   |      |   |   |    |   |
| Toscana        Gas Clienti SpA                                 |   | 46      |   |   |      |   |   |      |   |   |    |   |   |      |   |   | 118       |   |   |    |   |
| Trans Austria Gasleitung GmbH                                  |   | 43      |   |   | 55        |   |   |      |   |   | 43      |   |   | 143       |   |   |      |   |   | 47      |   |
| Trans        Europa Naturgas Pipeline GmbH                     |   |    |   |   | 2         |   |   |      |   |   |    |   |   | 44        |   |   |      |   |   |    |   |
| Transitgas AG                                                  |   |    |   |   | 7         |   |   |      |   |   |    |   |   | 64        |   |   |      |   |   |    |   |
| Transmediterranean        Pipeline Co Ltd                      |   |    |   |   | 4         |   |   |      |   |   |    |   |   | 88        |   |   |      |   |   | 1       |   |
| Unión Fenosa Gas Comercializadora SA                      |   | 4       |   |   |      |   |   |      |   |   | 36      |   |   |      |   |   | 37        |   |   |    |   |
| Unión        Fenosa Gas SA                                |   | 4       |   |   | 4         |   |   | 62        |   |   | 79      |   |   |      |   |   | 16        |   |   | 2       |   |
| Other (*)                                                      |   | 84      |   |   | 84        |   |   | 112       |   |   | 33      |   |   | 113       |   |   | 62        |   |   | 67      |   |
|                                                           |   | **598** |   |   | **940**   |   |   | **5,312** |   |   | **838** |   |   | **2,456** |   |   | **2,032** |   |   | **547** |   |
| **Unconsolidated subsidiaries**                                |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |   |    |   |
| Agip        Kazakhstan North Caspian Operating Co NV           |   | 4       |   |   | 152       |   |   |      |   |   | 5       |   |   | 19        |   |   |      |   |   | 28      |   |
| Eni BTC Ltd                                                    |   |    |   |   |      |   |   | 165       |   |   |    |   |   |      |   |   |      |   |   |    |   |
| Other (*)                                                      |   | 44      |   |   | 48        |   |   | 8         |   |   | 1       |   |   | 31        |   |   | 15        |   |   | 9       |   |
|                                                           |   | **48**  |   |   | **200**   |   |   | **173**   |   |   | **6**   |   |   | **50**    |   |   | **15**    |   |   | **37**  |   |
|                                                           |   | **646** |   |   | **1,140** |   |   | **5,485** |   |   | **844** |   |   | **2,506** |   |   | **2,047** |   |   | **584** |   |
| **Entities owned or controlled by the        Government**      |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |   |    |   |
| Enel                                                           |   | 187     |   |   | 5         |   |   |      |   |   | 12      |   |   | 10        |   |   | 1,180     |   |   | 333     |   |
|                                                           |   | **833** |   |   | **1,145** |   |   | **5,485** |   |   | **856** |   |   | **2,516** |   |   | **3,227** |   |   | **917** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 50        million. |

 

Engineering, construction and maintenanceservices were acquired on an arm’s length basis from theCosmi Holding Group, related to Eni through a member of the Boardof Directors, for a total of approximately euro 28 million andeuro 18 million in 2004 and 2005, respectively.

Most significant transactions concern:

| • |   | provision of        specialized services in upstream activities from Agip        Kazakhstan North Caspian Operating Co NV, Eni Oil Co Ltd,        Eni Gas BV, Karachaganak Petroleum Operating BV and        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 Co BV and Agip        Kazakhstan North Caspian Operating Co NV the provision of        services from the Oilfield Services Construction and        Engineering segment of Eni; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | communication        services, data transmission and concessions of optical        fibers with Albacom SpA; in 2005 the company was sold;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| • |   | 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 mbH, Bernhard Rosa Inh. Ingeborg        Plochinger GmbH, Bronberger & Kessler und Gilg        & Schweiger GmbH, Cam Petroli Srl, Gruppo        Distribuzione Petroli Srl, Fox Energy Srl, Supermetanol        CA and Superoctanos CA;                                                                                                                                                                                                                                                                                                                                     |
| • |   | acquisition        of natural gas transport services outside Italy from Blue        Stream Pipeline Co BV and services from the Oilfield        Services Construction and Engineering segment of Eni;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| • |   | acquisition        of refining services from Erg Raffinerie Mediterranee SpA        and Raffineria di Milazzo ScpA on the basis of general        conditions applied to third parties for Erg Raffinerie        Mediterranee SpA and of incurred costs for Raffineria di        Milazzo ScpA; in 2005 Erg Raffinerie Mediterranee SpA was        sold;                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | guarantees        given on behalf of Mangrove Gas Netherlands BV and RPCO        Enterprise Ltd relating to bid bonds and performance        bonds;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • |   | sale and        acquisition of natural gas outside Italy with Promgas        SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| • |   | sale of        natural gas with Siciliana Gas Vendite SpA e Toscana Gas        Clienti SpA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | transactions        related to the planning and the construction of the        tracks for high speed/high capacity trains from Milan to        Bologna with the Consorzio Eni per l’Alta Velocità        - CEPAV Uno, ASG Scarl, Modena Scarl and Rodano        Consortile Scarl, and relevant guarantees;                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • |   | acquisition        of natural gas transport services outside Italy from        Trans Austria Gasleitung GmbH, Trans Europa Naturgas        Pipeline GmbH and Transitgas AG; transactions are        regulated on the basis of compensation calculated        following the same criteria used in third parties        transactions;                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • |   | performance        guarantees given on behalf of Unión Fenosa Gas SA in        relation to contractual commitments related to the        results of operations and sale and acquisition of natural        outside Italy with Unión Fenosa Gas SA and Unión Fenosa        Gas Comercializadora SA;                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| • |   | 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 the contractual        commitments with the Government of the Kingdom of Saudi        Arabia in 2004; in 2005 the company has been included in        the scope of consolidation; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| • |   | 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, the sale of fuel oil and the saleand purchase of electricity; transactions are mainly conducted onan arm’s length basis.

**Financing transactions**

Financing transactions in 2004 were as follows:

| (million euro) |   | **Dec. 31, 2004** |   | **2004** |
|----------------|--------|-------------------|--------|----------|
|           |   |                   |   |          |

| **Name** |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Charges** |   | **Gains** |
|----------|--------|-----------------|--------|--------------|--------|----------------|--------|-------------|--------|-----------|
|          |   |                 |   |              |   |                |   |             |   |           |

| **Joint        ventures and affiliated companies** |   |    |   |   |    |   |   |      |   |   |   |   |   |   |   |
|----------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|
| Albacom SpA                                        |   | 22      |   |   |    |   |   | 88        |   |   |   |   |   |   |   |
| Blue        Stream Pipeline Co BV                  |   |    |   |   | 2       |   |   | 768       |   |   |   |   |   | 29     |   |
| EnBW - Eni Verwaltungsgesellschaft mbH             |   |    |   |   |    |   |   | 250       |   |   |   |   |   |   |   |
| Raffineria        di Milazzo ScpA                  |   |    |   |   |    |   |   | 107       |   |   |   |   |   |   |   |
| Spanish Egyptian Gas Co SAE                        |   |    |   |   |    |   |   | 404       |   |   |   |   |   | 9      |   |
| Trans        Austria Gasleitung GmbH               |   | 389     |   |   |    |   |   |      |   |   |   |   |   | 9      |   |
| Transmediterranean Pipeline Co Ltd                 |   | 197     |   |   |    |   |   |      |   |   |   |   |   | 9      |   |
| Other (*)                                          |   | 52      |   |   | 91      |   |   | 55        |   |   | 9      |   |   | 11     |   |
|                                               |   | **660** |   |   | **93**  |   |   | **1,672** |   |   | **9**  |   |   | **67** |   |
| **Unconsolidated        subsidiaries**             |   |    |   |   |    |   |   |      |   |   |   |   |   |   |   |
| Other (*)                                          |   | 71      |   |   | 54      |   |   | 2         |   |   | 4      |   |   | 2      |   |
|                                               |   | **71**  |   |   | **54**  |   |   | **2**     |   |   | **4**  |   |   | **2**  |   |
|                                               |   | **731** |   |   | **147** |   |   | **1,674** |   |   | **13** |   |   | **69** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 50        million. |

Financing transactions in 2005were as follows:

| (million euro) |   | **Dec. 31, 2005** |   | **2005** |
|----------------|--------|-------------------|--------|----------|
|           |   |                   |   |          |

| **Name** |   | **Receivables** |   | **Payables** |   | **Guarantees** |   | **Charges** |   | **Gains** |
|----------|--------|-----------------|--------|--------------|--------|----------------|--------|-------------|--------|-----------|
|          |   |                 |   |              |   |                |   |             |   |           |

| **Joint        ventures and affiliated companies** |   |    |   |   |    |   |   |      |   |   |   |   |   |   |   |
|----------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|
| Blue Stream Pipeline Co BV                         |   |    |   |   | 15      |   |   | 887       |   |   |   |   |   |   |   |
| Raffineria        di Milazzo ScpA                  |   |    |   |   |    |   |   | 72        |   |   |   |   |   |   |   |
| Spanish Egyptian Gas Co SAE                        |   |    |   |   |    |   |   | 360       |   |   |   |   |   |   |   |
| Trans        Austria Gasleitung GmbH               |   | 386     |   |   |    |   |   |      |   |   |   |   |   | 12     |   |
| Transmediterranean Pipeline Co Ltd                 |   | 190     |   |   |    |   |   |      |   |   |   |   |   | 11     |   |
| Other        (*)                                   |   | 74      |   |   | 125     |   |   | 81        |   |   | 27     |   |   | 47     |   |
|                                               |   | **650** |   |   | **140** |   |   | **1,400** |   |   | **27** |   |   | **70** |   |
| **Unconsolidated        subsidiaries**             |   |    |   |   |    |   |   |      |   |   |   |   |   |   |   |
| Other (*)                                          |   | 79      |   |   | 30      |   |   | 34        |   |   | 1      |   |   | 2      |   |
|                                               |   | **79**  |   |   | **30**  |   |   | **34**    |   |   | **1**  |   |   | **2**  |   |
|                                               |   | **729** |   |   | **170** |   |   | **1,434** |   |   | **28** |   |   | **72** |   |

|   |   |                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------|
| (*)    |   | Each        individual amount included herein does not exceed euro 50        million. |

 

Most significant transactions in 2005 included:

| • |   | lendings and        guarantees to Albacom SpA in 2004; in 2005 Albacom SpA        has been sold to third parties;                                                                                                                                                                                                                                            |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | bank debt        guarantees given on behalf of Blue Stream Pipeline Co BV,        EnBW - Eni Verwaltungsgesellschaft mbH, Raffineria di        Milazzo and Spanish Egyptian Gas Co SAE and the cash        deposit at Eni’s financial companies; guarantee        given on behalf of EnBW - Eni Verwaltungsgesellschaft mbH        expired in 2005; 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 Trans        Austria Gasleitung GmbH and Transmediterranean Pipeline        Co Ltd.                                                                   |

 

**33Adjustment of the Consolidated Financial Statements to U.S. GAAP**

As its shares are listed on the New York StockExchange, Eni files an Annual Report (Form 20-F) with theSecurities and Exchange Commission (SEC). The followinginformation is necessary to reconcile the Italian consolidatedannual report for the 2005 to generally accepted accountingprinciples in the United States (U.S. GAAP).

**Summary of significant differences betweenIFRS and U.S. GAAP**

Eni’s financial statements at December 31,2005 have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS)16 adopted by theEuropean Commission, which differ in certain respects from U.S.GAAP. A description of the significant differences and theireffects on net profit and shareholders’ equity is set forthin the following notes17. Compared with the Italian accounting principlesapplied until December 31, 2004 the differences between IFRS andU.S. GAAP are considerably fewer.

*A) Consolidation policy*

Eni’s consolidation policy is describedunder "Principles of consolidation" in Note 12 to theConsolidated Financial Statements. In particular, under IFRS, theConsolidated Financial Statements include also companies in whichEni holds less than 50% of the voting rights, but over which itexercises control in shareholders’ meetings.

Under U.S. GAAP, investments of less than 50%are accounted for by applying the equity method. Saipem SpA(43.26%), and its subsidiaries which are controlled by Eniwithout holding the majority of voting rights have beenconsolidated under the equity method for U.S. GAAP purposes.

*B) Exploration & production activities*

*Exploration*

Under IFRS, the internationally specificcriteria have been applied for hydrocarbons exploration andproduction activities. In particular, 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 after the completion ofdrilling if: (i) such wells have found a sufficient quantity ofreserves to justify completion as a producing wells;(ii) the enterprise is making sufficient progress assessingthe reserves and the economic and operating viability of theproject. If either condition is not met or if an enterpriseobtains information that raises substantial doubt about theeconomic or operational viability of the project, the exploratorywell is assumed to be impaired, and its costs, net of any salvagevalue, are charged to expense. Capitalized well costs related toproved properties are amortized over proved developed reserves onthe basis of units of production. Other exploration costs,including geological and geophysical surveys, are expensed whenincurred.

*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 IFRS, costs of unsuccessful developmentwells are expensed immediately. Costs of successful developmentwells are capitalized and amortized on the basis of units ofproduction.

Under U.S. GAAP, costs of productive wells anddevelopment dry holes, both tangible and intangible, arecapitalized and amortized on UOP method.

*C) Valuation of assets and subsequentrevaluation*

Both IFRS and U.S. GAAP require that assetswhich are impaired be written down to their fair value, with theexception of the following aspects.

Under IFRS, in order to determine whether animpairment exists, the book value of an asset in question iscompared with its recoverable amount which is represented by thegreater of fair value, net of disposal costs and value in use,which is calculated by discounting estimated cash flows arisingfrom the use of the asset and its sale at the end of its usefullife. Impairment charges of assets different from goodwill arereversed when the situation giving rise to an impairment ceasesto exist.

Under U.S. GAAP, the recoverability of thevalue of an asset used in the production process is first checkedby comparing the carrying amount with the sum of undiscountedcash flows expected from use of the asset and its disposal at theend of its useful life. Only if the result of this first check isnegative does the entity write the asset down using discountedfuture cash flows. Under U.S. GAAP reversals of impairmentcharges are not permitted.

*D) Deferred tax assets and liabilities*

Under IFRS, taxes payable relating to certainpotential distributions from shareholders’ equity or uponliquidation of a company are accrued only to the extent suchdistributions are planned.

Under U.S. GAAP, deferred tax liabilities arerecognized regardless of expected distribution of dividends orthe disposal of investments. However, U.S. GAAP does not requirethe accrual of deferred taxes when the investment is a foreignsubsidiary and there is sufficient evidence that profits willremain permanently invested in the entity.

The adjustments included in Note 34 include therecognition of deferred taxes on undistributed earnings ofsubsidiaries and deferred taxes on acquired temporarydifferences. The adjustments also include the deferred tax effectof U.S. GAAP adjustments.

The adjustment relating to the results of 2005includes the impact of the circumstance that starting on January1, 2005, the Company recorded for U.S. GAAP purposes the taxeffects of temporary differences of activities conducted underthe terms of certain Production Sharing Agreements where thecompany’s income tax liability is paid out of Eni’sshare of oil and gas production. The effect of recording did nothave a material effect on the Company’s results ofoperations.

*E) Intangible assets*

Under U.S. GAAP intangible assets include therecording, separately from goodwill, of assets acquired in orfollowing business combinations arising from legal or contractualrights regardless of their ability to be transferred and of otherassets owned by the entity that can be transferred individuallyor together with other assets and liabilities. If such intangibleassets have definite lives they are amortized by the straightline method over their useful lives.

IFRS are consistent with U.S. GAAP. However,considering that in the first application of IFRS, Eni hasdecided not to restate business combinations, the value of theintangible assets described is recorded in the item"Goodwill".

Both under U.S. GAAP and IFRS, goodwill andintangible assets with an indefinite useful life are notamortized; these assets are subject to a yearly evaluation inorder to define the relevant impairment if needed. Suchaccounting principles have been adopted starting from January 1,2002 for U.S. GAAP and January 1, 2004 for IFRS. The adjustmentsfor the reconciliation of the shareholders equity included inNote 34 concern the reversal of the amortization of goodwill forthe years 2002 and 2003.

*F) Valuation of Inventories*

Under U.S. GAAP, crude oil, petroleum productsand natural gas inventories are calculated using the LIFO method.

Under IFRS the LIFO method is not permitted.

**34 Reconciliation of net profit and shareholders’equity determined under IFRS to U.S. GAAP**

The following is a summary of the significantadjustments to net profit for 2004 and 2005 and toshareholders’ equity as of December 31, 2004 and as ofDecember 31, 2005 that would be required if U.S. GAAP had beenapplied instead of IFRS in the Consolidated Financial Statements.

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| **Net profit according to the financial        statements prepared under IFRS**                                                      |   | **7,059** |   |   | **8,788**  |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|------------|--------|
| Items        increasing (decreasing) reported net profit:                                                                            |   |      |   |   |       |   |
| A. effect of the differences related to        companies consolidated under IFRS but carried at equity        method under U.S. GAAP |   | (1        | )      |   |       |   |
| B.        successful-efforts accounting                                                                                              |   | (82       | )      |   | 47         |   |
| C. elimination of assets impairments and        revaluations                                                                         |   | 5         |   |   |       |   |
| D.        deferred income taxes                                                                                                      |   | (21       | )      |   | (279       | )      |
| E. assets associated to the acquisition of a        company (portfolio of clients)                                                   |   | (5        | )      |   | (5         | )      |
| F.        valuation of inventories                                                                                                   |   | (316      | )      |   | (956       | )      |
| Effect of the difference between IFRS and U.S.        GAAP on investments accounted for using the equity method                      |   | 34        |   |   | 12         |   |
| Other        adjustments (a)                                                                                                         |   | (280      | )      |   | (3         | )      |
| Effect of U.S. GAAP adjustments on minority        interest (b)                                                                      |   | 8         |   |   | (21        | )      |
| **Net        adjustment**                                                                                                            |   | **(658**  | **)**  |   | **(1,205** | **)**  |
| **Net profit in accordance with U.S. GAAP**                                                                                          |   | **6,401** |   |   | **7,583**  |   |
| Basic        profit per share (c)                                                                                                    |   | 1.70      |   |   | 2.02       |   |
| Diluted profit per share (c)                                                                                                         |   | 1.70      |   |   | 2.01       |   |
| Basic        profit per ADS (based on two shares per ADS) (c)                                                                        |   | 3.39      |   |   | 4.03       |   |
| Diluted profit per ADS (based on two shares per        ADS) (c)                                                                      |   | 3.39      |   |   | 4.03       |   |

|   |   |                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | In 2004,        other adjustments relate to other reconciling items        between IFRS and U.S. GAAP mainly in respect of the        accounting of the derivative financial instruments, which        in 2004 were not accounted for under the fair value        accounting method as permitted under IFRS first        application exemptions. |
| (b)    |   | Adjustment to account for        minority interest portion of differences A through F,        which include 100% of differences between IFRS and U.S.        GAAP on less than wholly-owned subsidiaries.                                                                                                                                        |
| (c)    |   | Amounts in euro.                                                                                                                                                                                                                                                                                                                                 |

 

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| **Shareholders’        equity according to the financial statements prepared        under IFRS**                                |   | **32,374** |   |   | **36,868** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Items increasing (decreasing) reported        shareholders’ equity (a):                                                         |   |       |   |   |       |   |
| A. effect        of the differences related to companies consolidated        under IFRS but carried at equity method under U.S. GAAP |   | 61         |   |   | 37         |   |
| B. successful-efforts accounting                                                                                                     |   | 2,072      |   |   | 2,504      |   |
| C.        elimination of assets impairments and revaluations                                                                         |   | 231        |   |   | 230        |   |
| D. deferred income taxes                                                                                                             |   | (2,982     | )      |   | (3,415     | )      |
| E.        goodwill                                                                                                                   |   | 846        |   |   | 811        |   |
| F. assets associated with the acquisition of a        company (portfolio of clients)                                                 |   | (11        | )      |   | (16        | )      |
| G.        valuation of inventories                                                                                                   |   | (1,080     | )      |   | (2,036     | )      |
| Effect of the difference between IFRS and U.S.        GAAP on investments accounted for using the equity method                      |   | 269        |   |   | 173        |   |
| Other        adjustments                                                                                                             |   | (137       | )      |   |       |   |
| Effect of U.S. GAAP adjustments on minority        interest (b)                                                                      |   | 6          |   |   | (31        | )      |
| **Net        adjustment**                                                                                                            |   | **(725**   | **)**  |   | **(1,743** | **)**  |
| **Shareholders’ equity in accordance with        U.S. GAAP**                                                                    |   | **31,649** |   |   | **35,125** |   |

|   |   |                                                                                                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Items        increasing (decreasing) reported shareholders’        equity of foreign companies are translated into euro at        the exchange rate prevailing at the end of each period.            |
| (b)    |   | Adjustment to account for        minority interest portion of differences A through G,        which include 100% of differences between IFRS and U.S.        GAAP on less than wholly-owned subsidiaries. |

The consolidated balance sheets,if determined under U.S. GAAP would have been as follows:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| **ASSETS**                                                                                                                         |   |       |   |   |       |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| **Current assets**                                                                                                                 |   |       |   |   |       |   |
| Cash and        cash equivalent                                                                                                    |   | 988        |   |   | 1,121      |   |
| Other financial assets for trading or available        for sale                                                                    |   | 1,475      |   |   | 1,484      |   |
| Trade and        other receivables                                                                                                 |   | 13,268     |   |   | 17,971     |   |
| Inventories                                                                                                                        |   | 2,273      |   |   | 1,929      |   |
| Income tax        receivables                                                                                                      |   | 636        |   |   | 575        |   |
| Other current assets                                                                                                               |   | 494        |   |   | 387        |   |
| **Total        current assets**                                                                                                    |   | **19,134** |   |   | **23,467** |   |
| **Non-current assets**                                                                                                             |   |       |   |   |       |   |
| Property,        plant and equipment                                                                                               |   | 39,652     |   |   | 43,868     |   |
| Inventories - compulsory stock                                                                                                     |   | 662        |   |   | 1,462      |   |
| Intangible        assets                                                                                                           |   | 5,125      |   |   | 5,244      |   |
| Investments accounted for using the equity        method                                                                           |   | 3,892      |   |   | 4,589      |   |
| Other        investments                                                                                                           |   | 439        |   |   | 416        |   |
| Other financial assets                                                                                                             |   | 2,015      |   |   | 1,105      |   |
| Deferred        tax assets                                                                                                         |   | 1,159      |   |   | 1,847      |   |
| Other non-current assets                                                                                                           |   | 276        |   |   | 979        |   |
| **Total        non-current assets**                                                                                                |   | **53,220** |   |   | **59,510** |   |
| **TOTAL ASSETS**                                                                                                                   |   | **72,354** |   |   | **82,977** |   |
| **LIABILITIES        AND EQUITY**                                                                                                  |   |       |   |   |       |   |
| **Current liabilities**                                                                                                            |   |       |   |   |       |   |
| Current        financial liabilities                                                                                               |   | 4,474      |   |   | 4,916      |   |
| Current portion of long-term debt                                                                                                  |   | 935        |   |   | 809        |   |
| Trade and        other payables                                                                                                    |   | 9,392      |   |   | 11,552     |   |
| Taxes payable                                                                                                                      |   | 2,423      |   |   | 3,296      |   |
| Other        current liabilities                                                                                                   |   | 594        |   |   | 648        |   |
| **Total current liabilities**                                                                                                      |   | **17,818** |   |   | **21,221** |   |
| **Non-current        liabilities**                                                                                                 |   |       |   |   |       |   |
| Long-term debt                                                                                                                     |   | 7,288      |   |   | 7,229      |   |
| Provisions        for contingencies                                                                                                |   | 5,720      |   |   | 7,615      |   |
| Provisions for employee benefits                                                                                                   |   | 746        |   |   | 939        |   |
| Deferred        tax liabilities                                                                                                    |   | 6,367      |   |   | 8,370      |   |
| Other non-current liabilities                                                                                                      |   | 461        |   |   | 1,015      |   |
| **Total        non-current liabilities**                                                                                           |   | **20,582** |   |   | **25,168** |   |
| **TOTAL LIABILITIES**                                                                                                              |   | **38,400** |   |   | **46,389** |   |
| **SHAREHOLDERS’        EQUITY**                                                                                               |   |       |   |   |       |   |
| **Minority interests**                                                                                                             |   | **2,305**  |   |   | **1,463**  |   |
| **Eni        shareholders’ equity:**                                                                                          |   |       |   |   |       |   |
| Share capital: 4,005,358,876 fully paid shares        nominal value euro 1 each (4,004,424,476 shares at        December 31, 2004) |   | 4,004      |   |   | 4,005      |   |
| Other        reserves                                                                                                              |   | 24,473     |   |   | 27,753     |   |
| Net profit                                                                                                                         |   | 6,401      |   |   | 7,583      |   |
| Treasury        shares                                                                                                             |   | (3,229     | )      |   | (4,216     | )      |
| ***Eni shareholders’ equity***                                                                                                |   | **31,649** |   |   | **35,125** |   |
| **Total        shareholders’ equity**                                                                                         |   | **33,954** |   |   | **36,588** |   |
| **TOTAL LIABILITIES AND SHAREHOLDERS’        EQUITY**                                                                         |   | **72,354** |   |   | **82,977** |   |

 

Fixed assets determined under U.S.GAAP consisted of the following:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Fixed        assets, gross:                       |   |       |   |   |       |   |
|---------------------------------------------------|--------|------------|--------|--------|------------|--------|
| - Exploration & Production                    |   | 39,584     |   |   | 47,882     |   |
| - Gas        & Power                          |   | 20,106     |   |   | 21,514     |   |
| - Refining & Marketing                        |   | 8,568      |   |   | 9,059      |   |
| -        Petrochemicals                           |   | 3,793      |   |   | 3,923      |   |
| - Oilfield Services Construction and Engineering  |   | 110        |   |   | 72         |   |
| - Other        activities                         |   | 1,511      |   |   | 1,413      |   |
| - Corporate and financial companies               |   | 191        |   |   | 212        |   |
| -        Elimination of intra-group profits       |   |       |   |   | (88        | )      |
|                                              |   | **73,863** |   |   | **83,987** |   |
| Accumulated        depreciation and amortization: |   |       |   |   |       |   |
| - Exploration & Production                    |   | 18,155     |   |   | 22,786     |   |
| - Gas        & Power                          |   | 6,896      |   |   | 7,754      |   |
| - Refining & Marketing                        |   | 5,214      |   |   | 5,503      |   |
| -        Petrochemicals                           |   | 2,564      |   |   | 2,715      |   |
| - Oilfield Services Construction and Engineering  |   | 69         |   |   | 56         |   |
| - Other        activities                         |   | 1,229      |   |   | 1,221      |   |
| - Corporate and financial companies               |   | 84         |   |   | 88         |   |
| -        Elimination of intra-group profits       |   |       |   |   | (4         | )      |
|                                              |   | **34,211** |   |   | **40,119** |   |
| Fixed        assets, net:                         |   |       |   |   |       |   |
| - Exploration & Production                    |   | 21,429     |   |   | 25,096     |   |
| - Gas        & Power                          |   | 13,210     |   |   | 13,760     |   |
| - Refining & Marketing                        |   | 3,354      |   |   | 3,556      |   |
| -        Petrochemicals                           |   | 1,229      |   |   | 1,208      |   |
| - Oilfield Services Construction and Engineering  |   | 41         |   |   | 16         |   |
| - Other        activities                         |   | 282        |   |   | 192        |   |
| - Corporate and financial companies               |   | 107        |   |   | 124        |   |
| -        Elimination of intra-group profits       |   |       |   |   | (84        | )      |
|                                              |   | **39,652** |   |   | **43,868** |   |

 

With regard to the profit and lossaccount, operating profit (loss) by industry segment and profitbefore income taxes, as determined under U.S. GAAP, would havebeen as follows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| **Operating profit (loss) by industry segment**       |   |       |   |   |       |   |
|-------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Exploration        & Production                   |   | 7,946      |   |   | 12,672     |   |
| Gas & Power                                       |   | 3,371      |   |   | 3,237      |   |
| Refining        & Marketing                       |   | 811        |   |   | 881        |   |
| Petrochemicals                                        |   | 281        |   |   | 202        |   |
| Oilfield        Services Construction and Engineering |   | (52        | )      |   | 1          |   |
| Other activities                                      |   | (364       | )      |   | (935       | )      |
| Corporate        and financial companies              |   | (254       | )      |   | (389       | )      |
| Elimination of intra-group profits                    |   |       |   |   | (141       | )      |
|                                                  |   | **11,739** |   |   | **15,528** |   |
| **Net profit before income taxes**                    |   | **12,324** |   |   | **16,281** |   |

 

**35 Additional financial statement disclosures required byU.S. GAAP and the SEC**

**Charges related to asset retirementobligations (SFAS 143)**

Changes in asset retirement obligations duringthe year were:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| **Asset retirement obligations as of January 1**          |   | **1,950** |   |   | **1,959** |   |
|-----------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|
| New        obligations incurred during the year           |   | 193       |   |   | 311       |   |
| Accretion discount                                        |   | 80        |   |   | 106       |   |
| Revisions        of previous estimates                    |   | 40        |   |   | 277       |   |
| Spending on existing obligations                          |   | (32       | )      |   | (107      | )      |
| Property        dispositions                              |   | (234      | )      |   |      |   |
| Foreign currency translation                              |   | (36       | )      |   | 110       |   |
| Other        adjustments                                  |   | (2        | )      |   | (10       | )      |
| **Asset retirement obligations as of December        31** |   | **1,959** |   |   | **2,646** |   |

 

Revisions of previous estimates were made inconnection with higher estimated costs for the retirement andremoval of assets pertaining to certain fields located mainly inUnited Kingdom, Norway and Kazakhstan.

In March 2005, the FASB issued FASBInterpretation No. 47, "*Accounting for Conditional AssetRetirement Obligations – An Interpretation of FASB StatementNo. 143*" (FIN 47), which was effective for the companyon December 31, 2005. In adopting FIN 47, the company did notrecognize any additional liabilities for conditional retirementobligations.

**Income taxes**

The following information is presentedaccording to Statement of Financial Accounting Standards No. 109"Accounting for Income Taxes". Domestic and foreigncomponents of pre-tax income were as follows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Domestic |   |   |   |   |   |   |   | 5,468      |   |   | 4,727      |   |
|----------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|
| Foreign  |   |   |   |   |   |   |   | 6,856      |   |   | 11,554     |   |
|     |   |   |   |   |   |   |   | **12,324** |   |   | **16,281** |   |

The provisions for income taxes were asfollows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Current  |   |   |   |   |   |   |   | 4,470     |   |   | 7,217     |   |
|----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|
| Deferred |   |   |   |   |   |   |   | 1,112     |   |   | 1,116     |   |
|     |   |   |   |   |   |   |   | **5,582** |   |   | **8,333** |   |
| Domestic |   |   |   |   |   |   |   | 2,197     |   |   | 2,066     |   |
| Foreign  |   |   |   |   |   |   |   | 3,385     |   |   | 6,267     |   |

The reconciliation of the incometax provision calculated under Italian tax regulation by applyinga 33% rate (Ires - national corporate income tax) to pre-taxincome and a 4.25% rate (Irap - regional income tax) to net valueof production, to the provision for income taxes recorded on aU.S. GAAP basis in the consolidated statements of income is asfollows:

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| **Income before tax in accordance with U.S.        GAAP**                                           |   | **12,324** |   |   | **16,281** |   |
|-----------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| Italian        statutory tax rate (state and local)                                                 |   | 38.3       |   |   | 37.9       |   |
| **Expected income tax provision in        accordance with U.S. GAAP at Italian statutory tax rate** |   | **4,714**  |   |   | **6,176**  |   |
| Effect of        items increasing (decreasing) the Italian statutory tax        rate:               |   |       |   |   |       |   |
| - taxation of foreign operations at rates        different from Italian statutory tax rate          |   | 835        |   |   | 1,946      |   |
| - taxes on        distributable reserves                                                            |   | 446        |   |   | 252        |   |
| - permanent differences                                                                             |   | (143       | )      |   | 131        |   |
| -        devaluation/revaluation of deferred tax assets                                             |   | (218       | )      |   | (52        | )      |
| - benefits deriving from the application of        favorable tax laws                               |   | (8         | )      |   | (11        | )      |
| - other                                                                                             |   | (44        | )      |   | (109       | )      |
|                                                                                                |   | **5,582**  |   |   | **8,333**  |   |

**Income taxes in accordance with U.S GAAP**

*Net deferred tax liabilities*

The tax effects of significant temporarydifferences causing the tax liabilities were as follows:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Deferred        tax liabilities:                                                                       |   |       |   |   |       |   |
|--------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|
| - accelerated depreciation                                                                             |   | 4,672      |   |   | 6,006      |   |
| -        distributable reserves subject to taxes in case of        distribution                        |   | 2,970      |   |   | 3,212      |   |
| - excess cost paid for the acquisition of        consolidated investments                              |   | 1,033      |   |   | 485        |   |
| -        successful-efforts method accounting                                                          |   | 467        |   |   | 690        |   |
| - capitalization of interest expense                                                                   |   | 246        |   |   | 245        |   |
| -        provisions for uncollectible receivables                                                      |   | 137        |   |   | 84         |   |
| - release of excess contingency provisions                                                             |   | 83         |   |   | 50         |   |
| - gains        taxable in the future                                                                   |   | 46         |   |   | 34         |   |
| - other (a)                                                                                            |   | 378        |   |   | 1,151      |   |
|                                                                                                   |   | **10,032** |   |   | **11,957** |   |
| Deferred tax assets:                                                                                   |   |       |   |   |       |   |
| - accruals        for doubtful accounts and contingencies                                              |   | (2,045     | )      |   | (1,949     | )      |
| - revaluation of assets in accordance with Law        342/2000 and 448/2001                            |   | (2,000     | )      |   | (1,186     | )      |
| - tax loss        carryforwards                                                                        |   | (1,072     | )      |   | (510       | )      |
| - undeductible expense on investments                                                                  |   | (472       | )      |   | (237       | )      |
| - losses        on investments and subsidiaries in excess of currently        allowable tax deductions |   | (225       | )      |   | (135       | )      |
| - undeductible depreciation and amortization of        assets                                          |   | (432       | )      |   | (904       | )      |
| - other (a)                                                                                            |   | (599       | )      |   | (1,062     | )      |
|                                                                                                   |   | **(6,845** | **)**  |   | **(5,983** | **)**  |
| Less:                                                                                                  |   |       |   |   |       |   |
| - valuation allowance                                                                                  |   | 2,021      |   |   | 549        |   |
|                                                                                                   |   | **(4,824** | **)**  |   | **(5,434** | **)**  |
| **Net deferred tax liabilities**                                                                       |   | **5,208**  |   |   | **6,523**  |   |

|   |   |                                                                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Other deferred tax assets        and liabilities items pertain in particular to temporary        differences arising in connection with the recognition of        asset removal obligations. |

 

The valuation allowance relates to deferred taxassets of euro 549 million (euro 2,021 million at December 31,2004) of consolidated companies whose expected future fiscalprofits are not considered sufficient for the utilization ofthese assets.

*Tax loss carryforwards*

The difference in gross tax loss carryforwardsbetween IFRS and U.S. GAAP relates to the companies which areconsolidated under IFRS (see Note 21), but excluded fromconsolidation according to U.S. GAAP.

**Investments**

At December 31, 2004 and 2005, investmentsaccounted for under the equity method of euro 3,892 million andeuro 4,589 million, respectively, included shares of Saipem SpA,which is publicly listed on the Italian Stock Exchange. Thefollowing information includes its fair value:

|   |   | **Eni’s number of shares** |   | **Equity ratio**(%) |   | **Share price**(euro) |   | **Market value**(million euro) |
|--------|--------|---------------------------------|--------|---------------------|--------|-----------------------|--------|--------------------------------|
|   |   |                                 |   |                     |   |                       |   |                                |

| **December        31, 2004** |   |        |   |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|-------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Saipem SpA                   |   | 189,423,307 |   |   | 43.29  |   |   | 8.864  |   |   | 1,679  |   |
| **December        31, 2005** |   |        |   |   |   |   |   |   |   |   |   |   |
| Saipem SpA                   |   | 189,423,307 |   |   | 43.26  |   |   | 13.793 |   |   | 2,613  |   |

In 2004 and 2005, Saipem SpA wasincluded in the consolidation under IFRS, while, under U.S. GAAP,it is valued under the equity method. Information about SaipemSpA and its subsidiaries, representing a 100% share of thecompanies, is as follows:

| (million euro) |   | **Dec. 31, 2004** |   | **Dec. 31, 2005** |
|----------------|--------|-------------------|--------|-------------------|
|           |   |                   |   |                   |

| Total        assets  |   | 5,137 |   | 5,968 |
|----------------------|--------|-------|--------|-------|
| - current            |   | 2,514 |   | 3,101 |
| - non        current |   | 2,623 |   | 2,867 |
| Total liabilities    |   | 3,592 |   | 4,325 |
| - current            |   | 2,941 |   | 3,633 |
| - non current        |   | 651   |   | 692   |

 

| (million euro) |   | **2004** |   | **2005** |
|----------------|--------|----------|--------|----------|
|           |   |          |   |          |

| Net sales from operations |   |   |   |   |   |   |   | 4,306 |   |   | 4,528 |   |
|---------------------------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|-------|--------|
| Operating        profit   |   |   |   |   |   |   |   | 328   |   |   | 365   |   |
| Net profit                |   |   |   |   |   |   |   | 235   |   |   | 255   |   |

**Concentrations and certain significantestimates**

The following information is presentedaccording to Statement of Position 94-6 "Disclosures ofCertain Significant Risks and Uncertainties".

*Nature of operations*

Eni is an integrated energy company operatingin the oil and gas, electricity generation, petrochemicals andoilfield services and engineering industries.

EXPLORATION & PRODUCTION: throughExploration & 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), the former Soviet Unioncountries (mainly Kazakhstan), the United States (Gulf of Mexicoand Alaska) and Asia (mainly Saudi Arabia, China, India,Indonesia, Iran and Pakistan). In 2005 approximately 68% of oilproduction sold was supplied to Eni’s Refining &Marketing segment and approximately 29% of natural gas productionsold was supplied to Eni’s Gas & Power segment.

Eni owns a storage system, made up by eightdepleted fields, which is 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 the supply,transmission and sale of natural gas in Italy and outside Italythrough its Gas & Power Division, which was constituted bythe incorporation of Snam SpA into Eni SpA in 2002, and throughcertain subsidiaries. Approximately 87% of total purchases arepurchased from foreign sources (primarily Algeria, Russia, TheNetherlands and Norway) under long-term contracts, which containtake-or-pay provisions, and transported to Italy through anetwork of over 4,300 kilometers international pipelines of whichEni owns the transmission rights. The remaining purchases inItaly are obtained principally from domestic gas produced byEni’s Exploration & Production segment. Through anapproximately 30,700-kilometer long network (corresponding to 96%of the Italian domestic natural gas network), Eni suppliesnatural gas to residential and commercial users (civil market),industrial users and the thermoelectric segment. Snam Rete Gas(Eni 50.05%), that was constituted in accordance with Law DecreeNo. 164/2000, owns the pipelines network used by Eni. Snam ReteGas, a company listed on the Italian stock exchange, engages innatural gas transportation activities also for other operators ofthe segment. Following the merging of Italgas Più, Eni supplynatural gas directly to approximately 5 million customers in theresidential and commercial segment. Through Italgas (Eni 100%),Eni is engaged in domestic distribution of natural gas in Italythrough an approximately 48,000-kilometer long network.

Eni is engaged in distribution and sale ofnatural gas to residential and commercial customers outsideItaly, in Argentina through Distribuidora de Gas Cuyana, inHungary through Tigáz 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. In 2005 Eni’s        presence in the Italian natural gas market was in        accordance with the above limitations; |
| • |   | tariffs for        transport infrastructure, storage, use of LNG terminals        and distribution networks are set by the Authority for        Electricity and Gas; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| • |   | third parties        are allowed to access natural gas infrastructure        according to set conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

Eni through EniPower SpA (Eni 100%) andsubsidiaries is engaged managing Eni’s electricity businessat the power plants located in the Ferrera Erbognone, Ravenna,Livorno, Taranto, Mantova, Brindisi and Ferrara industrial siteswith installed capacity of 4.5 gigawatt and a production sold of22.77 terawatthours. The demand for gas and fuel oils ofEniPower’s stations is met by Eni supplies.

REFINING & MARKETING: Eni, through itsRefining & Marketing Division, which was constituted by theincorporation of AgipPetroli SpA in Eni SpA in 2002 and certainsubsidiaries, 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 56% of crude oil sold ispurchased from Eni’s Exploration & Production segment,the rest is purchased from producing countries pursuant topurchase contracts (22%) and in international spot markets (22%),while the remainder is obtained. Approximately 58% of thepurchased crude oil is refined. 32% of oil refined derives fromthe production of Eni’s Exploration & Productionsegment.

PETROCHEMICALS: through Polimeri Europa SpA andsubsidiaries (Eni 100%), Eni engages in manufacturing of olefins,aromatics, intermediate products, styrene and elastomers.Eni’s petrochemicals production is concentrated in Italy,the other operations being primarily in Western Europe.Approximately 23% of the oil-based feedstock requirements used bypetrochemical plants are supplied by Eni’s Refining &Marketing segment.

OILFIELD SERVICES CONSTRUCTION AND ENGINEERING:through Saipem SpA (Eni 43%), a company listed on the Italianstock exchange, and its subsidiaries, Eni is engaged inconstruction and drilling services to customers in the oil andgas industries. Through Snamprogetti SpA (Eni 100%) andsubsidiaries, Eni is a leading provider of engineering andproject management services to customers in the oil and gas andpetrochemical industries. At December 31, 2005 approximately 7%of the order backlog of Eni’s Oilfield Services,Construction and Engineering segment related to orders from EniGroup companies.

**Disclosure in accordance with SFAS No.107**

In accordance with FAS No. 107, fair value ofEni’s long-term debt (including the current portion)amounted to euro 8,384 million and euro 8,437 million at December31, 2005 and 2004, respectively.

**Accounting for Suspended Well Costs**

Refer to Note 33 "Adjustment ofthe Consolidated Financial Statements to U.S. GAAP" underthe caption "B) Exploration & Productionactivities" for a discussion of the company’saccounting policy for the cost of exploratory wells.

Effective January 1, 2005 Eni adopted PositionFAS 19-1 (FSP 19-1), "Accounting for Suspended WellCosts." FSP 19-1 amended Statement of Financial AccountingStandards No. 19 (FAS 19), "Financial Accounting andReporting by Oil and Gas Producing Companies". Under thisprovision companies in the oil and gas industry are allowed tocontinue capitalization of an exploratory well after thecompletion of drilling when: (a) the well has found a sufficientquantity of reserves to justify completion as a producing well;and (b) the enterprise is making sufficient progress assessingthe reserves and the economic and operating viability of theproject. If either condition is not met or if an enterpriseobtains information that raises substantial doubt about theeconomic or operational viability of the project, the exploratorywell would be assumed to be impaired, and its costs, net of anysalvage value, would be charged to expense. FSP FAS 19-1 provideda number of indicators needing to be present to demonstratesufficient progress was being made in assessing the reserves andeconomic viability of the project. Among these indicators are:(i) costs are being incurred to assess the reserves and theirpotential development; (ii) existence (or active negotiations) ofsales contracts with customers for oil and natural gas; and (iii)existence of firm plans, established timetables or contractualcommitments, which may include seismic testing and drilling ofadditional 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 2005 and 2004, and doesnot include amounts that were capitalized and subsequentlyexpensed in the same period. Capitalized exploratory well costsfor fiscal years ending December 31, 2005 and 2004, are presentedbased on the Company’s previous accounting policy.

| (million        euro) |   | **2005** |   | **2004** |
|-----------------------|--------|----------|--------|----------|
|                  |   |          |   |          |

| Beginning balance at January 1                                                                                 |   | 513 |   |   | 570 |   |
|----------------------------------------------------------------------------------------------------------------|--------|-----|--------|--------|-----|--------|
| Addition        pending determination of proved reserves                                                       |   | 128 |   |   | 185 |   |
| Amount previously capitalized expended during        the year                                                  |   | (96 | )      |   | (54 | )      |
| Reclassification        to wells, facilities and equipment basedon the        determination of proved reserves |   | (67 | )      |   | (72 | )      |
| Others reduction (*)                                                                                           |   | (1  | )      |   | (79 | )      |
| Foreign        exchange changes                                                                                |   | 74  |   |   | (37 | )      |
| Ending Balance at December 31                                                                                  |   | 551 |   |   | 513 |   |

|   |   |                                |
|--------|--------|-------------------------------------|
| (*)    |   | Represents        properties sales. |

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:

|   | **2005** |   | **2004** |
|--------|----------|--------|----------|
|   |          |   |          |

|   | **million euro** |   | **No. of Net Wells****(*)** |   | **million euro** |   | **No. of Net Wells****(*)** |
|--------|------------------|--------|-----------------------------|--------|------------------|--------|-----------------------------|
|   |                  |   |                             |   |                  |   |                             |

| < 1 year  |   | 148     |   | 9.35      |   | 156     |   | 11.14     |
|--------------|--------|---------|--------|-----------|--------|---------|--------|-----------|
| 1 to 3 years |   | 323     |   | 24.09     |   | 319     |   | 27.55     |
| 3 to 8 years |   | 80      |   | 5.53      |   | 39      |   | 3.80      |
|         |   | **551** |   | **38.97** |   | **513** |   | **42.49** |

|   |   |                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------|
| (*)    |   | Net well is        the sum of the fractional working interest owned in gross        wells. |

The following table provides, based on the datethe drilling was completed, the capitalized costs and the relatednet well number at year end 2005 and 2004 divided by category ofprojects of exploratory activity.

|   | **2005** |   | **2004** |
|--------|----------|--------|----------|
|   |          |   |          |

|   | **million euro** |   | **No. of Net Wells****(*)** |   | **million euro** |   | **No. of Net Wells****(*)** |
|--------|------------------|--------|-----------------------------|--------|------------------|--------|-----------------------------|
|   |                  |   |                             |   |                  |   |                             |

| **Project with wells drilled in the past 12        months**                   |   | **148** |   | **9.35**  |   | **156** |   | **11.14** |
|-------------------------------------------------------------------------------|--------|---------|--------|-----------|--------|---------|--------|-----------|
| **Project with recent or planned exploratory        activity**                |   | **344** |   | **21.21** |   | **283** |   | **21.94** |
| Project with exploration activities already        underwayor firmly planned: |   |    |   |      |   |    |   |      |
| *-        future exploration drilling*                                        |   | 159     |   | 9.37      |   | 148     |   | 10.29     |
| *- other exploratory activities*                                              |   | 185     |   | 11.84     |   | 135     |   | 11.65     |
| **Project        with completed exploratory activity**                        |   | **59**  |   | **8.41**  |   | **75**  |   | **9.41**  |
| Project progressing towards        commercialization/sanctioning              |   | 45      |   | 6.22      |   | 61      |   | 8.32      |
| Project        waiting finalization of development facilities                 |   | 14      |   | 2.19      |   | 14      |   | 1.09      |
| **Total/Number of wells at the year end**                                     |   | **551** |   | **38.97** |   | **513** |   | **42.49** |

|   |   |                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------|
| (*)    |   | Net well is        the sum of the fractional working interest owned in gross        wells. |

At the end of 2005 of the euro 551 million ofexploratory suspended costs, approximately euro 148 millionrelated to the 9.35 net wells for which the drilling wascompleted in one year or less. Of the remaining euro 403 million,related to the 29.62 net wells suspended for more than one yearsince the completion of drilling, 85% was associated withprojects for which exploration activity is still ongoing.

**Subsequent events**

The main significant events that occurred afterthe balance sheet date are as follows:

| • |   | With        effective date April 1, 2006, the Venezuelan State oil        company Petróleos de Venezuela SA (PDVSA) unilaterally        terminated the service contract governing activities at        the Dación oil field where Eni acted as a contractor,        holding a 100% working interest. As a consequence,        starting on the same day, operations at the Dación oil        field are conducted by PDVSA which replaced Eni Dación        BV, Eni’s wholly-owned subsidiary that had been        operating the field until that date.        Eni believes that it is entitled to a market value        compensation for the expropriation of the Dación field.        On these basis, Eni is available to reach an agreement        with the Venezuelan authorities. In case an amicable        settlement is not possible, Eni will take any other        action in order to protect its interest in Venezuela.        Based on internal and external independent evaluation,        Eni is confident that a fair market compensation will not        be lower than the book value of the Dación related        assets. Accordingly, management decided not to impair the        book value of Eni’s Dación assets. In 2005 and in        the first quarter 2006, the Dación field production rate        was about 60 KBBL/d. Management expects Eni’s proved        reserves of hydrocarbons to be reduced by an amount of        approximately 175 mmBBL corresponding to Eni’s net        proved reserves of the Dación field as of December 31,        2005 as a consequence of the loss of Eni’s title to        the field. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | On May 5,        2006 the European Commission started an inquiry in order        to verify an alleged abuse of dominant position on the        part of Eni in violation of article 82 of the EEC Treaty        and article 54 of the CES Agreement in the activities of        international gas transport and wholesale and retail        supply of gas. According to the European Commission Eni        might have adopted commercial practices that constitute        barriers to access to the Italian market for the        wholesale supply of natural gas, in particular taking        account of Eni long-term purchase contracts. In addition        Eni also entered into long-term transport contracts which        award Eni a majority share of transport capacity of        certain international gaslines and, as a consequence, Eni        may have prevented others access to infrastructure.        Officials from the European Commission have conducted        inspections at Eni’s headquarters and of certain of        Eni’s subsidiaries and collected documents.        If the existence of the alleged anti-competitive        practices is confirmed, the European Commission could        fine Eni.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

| • |   | On May 25,        2006, Eni’s Annual General Shareholders Meeting        approved a euro 2 billion increase in Eni’s ongoing        share repurchase program. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Supplemental oil 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, 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** |   |
| **At        December 31, 2005**                                |   |       |   |   |       |   |   |      |   |   |      |   |   |       |   |   |       |   |
| Proved mineral interests (a)                                   |   | 9,756      |   |   | 9,321      |   |   | 8,733     |   |   | 8,350     |   |   | 9,463      |   |   | 45,623     |   |
| Unproved        mineral interests                              |   | 33         |   |   | 197        |   |   | 134       |   |   | 413       |   |   | 1,265      |   |   | 2,042      |   |
| Support equipment and facilities                               |   | 253        |   |   | 1,385      |   |   | 272       |   |   | 33        |   |   | 93         |   |   | 2,036      |   |
| Incomplete        wells and other                              |   | 657        |   |   | 638        |   |   | 728       |   |   | 221       |   |   | 1,895      |   |   | 4,139      |   |
| **Gross Capitalized Costs**                                    |   | **10,699** |   |   | **11,541** |   |   | **9,867** |   |   | **9,017** |   |   | **12,716** |   |   | **53,840** |   |
| Accumulated        depreciation, depletion and amortization    |   | (6,888     | )      |   | (5,113     | )      |   | (5,193    | )      |   | (4,619    | )      |   | (4,697     | )      |   | (26,510    | )      |
| **Net Capitalized Costs consolidated**                         |   | **3,811**  |   |   | **6,428**  |   |   | **4,674** |   |   | **4,398** |   |   | **8,019**  |   |   | **27,330** |   |
| Net        Capitalized Costs affiliates and joint ventures (b) |   |       |   |   | 13         |   |   | 66        |   |   |      |   |   | 157        |   |   | 236        |   |
| **Net Capitalized Costs**                                      |   | **3,811**  |   |   | **6,441**  |   |   | **4,740** |   |   | **4,398** |   |   | **8,176**  |   |   | **27,566** |   |

|   |   |                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Includes        capitalized costs for wells and facilities related to        proved reserves.                             |
| (b)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included. |

*Cost incurred*

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, 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**                       |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |
| 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** |   |
| **Year        ended December 31, 2005**                       |   |    |   |   |      |   |   |      |   |   |    |   |   |      |   |   |      |   |
| Proved property acquisitions                                  |   | 19      |   |   |      |   |   | 16        |   |   |    |   |   | 99        |   |   | 134       |   |
| Unproved        property acquisitions                         |   | 13      |   |   |      |   |   | 44        |   |   |    |   |   | 99        |   |   | 156       |   |
| Exploration                                                   |   | 45      |   |   | 153       |   |   | 75        |   |   | 127     |   |   | 264       |   |   | 664       |   |
| Development        (a)                                        |   | 644     |   |   | 960       |   |   | 909       |   |   | 528     |   |   | 1,396     |   |   | 4,437     |   |
| **Total costs incurred consolidated**                         |   | **721** |   |   | **1,113** |   |   | **1,044** |   |   | **655** |   |   | **1,858** |   |   | **5,391** |   |
| Total        costs incurred affiliates and joint ventures (c) |   |    |   |   | 2         |   |   | 22        |   |   |    |   |   | 25        |   |   | 49        |   |
| **Total costs incurred**                                      |   | **721** |   |   | **1,115** |   |   | **1,066** |   |   | **655** |   |   | **1,883** |   |   | **5,440** |   |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Includes for        assets retirement obligations pursuant to SFAS 143        "Accounting for asset retirement obligations"        of euro 84 million of costs capitalized during 2003, euro        233 million for 2004 and euro 588 million for 2005.                                                                                                                                                              |
| (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. |
| (c)    |   | Starting from 2005 data related to        affiliates and joint ventures carried on the equity        method are included.                                                                                                                                                                                                                                                                                                      |

*Results of operations from oil and gasproducing 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, 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       | )      |
| DD&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)                                                           |   | (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       | )      |
| DD & 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)                                                           |   | (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**  |   |
| **Year        ended December 31, 2005**                                                        |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| Revenues:                                                                                      |   |      |   |   |      |   |   |      |   |   |      |   |   |      |   |   |       |   |
| - sales to        affiliates                                                                   |   | 3,133     |   |   | 2,813     |   |   | 4,252     |   |   | 2,707     |   |   | 828       |   |   | 13,733     |   |
| - sales to unaffiliated entities                                                               |   | 161       |   |   | 2,579     |   |   | 394       |   |   | 889       |   |   | 2,883     |   |   | 6,906      |   |
| **Total        revenues**                                                                      |   | **3,294** |   |   | **5,392** |   |   | **4,646** |   |   | **3,596** |   |   | **3,711** |   |   | **20,639** |   |
| Operations costs                                                                               |   | (261      | )      |   | (390      | )      |   | (363      | )      |   | (417      | )      |   | (338      | )      |   | (1,769     | )      |
| Production        taxes                                                                        |   | (157      | )      |   | (98       | )      |   | (513      | )      |   | (15       | )      |   | (207      | )      |   | (990       | )      |
| Exploration expenses                                                                           |   | (32       | )      |   | (59       | )      |   | (38       | )      |   | (125      | )      |   | (181      | )      |   | (435       | )      |
| DD&A        and Provision for abandonment (a)                                              |   | (512      | )      |   | (711      | )      |   | (632      | )      |   | (710      | )      |   | (1,007    | )      |   | (3,572     | )      |
| Other income and (expenses)                                                                    |   | (205      | )      |   | (400      | )      |   | (176      | )      |   | 55        |   |   | (251      | )      |   | (977       | )      |
| Accretion        discount (SFAS 143)                                                           |   | (45       | )      |   | (9        | )      |   | (15       | )      |   | (31       | )      |   | (6        | )      |   | (106       | )      |
| **Pretax income from producing activities**                                                    |   | **2,082** |   |   | **3,725** |   |   | **2,909** |   |   | **2,353** |   |   | **1,721** |   |   | **12,790** |   |
| Estimated        income taxes                                                                  |   | (762      | )      |   | (2,197    | )      |   | (1,818    | )      |   | (1,386    | )      |   | (580      | )      |   | (6,743     | )      |
| **Results of operations from E&P activities        consolidated**                          |   | **1,320** |   |   | **1,528** |   |   | **1,091** |   |   | **967**   |   |   | **1,141** |   |   | **6,047**  |   |
| Results of        operations from E&P activities, affiliates and joint        ventures (b) |   |      |   |   |      |   |   | 6         |   |   |      |   |   | (19       | )      |   | (13        | )      |
| **Total results of operations from E&P        activities**                                 |   | **1,320** |   |   | **1,528** |   |   | **1,097** |   |   | **967**   |   |   | **1,122** |   |   | **6,034**  |   |

|   |   |                                                                                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Includes        asset impairments amounting for euro 210 million for        2003, euro 300 million for 2004 and euro 147 million for        2005. |
| (b)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included.                         |

 

*Average sale prices and production costs perunit of production*

| (million euro) |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|----------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|           |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **2003**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Average        sale prices                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and condensates, per BBL                 | ($)    |   | 24.24  |   | 27.14  |   | 27.60  |   | 28.37  |   | 21.53  |   | 26.29  |
| Natural        gas, per KCF                  |   |   | 4.65   |   | 2.86   |   | 0.53   |   | 3.11   |   | 3.18   |   | 3.56   |
| Average production costs, per BOE (1)        |   |   | 3.77   |   | 3.70   |   | 6.21   |   | 4.19   |   | 3.26   |   | 4.16   |
| **2004**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average sale prices                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and        condensates, per BBL          | ($)    |   | 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   |
| **2005**                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average        sale prices                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oil and condensates, per BBL                 | ($)    |   | 45.46  |   | 50.26  |   | 51.58  |   | 51.96  |   | 44.39  |   | 49.32  |
| Natural        gas, per KCF                  |   |   | 6.29   |   | 3.35   |   | 0.79   |   | 5.27   |   | 3.71   |   | 4.49   |
| Average production costs, per BOE (1)        |   |   | 5.58   |   | 3.66   |   | 8.90   |   | 5.32   |   | 5.59   |   | 5.59   |

*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.

Net proved reserves exclude royalties andinterests owned by others.

Proved developed oil and gas reserves areproved reserves that can be estimated to be recovered throughexisting wells with existing 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.

Eni’s proved reserves have been estimatedon the basis of the applicable U.S. Securities & ExchangeCommission regulation, Rule 4-10 of Regulation S-X and itsinterpretations and have been disclosed in accordance withStatement of Financial Accounting Standard No. 69. The estimatesof proved reserves, developed and undeveloped for years endedDecember 31, 2002, 2003, 2004 and 2005 are based on data preparedby Eni. Since 1991 Eni has requested qualified independent oilengineering companies to carry out an independent evaluation18 of its proved reserves on a rotative basis. Inparticular a total of 1.64 billion boe of proved reserves, orabout 24% of Eni’s total proved reserves at December 31,2005, have been evaluated. The results of this independentevaluation confirmed Eni’s evaluations, as in previousyears. In the 2003-2005 three-year period, 84% of Eni’stotal proved reserves were subject to independent evaluations.

Eni operates under PSAs in several of theforeign jurisdictions where it has oil and gas exploration andproduction activities. Reserves of oil and natural gas to whichEni is entitled under PSA arrangements are shown in accordancewith Eni’s economic interest in the volumes of oil andnatural gas estimated to be recoverable in future years. Suchreserves include estimated quantities allocated to Eni forrecovery of costs, income taxes owed by Eni but settled by itsjoint venture partners (which are state-owned entities) out ofEni’s share of production and Eni’s net equity shareafter cost recovery.

Proved oil and gas reserves associated withPSAs represented 46%, 51% and 48% of total proved reserves as ofyear end 2003, 2004 and 2005, respectively, on an oil-equivalentbasis.

A similar scheme to PSAs applies to Service and"Buy-Back" contracts; proved reserves associated withsuch contracts represented 3%, 3% and 2% of total proved reserveson an oil-equivalent basis as of year end 2003, 2004 and 2005,respectively.

Oil and gas reserve quantities include: (i) oiland natural gas quantities in excess to cost recovery which thecompany has an obligation to purchase under certain PSAs withgovernments or authorities whereby the company serves as producerof reserves. In accordance with SFAS 69, paragraph 13, reservevolumes associated with such oil and gas quantities represented1.6%, 1.4% and 1.7% of total proved reserves as of year end 2003,2004 and 2005 respectively, on an oil-equivalent basis; (ii)natural gas volumes of natural gas used for own consumption and(iii) volumes of natural gas held in certain Eni storagefields in Italy. Proved reserves attributable to these fieldsinclude: (a) the residual natural gas volumes of the reservoirsand (b) natural gas volumes from other Eni fields input intothese reservoirs in subsequent periods. Proved reserves do notinclude volumes owned by or acquired from third parties. Gaswithdrawn from storage is produced and thereby detracted fromproved reserves when sold.

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 or downwardrevision. In addition, changes in oil and natural gas prices havean effect on the quantities of Eni’s proved reserves sinceestimates of reserves are based on prices and costs relative tothe date when such estimates are made. Reserve estimates are alsosubject to revision as prices fluctuate due to the cost recoveryfeature 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 2003, 2004 and 2005.

*Crude oil (including condensates and naturalgas liquids)*

(mmBBL)

| **Proved Oil Reserves** |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-------------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                    |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| **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** |   |
| 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** |   |
| Purchase of Minerals in Place                                          |   | 2       |   |   |      |   |   | 6         |   |   |    |   |   | 47        |   |   | 55        |   |
| Revisions        of Previous Estimates                                 |   | 33      |   |   | 36        |   |   | (47       | )      |   | 27      |   |   | (88       | )      |   | (39       | )      |
| Improved Recovery                                                      |   |    |   |   | 43        |   |   | 29        |   |   |    |   |   | 15        |   |   | 87        |   |
| Extensions        and Discoveries                                      |   |    |   |   | 26        |   |   | 14        |   |   | 21      |   |   | 16        |   |   | 77        |   |
| Production                                                             |   | (32     | )      |   | (111      | )      |   | (113      | )      |   | (65     | )      |   | (83       | )      |   | (404      | )      |
| Reclassification        2004 affiliates and joint ventures data        |   |    |   |   | (26       | )      |   | (9        | )      |   |    |   |   | (1        | )      |   | (36       | )      |
| **Reserves at December 31, 2005 consolidated**                         |   | **228** |   |   | **961**   |   |   | **936**   |   |   | **433** |   |   | **1,190** |   |   | **3,748** |   |
| Reserves        at December 31, 2005 affiliates and joint ventures (a) |   |    |   |   | 18        |   |   | 6         |   |   |    |   |   | 1         |   |   | 25        |   |
| **Reserves at December 31, 2005**                                      |   | **228** |   |   | **979**   |   |   | **942**   |   |   | **433** |   |   | **1,191** |   |   | **3,773** |   |

(mmBBL)

| **Proved Developed Oil Reserves** |   | **Italy** |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-----------------------------------|--------|-----------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                              |   |           |   |                  |   |                 |   |               |   |                   |   |           |

| 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 |   |
| Reserves at December 31, 2005 consolidated                             |   | 149    |   |   | 697 |   |   | 568 |   |   | 353    |   |   | 564 |   |   | 2,331 |   |
| Reserves        at December 31, 2005 affiliates and joint ventures (a) |   |   |   |   | 15  |   |   | 3   |   |   |   |   |   | 1   |   |   | 19    |   |
| Reserves at December 31, 2005                                          |   | 149    |   |   | 712 |   |   | 571 |   |   | 353    |   |   | 565 |   |   | 2,350 |   |

|   |   |                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included. |

*Natural gas*

(BCF)

| **Proved Natural Gas Reserves** |   | **Italy**(a) |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|---------------------------------|--------|--------------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                            |   |              |   |                  |   |                 |   |               |   |                   |   |           |

| **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       | )      |
| 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** |   |
| Purchase of Minerals in Place                                          |   | 63        |   |   |      |   |   | 8         |   |   |      |   |   | 222       |   |   | 293        |   |
| Revisions        of Previous Estimates                                 |   | 159       |   |   | (6        | )      |   | (9        | )      |   | (18       | )      |   | (368      | )      |   | (242       | )      |
| Improved Recovery                                                      |   |      |   |   | 11        |   |   |      |   |   |      |   |   |      |   |   | 11         |   |
| Extensions        and Discoveries                                      |   | 1         |   |   | 37        |   |   | 309       |   |   | 50        |   |   | 56        |   |   | 453        |   |
| Production                                                             |   | (365      | )      |   | (357      | )      |   | (70       | )      |   | (219      | )      |   | (281      | )      |   | (1,292     | )      |
| Reclassification        2004 affiliates and joint ventures data        |   |      |   |   | (21       | )      |   | (2        | )      |   |      |   |   | (134      | )      |   | (157       | )      |
| **Reserves at December 31, 2005 consolidated**                         |   | **3,676** |   |   | **6,117** |   |   | **1,965** |   |   | **1,864** |   |   | **3,879** |   |   | **17,501** |   |
| Reserves        at December 31, 2005 affiliates and joint ventures (b) |   |      |   |   | 15        |   |   | 2         |   |   |      |   |   | 73        |   |   | 90         |   |
| **Reserves at December 31, 2005**                                      |   | **3,676** |   |   | **6,132** |   |   | **1,967** |   |   | **1,864** |   |   | **3,952** |   |   | **17,591** |   |

(BCF)

| **Proved Developed Natural Gas Reserves** |   | **Italy**(a) |   | **North Africa** |   | **West Africa** |   | **North Sea** |   | **Rest of World** |   | **Total** |
|-------------------------------------------|--------|--------------|--------|------------------|--------|-----------------|--------|---------------|--------|-------------------|--------|-----------|
|                                      |   |              |   |                  |   |                 |   |               |   |                   |   |           |

| 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 |   |
| Reserves at December 31, 2005 consolidated                             |   | 2,704  |   |   | 3,060 |   |   | 1,289 |   |   | 1,484  |   |   | 2,622 |   |   | 11,159 |   |
| Reserves        at December 31, 2005 affiliates and joint ventures (b) |   |   |   |   | 12    |   |   | 2     |   |   |   |   |   | 56    |   |   | 70     |   |
| Reserves at December 31, 2005                                          |   | 2,704  |   |   | 3,072 |   |   | 1,291 |   |   | 1,484  |   |   | 2,678 |   |   | 11,229 |   |

|   |   |                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Including        approximately 779, 747, 737 and 760 BCF held in storage        at December 31, 2002, 2003, 2004 and 2005 respectively. |
| (b)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included.               |

*Standardized measure of discounted futurenet 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. Year-end pricesin 2005 were $58.205 per barrel of oil. Future price changes areconsidered only to the 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, 2003, 2004and 2005 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, 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**  |   |
| **At December 31, 2005**                                                                                 |   |       |   |   |       |   |   |       |   |   |       |   |   |       |   |   |        |   |
| Future        cash inflows                                                                               |   | 36,203     |   |   | 66,100     |   |   | 45,952     |   |   | 30,835     |   |   | 50,590     |   |   | 229,680     |   |
| Future production costs                                                                                  |   | (4,609     | )      |   | (10,030    | )      |   | (9,604     | )      |   | (5,632     | )      |   | (6,399     | )      |   | (36,274     | )      |
| Future        development and abandonment costs                                                          |   | (2,936     | )      |   | (3,960     | )      |   | (2,594     | )      |   | (1,774     | )      |   | (4,059     | )      |   | (15,323     | )      |
| **Future net inflow before income tax**                                                                  |   | **28,658** |   |   | **52,110** |   |   | **33,754** |   |   | **23,429** |   |   | **40,132** |   |   | **178,083** |   |
| Future        income tax                                                                                 |   | (9,890     | )      |   | (22,744    | )      |   | (21,056    | )      |   | (15,225    | )      |   | (12,097    | )      |   | (81,012     | )      |
| **Future net cash flows**                                                                                |   | **18,768** |   |   | **29,366** |   |   | **12,698** |   |   | **8,204**  |   |   | **28,035** |   |   | **97,071**  |   |
| 10%        discount factor                                                                               |   | (7,643     | )      |   | (12,095    | )      |   | (4,122     | )      |   | (2,155     | )      |   | (15,705    | )      |   | (41,720     | )      |
| **Standardized measure of discounted future net        cash flows**                                      |   | **11,125** |   |   | **17,271** |   |   | **8,576**  |   |   | **6,049**  |   |   | **12,330** |   |   | **55,351**  |   |
| Standardized        measure of discounted future net cash flows affiliates        and joint ventures (a) |   |       |   |   | 130        |   |   | 127        |   |   |       |   |   | 114        |   |   | 371         |   |
| **Standardized measure of discounted future net        cash flows**                                      |   | **11,125** |   |   | **17,401** |   |   | **8,703**  |   |   | **6,049**  |   |   | **12,444** |   |   | **55,722**  |   |

|   |   |                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included. |

*Changes in standardized measure ofdiscounted future net cash flows*

The following table reflects the changes instandardized measure of discounted future net cash flows for theyears 2003, 2004 and 2005.

| (million        euro) |   | **2003** |   | **2004** |   | **2005** |
|-----------------------|--------|----------|--------|----------|--------|----------|
|                  |   |          |   |          |   |          |

| **Beginning of year**                                                                                  |   |   |   |   | **34,480** |   |   | **31,264** |   |   | **37,258** |   |
|--------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| Reclassification        2004 affiliates and joint ventures data                                        |   |   |   |   |       |   |   |       |   |   | (357       | )      |
| **Beginning of year consolidated**                                                                     |   |   |   |   | **34,480** |   |   | **31,264** |   |   | **36,901** |   |
| Increase        (Decrease):                                                                            |   |   |   |   |       |   |   |       |   |   |       |   |
| - sales, net of production costs                                                                       |   |   |   |   | (10,144    | )      |   | (12,172    | )      |   | (17,880    | )      |
| - net        changes in sales and transfer prices, net of production        costs                      |   |   |   |   | (1,050     | )      |   | 13,031     |   |   | 33,372     |   |
| - extensions, discoveries and improved recovery,        net of future production and development costs |   |   |   |   | 1,855      |   |   | 2,806      |   |   | 3,527      |   |
| - changes        in estimated future development and abandonment costs                                 |   |   |   |   | (3,576     | )      |   | (3,437     | )      |   | (3,654     | )      |
| - development costs incurred during the period        that reduced future development costs            |   |   |   |   | 4,864      |   |   | 4,229      |   |   | 3,865      |   |
| -        revisions of quantity estimates                                                               |   |   |   |   | 2,348      |   |   | 1,658      |   |   | 47         |   |
| - accretion of discount                                                                                |   |   |   |   | 5,585      |   |   | 5,328      |   |   | 6,573      |   |
| - net        change in income taxes                                                                    |   |   |   |   | 105        |   |   | (4,805     | )      |   | (17,327    | )      |
| - purchase of reserves in-place                                                                        |   |   |   |   | 1,488      |   |   |       |   |   | 977        |   |
| - sale of        reserves in-place                                                                     |   |   |   |   | (222       | )      |   | (727       | )      |   |       |   |
| - changes in production rates and other (a)                                                            |   |   |   |   | (4,469     | )      |   | 83         |   |   | 8,950      |   |
| **Net        increase (decrease)**                                                                     |   |   |   |   | **(3,216** | **)**  |   | **5,994**  |   |   | **18,450** |   |
| **End of year consolidated**                                                                           |   |   |   |   | **31,264** |   |   | **37,258** |   |   | **55,351** |   |
| End of        year affiliates and joint ventures (b)                                                   |   |   |   |   |       |   |   |       |   |   | 371        |   |
| **End of year**                                                                                        |   |   |   |   | **31,264** |   |   | **37,258** |   |   | **55,722** |   |

|   |   |                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | This item relates mainly to changes in        production timing and foreign exchange effects.                             |
| (b)    |   | Starting from        2005 data related to affiliates and joint ventures        carried on the equity method are included. |

 

----

 

##### 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. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

> 
***Part II - Company Objects***

**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. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

> 
***Part III - Capital - Shareholdings - Bonds***

**ARTICLE 5**

| 5.1 |   | The company capital is euro        4,005,358,876.00 (four billion five million three hundred        and fifty-eight thousand eight hundred and seventy-six)        represented by 4,005,358,876 (four billion five million        three hundred and fifty-eight thousand eight 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.                                                                                                                                                                                                                                                                                            |

**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. |
|------|--------|-----------------------------------------------------------------------------------------------------------------|

> 
***Part IV - Shareholders’ Meeting***

**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        Financial Statements. |

**ARTICLE 13**

| 13.1 |   | Shareholders’ meetings        are convened through a notice to be published on the        Italian Official Gazette or "Il Sole 24 Ore"        and other newspapers with national circulation, according        to the current legislation and in compliance with the        rules in force regulating the exercise of the vote by        mail.         The Shareholders that, severally or jointly, represent at        least one fortieth of Eni share capital, may ask, within        five days as of the date of publication of the        Shareholders’ Meeting notice, to add other items in        the agenda. The request shall contain the matters to be        proposed to the Shareholders’ Meeting. Said faculty        may not be exercised on the matters upon which, pursuant        to the applicable legislation, the Shareholders’        Meeting resolves on the basis of a proposal of the Board        of Directors or on the basis of a project or report of        the Board. The integrations accepted by the Board shall        be published at least ten days before the        Shareholders’ Meeting date, through a notice to be        published as indicated above. |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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 Chief Executive Officer;        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.                                                                                                       |

> 
***Part V - The Board of Directors***

**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 causes for his ineligibility and        incompatibility are non existing and that he possesses        the requirements, honorability and independence        requirements required by the norms in force for the        Statutory Auditors included.        At least one Board member, if the Board members are no        more than five, or at least three Board members if they        are more than five, shall have the independence        requirement. The independent Board members take part,        according to the provisions set by the Board and by the        Corporate Governance Codes issued by the companies that        manage stock markets to which the Company adheres, to the        Board Committees that the Board of Directors may        establish. Said Board Committees shall have advisory and        consulting tasks on specific items.         The Board of Directors evaluates periodically the        independence and the honorability of its members. If        these requirements are not present or elapse and, if the        minimum number of independent Board members set by these        by-laws is not met, the Board of Directors removes the        Board member without the independence requirement and        resolves upon his substitution.        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 Chief Executive Officer        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 Chief Executive Officer 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 Chief Executive Officer 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 to 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 Chief        Executive Officer, a new Chief Executive Officer is        simultaneously appointed.        The Board of Directors, upon proposal of the Chairman and        in agreement with the Chief Executive Officer, 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 to Article 6, second        Paragraph, letter d) of the by-laws. The Chairman and the        Chief Executive Officer, 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 Chief Executive Officer 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. In order        to make the appointment effective, the Board of Directors        shall verify if the General Manager to be appointed has        the honorability requirements set by the current        legislation. The General Managers without said        requirement shall be removed.        On proposal of the Chief Executive Officer and in        agreement with the Chairman, the Board of Directors        appoints the Manager responsible for the preparation of        financial reporting documents and delegates powers and        resources to him. The appointment is subject to the        favourable opinion of the Board of Statutory Auditors. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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 Chief Executive        Officer. |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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. |

> 
***Part VI - Board of Statutory Auditors***

**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 according to Article 17.3 letter b) of        these by-laws.        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’ meetings and at least        one effective Auditor is empowered to convene the Board        meetings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

> 
***Part VII - Financial Statements and Profits***

**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. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

> 
***Part VIII - Winding Up and Liquidation of the    Company***

**ARTICLE 31**

| 31.1 |   | IIn 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. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

> 
***Part IX - General Provisions***

**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 fully consolidatedsubsidiaries for year 2005**

| **Subsidiary** |   | **Country of        Incorporation** | **Eni's        interest (%)**(1) |
|----------------|--------|-------------------------------------|----------------------------------|
|           |   |                                |                             |
|           |   |                                |                             |

| Exploration &        Production                                                                                                                                                                             |   |                   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                                                                                                                                            |   |                   |   |
| Agip Caspian Sea BV                                                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Agip Energy and Natural        Resources (Nigeria) Ltd                                                                                                                                                          |   | (Nigeria)              | 100.00 |
| Agip Karachaganak BV                                                                                                                                                                                            |   | (the Netherlands)      | 100.00 |
| Agip Oil Ecuador BV                                                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Eni A E P Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni Algeria Exploration        BV                                                                                                                                                                               |   | (the Netherlands)      | 100.00 |
| Eni Algeria Ltd Sàr                                                                                                                                                                                        |   | (Luxembourg)           | 100.00 |
| Eni Algeria Production BV                                                                                                                                                                                       |   | (the Netherlands)      | 100.00 |
| Eni Ambalat Ltd                                                                                                                                                                                                 |   | (the United Kingdom)   | 100.00 |
| Eni America Ltd                                                                                                                                                                                                 |   | (USA)                  | 100.00 |
| Eni Angola Exploration BV                                                                                                                                                                                       |   | (the Netherlands)      | 100,00 |
| Eni Angola Production BV                                                                                                                                                                                        |   | (the Netherlands)      | 100.00 |
| Eni Australia BV                                                                                                                                                                                                |   | (the Netherlands)      | 100.00 |
| Eni Australia Ltd                                                                                                                                                                                               |   | (the United Kingdom)   | 100.00 |
| Eni BB Petroleum Inc                                                                                                                                                                                            |   | (USA)                  | 100.00 |
| Eni Birch Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni Bukat Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni Bulungan BV                                                                                                                                                                                                 |   | (the Netherlands)      | 100.00 |
| Eni China BV                                                                                                                                                                                                    |   | (the Netherlands)      | 100.00 |
| Eni Congo Holding BV (ex        Eni International BV)                                                                                                                                                           |   | (the Netherlands)      | 100.00 |
| Eni Congo SA                                                                                                                                                                                                    |   | (Congo)                | 100.00 |
| Eni Croatia BV                                                                                                                                                                                                  |   | (the Netherlands)      | 100.00 |
| Eni Dación BV                                                                                                                                                                                              |   | (the Netherlands)      | 100.00 |
| Eni Deepwater Llc                                                                                                                                                                                               |   | (USA)                  | 100.00 |
| Eni Denmark BV                                                                                                                                                                                                  |   | (the Netherlands)      | 100.00 |
| Eni Elgin/Franklin Ltd                                                                                                                                                                                          |   | (the United Kingdom)   | 100.00 |
| Eni Energy BV                                                                                                                                                                                                   |   | (the Netherlands)      | 100.00 |
| Eni Energy Ltd (in        liquidation)                                                                                                                                                                          |   | (the United Kingdom)   | 100.00 |
| Eni Ganal Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni Grand Maghreb BV                                                                                                                                                                                            |   | (the Netherlands)      | 100.00 |
| Eni Guibsen Exploration        BV                                                                                                                                                                               |   | (the Netherlands)      | 100.00 |
| Eni Indonesia Ltd                                                                                                                                                                                               |   | (the United Kingdom)   | 100.00 |
| Eni International NA NV        Sàrl                                                                                                                                                                        |   | (Luxembourg)           | 100.00 |
| Eni Investments Plc                                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni Iran BV                                                                                                                                                                                                     |   | (the Netherlands)      | 100.00 |
| Eni Ireland BV                                                                                                                                                                                                  |   | (the Netherlands)      | 100.00 |
| Eni JPDA 03-13 Ltd                                                                                                                                                                                              |   | (the United Kingdom)   | 100.00 |
| Eni Krueng Mane Ltd                                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni Lasmo Plc                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni LNS Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni Marketing Inc                                                                                                                                                                                               |   | (USA)                  | 100.00 |
| Eni Mediterranea        Idrocarburi SpA                                                                                                                                                                         |   | (Italy)                | 100.00 |
| Eni MEP Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni MHH Ltd (in        liquidation)                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni Middle East BV                                                                                                                                                                                              |   | (the Netherlands)      | 100.00 |
| Eni Middle East Ltd                                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni MOG Ltd (in        liquidation)                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni Muara Bakau BV                                                                                                                                                                                              |   | (the Netherlands)      | 100.00 |
| Eni Norge AS                                                                                                                                                                                                    |   | (Norway)               | 100.00 |
| Eni North Africa BV                                                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Eni Oil Algeria Ltd                                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni Oil & Gas Inc                                                                                                                                                                                           |   | (USA)                  | 100,00 |
| Eni Oil do Brasil SA                                                                                                                                                                                            |   | (Brazil)               | 100.00 |
| Eni Oil Holdings BV                                                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Eni Pakistan Ltd                                                                                                                                                                                                |   | (the United Kingdom)   | 100.00 |
| Eni Pakistan (M) Ltd        Sàrl                                                                                                                                                                           |   | (Luxembourg)           | 100.00 |
| Eni Papalang Ltd                                                                                                                                                                                                |   | (the United Kingdom)   | 100.00 |
| Eni Petroleum Co Inc                                                                                                                                                                                            |   | (USA)                  | 100.00 |
| Eni Petroleum Exploration        Co Inc                                                                                                                                                                         |   | (USA)                  | 100.00 |
| Eni Popodi Ltd                                                                                                                                                                                                  |   | (the United Kingdom)   | 100.00 |
| Eni Rapak Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 100.00 |
| Eni Resources Ltd (in        liquidation)                                                                                                                                                                       |   | (the United Kingdom)   | 100.00 |
| Eni Russia BV                                                                                                                                                                                                   |   | (the Netherlands)      | 100.00 |
| Eni Securities Ltd                                                                                                                                                                                              |   | (the United Kingdom)   | 100.00 |
| Eni TNS Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni Trading BV                                                                                                                                                                                                  |   | (the Netherlands)      | 100.00 |
| Eni Trinidad and Tobago        Ltd                                                                                                                                                                              |   | (Trinidad and Tobago)  | 100.00 |
| Eni TTO Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni Tunisia BEK BV                                                                                                                                                                                              |   | (the Netherlands)      | 100.00 |
| Eni Tunisia BV                                                                                                                                                                                                  |   | (the Netherlands)      | 100.00 |
| Eni UFL Ltd (in        liquidation)                                                                                                                                                                             |   | (the United Kingdom)   | 100.00 |
| Eni UHL Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni UKCS Ltd                                                                                                                                                                                                    |   | (the United Kingdom)   | 100.00 |
| Eni UK Ltd                                                                                                                                                                                                      |   | (the United Kingdom)   | 100.00 |
| Eni ULT Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni ULX Ltd                                                                                                                                                                                                     |   | (the United Kingdom)   | 100.00 |
| Eni USA Inc                                                                                                                                                                                                     |   | (USA)                  | 100.00 |
| Eni U.S. Operating Co Inc                                                                                                                                                                                       |   | (USA)                  | 100.00 |
| Eni Venezuela BV                                                                                                                                                                                                |   | (the Netherlands)      | 100.00 |
| Eni Ventures Plc                                                                                                                                                                                                |   | (the United Kingdom)   | 100.00 |
| Ieoc Exploration BV                                                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Ieoc Production BV                                                                                                                                                                                              |   | (the Netherlands)      | 100.00 |
| Ieoc SpA                                                                                                                                                                                                        |   | (Italy)                | 100.00 |
| Lasmo Sanga Sanga Ltd                                                                                                                                                                                           |   | (Bermuda)              | 100.00 |
| Nigerian Agip Exploration        Ltd                                                                                                                                                                            |   | (Nigeria)              | 100.00 |
| Nigerian Agip Oil Co Ltd                                                                                                                                                                                        |   | (Nigeria)              | 100.00 |
| S.A.R.C.I.S. - Società        Azionaria Ricerche Coltivazione Idrocarburi Sicilia SpA                                                                                                                      |   | (Italy)                | 100.00 |
| Società Petrolifera        Italiana SpA                                                                                                                                                                    |   | (Italy)                | 99.96  |
| Stoccaggi Gas Italia SpA        - Stogit SpA                                                                                                                                                                    |   | (Italy)                | 100.00 |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Gas & Power                                                                                                                                                                                                 |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Acqua Campania SpA (ex        Eni Acqua Campania SpA)                                                                                                                                                           |   | (Italy)                | 49.05  |
| Adriaplin Podjetje za        distribucijo zemeljskega plina doo Ljubljana                                                                                                                                       |   | (Slovenia)             | 51.00  |
| Compagnia Napoletana di        Illuminazione e Scaldamento col Gas SpA                                                                                                                                          |   | (Italy)                | 99.69  |
| Distribuidora de Gas        Cuyana SA                                                                                                                                                                           |   | (Argentina)            | 45.60  |
| Eni G&P Trading BV                                                                                                                                                                                          |   | (the Netherlands)      | 100.00 |
| Eni Gas & Power CH SA                                                                                                                                                                                       |   | (Switzerland)          | 100.00 |
| Eni Gas & Power        Deutschland SpA (ex Italgas Rete SpA)                                                                                                                                                |   | (Italy)                | 100.00 |
| Eni Gas & Power GmbH                                                                                                                                                                                        |   | (Germany)              | 100.00 |
| Eni Gas & Power LNG        Australia BV                                                                                                                                                                     |   | (the Netherlands)      | 100.00 |
| Eni Gas Trading Europe BV                                                                                                                                                                                       |   | (the Netherlands)      | 100.00 |
| EniPower SpA                                                                                                                                                                                                    |   | (Italy)                | 100.00 |
| EniPower Trading SpA                                                                                                                                                                                            |   | (Italy)                | 100.00 |
| EniPower Trasmissione SpA                                                                                                                                                                                       |   | (Italy)                | 100.00 |
| Fiorentina Gas Clienti        SpA                                                                                                                                                                               |   | (Italy)                | 100.00 |
| Fiorentina Gas SpA                                                                                                                                                                                              |   | (Italy)                | 51.03  |
| Gas Brasiliano        Distribuidora SA                                                                                                                                                                          |   | (Brazil)               | 100.00 |
| GNL Italia SpA                                                                                                                                                                                                  |   | (Italy)                | 50.07  |
| Greenstream BV                                                                                                                                                                                                  |   | (the Netherlands)      | 75.00  |
| Inversora de Gas Cuyana        SA                                                                                                                                                                               |   | (Argentina)            | 76.00  |
| Italgas Hellas SpA                                                                                                                                                                                              |   | (Italy)                | 100.00 |
| LNG Shipping SpA                                                                                                                                                                                                |   | (Italy)                | 100.00 |
| Napoletana Gas Clienti        SpA                                                                                                                                                                               |   | (Italy)                | 99.69  |
| Partecipazioni        Industriali SpA                                                                                                                                                                           |   | (Italy)                | 100.00 |
| Snam Rete Gas SpA                                                                                                                                                                                               |   | (Italy)                | 50.07  |
| Società EniPower Ferrara        Srl                                                                                                                                                                        |   | (Italy)                | 51.00  |
| Società Italiana per il        Gas pA                                                                                                                                                                      |   | (Italy)                | 100.00 |
| Société de Service du        Gazoduc Transtunisien SA - Sergaz SA                                                                                                                                     |   | (Tunisia)              | 66.67  |
| Société pour la        Construction du Gazoduc Transtunisien SA - Scogat SA                                                                                                                           |   | (Tunisia)              | 100.00 |
| Tigáz Tiszántúli        Gázszolgáltató Zártkörûen Mûködõ        Részvénytársaság                                                |   | (Hungary)              | 50.08  |
| Trans Tunisian Pipeline        Co Ltd                                                                                                                                                                           |   | (Channel Island)       | 100.00 |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Refining & Marketing                                                                                                                                                                                        |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Agip Austria GmbH                                                                                                                                                                                               |   | (Austria)              | 100.00 |
| Agip Benelux BV                                                                                                                                                                                                 |   | (the Netherlands)      | 100.00 |
| Agip Ceská Republika Sro                                                                                                                                                                                   |   | (Czech Republic)       | 100.00 |
| Agip Deutschland GmbH                                                                                                                                                                                           |   | (Germany)              | 100.00 |
| Agip Ecuador SA                                                                                                                                                                                                 |   | (Ecuador)              | 100.00 |
| Agip España SA                                                                                                                                                                                             |   | (Spain)                | 100.00 |
| Agip Française SA                                                                                                                                                                                          |   | (France)               | 100.00 |
| Agip Hungaria        Részvénytársaság                                                                                                                                                       |   | (Hungary)              | 99.41  |
| Agip Lubricantes SA                                                                                                                                                                                             |   | (Argentina)            | 100.00 |
| Agip Lubricants (Pty) Ltd                                                                                                                                                                                       |   | (South Africa)         | 100.00 |
| Agip Pannónia        Kereskedelmi Kft                                                                                                                                                                      |   | (Hungary)              | 99.41  |
| Agip Portugal -        Combustiveis SA                                                                                                                                                                          |   | (Portugal)             | 100.00 |
| Agip Romania SA                                                                                                                                                                                                 |   | (Romania)              | 99.97  |
| Agip Schmiertechnik GmbH                                                                                                                                                                                        |   | (Germany)              | 100.00 |
| Agip Slovenija doo                                                                                                                                                                                              |   | (Slovenia)             | 100.00 |
| Agip Slovensko Spol Sro                                                                                                                                                                                         |   | (Slovakia)             | 100.00 |
| Agip Suisse SA                                                                                                                                                                                                  |   | (Switzerland)          | 100.00 |
| AgipFuel SpA                                                                                                                                                                                                    |   | (Italy)                | 100.00 |
| AgipRete SpA                                                                                                                                                                                                    |   | (Italy)                | 100.00 |
| American Agip Co Inc                                                                                                                                                                                            |   | (USA)                  | 100.00 |
| Big Bon Distribuzione SpA                                                                                                                                                                                       |   | (Italy)                | 100.00 |
| Costiero Gas Livorno SpA                                                                                                                                                                                        |   | (Italy)                | 65.00  |
| Ecofuel SpA                                                                                                                                                                                                     |   | (Italy)                | 100.00 |
| Eni Portugal Investment        SpA                                                                                                                                                                              |   | (Italy)                | 100.00 |
| Esain SA                                                                                                                                                                                                        |   | (Ecuador)              | 100.00 |
| Intermode Trasporti        Logistica Integrata SpA                                                                                                                                                              |   | (Italy)                | 100.00 |
| Petrolig Srl                                                                                                                                                                                                    |   | (Italy)                | 70.00  |
| Petroven Srl                                                                                                                                                                                                    |   | (Italy)                | 68.00  |
| Praoil Oleodotti Italiani        SpA                                                                                                                                                                            |   | (Italy)                | 100.00 |
| Raffineria di Gela SpA                                                                                                                                                                                          |   | (Italy)                | 100.00 |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Petrochemicals                                                                                                                                                                                                  |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Dunastyr        Polisztirolgyártó Zártkoruen Mukodo        Részvénytársaság        (ex Dunastyr Polisztirolgyártó Részvénytársaság        Ltd) |   | (Hungary)              | 100.00 |
| Polimeri Europa Americas        Inc                                                                                                                                                                             |   | (USA)                  | 100.00 |
| Polimeri Europa Benelux        SA                                                                                                                                                                               |   | (Belgium)              | 100.00 |
| Polimeri Europa        Elastomères France SA                                                                                                                                                               |   | (France)               | 100.00 |
| Polimeri Europa France        SAS        (ex Polimeri Europa Distribution France SAS)                                                                                                                           |   | (France)               | 100.00 |
| Polimeri Europa GmbH                                                                                                                                                                                            |   | (Germany)              | 100.00 |
| Polimeri Europa Ibérica        SA                                                                                                                                                                          |   | (Spain)                | 100.00 |
| Polimeri Europa SpA                                                                                                                                                                                             |   | (Italy)                | 100.00 |
| Polimeri Europa UK Ltd                                                                                                                                                                                          |   | (the United Kingdom)   | 100.00 |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Oilfield Services        Construction and Engineering                                                                                                                                                           |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Oilfield Services and        Construction                                                                                                                                                                       |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| BOSCONGO SA                                                                                                                                                                                                     |   | (Congo)                | 43.25  |
| BOS Investment Ltd                                                                                                                                                                                              |   | (the United Kingdom)   | 43.26  |
| BOS Italia Srl                                                                                                                                                                                                  |   | (Italy)                | 43.26  |
| BOS - UIE Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 43.26  |
| Camom Gesellschaft fur        Instandhaltung und Montagen GmbH                                                                                                                                                  |   | (Germany)              | 43.26  |
| Camom SA                                                                                                                                                                                                        |   | (France)               | 43.26  |
| Consorzio Saipem Energy        International - Tecnomare                                                                                                                                                        |   | (Italy)                | 52.71  |
| Delong Hersent - Estudos,        Construções Maritimas e Participações, Unipessoal Lda                                                                                                      |   | (Portugal)             | 43.26  |
| Energy Maintenance        Services SpA                                                                                                                                                                          |   | (Italy)                | 71.63  |
| Entreprise Nouvelle        Marcellin SA                                                                                                                                                                         |   | (France)               | 43.26  |
| ER SAI Caspian Contractor        Llc                                                                                                                                                                            |   | (Kazakhstan)           | 21.63  |
| ERS - Equipment Rental        & Services BV                                                                                                                                                                 |   | (the Netherlands)      | 43.26  |
| European Marine        Contractors Ltd                                                                                                                                                                          |   | (the United Kingdom)   | 43.26  |
| European Marine        Investments Ltd                                                                                                                                                                          |   | (the United Kingdom)   | 43.26  |
| European Maritime        Commerce BV                                                                                                                                                                            |   | (the Netherlands)      | 43.26  |
| Global Petroprojects        Services AG (ex Global Petroprojects Services AG SA Ltd)                                                                                                                            |   | (Switzerland)          | 43.26  |
| Hazira Cryogenic        Engineering & Construction Management Private Ltd                                                                                                                                   |   | (India)                | 23.74  |
| Hazira Marine Engineering        & Construction Management Private Ltd                                                                                                                                      |   | (India)                | 43.26  |
| Intermare Sarda SpA                                                                                                                                                                                             |   | (Italy)                | 43.26  |
| Katran-K Llc                                                                                                                                                                                                    |   | (Russia)               | 43.26  |
| Moss Arctic Offshore AS                                                                                                                                                                                         |   | (Norway)               | 43.26  |
| Moss Maritime AS                                                                                                                                                                                                |   | (Norway)               | 43.26  |
| Moss Maritime Inc                                                                                                                                                                                               |   | (USA)                  | 43.26  |
| Moss Offshore AS                                                                                                                                                                                                |   | (Norway)               | 43.26  |
| Nigerian Services &        Supply Co Ltd                                                                                                                                                                    |   | (Nigeria)              | 43.26  |
| Petrex SA                                                                                                                                                                                                       |   | (Peru)                 | 43.26  |
| Petromar Lda                                                                                                                                                                                                    |   | (Angola)               | 30.28  |
| PT Saipem Indonesia                                                                                                                                                                                             |   | (Indonesia)            | 43.26  |
| PT Sofresid Engineering        (ex PT Sofresid Indonesia Ll)                                                                                                                                                    |   | (Indonesia)            | 43.26  |
| Saibos Construções        Maritimas Lda                                                                                                                                                               |   | (Portugal)             | 43.26  |
| Saibos Fze                                                                                                                                                                                                      |   | (United Arab Emirates) | 43.26  |
| Saibos SAS                                                                                                                                                                                                      |   | (France)               | 43.26  |
| Saigut SA De Cv                                                                                                                                                                                                 |   | (Mexico)               | 34.61  |
| Saimexicana SA De Cv                                                                                                                                                                                            |   | (Mexico)               | 43.26  |
| Saipem America Inc (ex        Sonsub Inc)                                                                                                                                                                       |   | (USA)                  | 43.26  |
| Saipem Asia Sdn Bhd                                                                                                                                                                                             |   | (Malaysia)             | 43.26  |
| Saipem Contracting        Algerie SpA                                                                                                                                                                           |   | (Algeria)              | 43.24  |
| Saipem Contracting        (Nigeria) Ltd                                                                                                                                                                         |   | (Nigeria)              | 42.37  |
| Saipem do Brasil        Serviçõs de Petroleo Ltda                                                                                                                                                     |   | (Brazil)               | 43.26  |
| Saipem Energy        International SpA                                                                                                                                                                          |   | (Italy)                | 43.26  |
| Saipem FPSO SpA (ex        Sonsub SpA)                                                                                                                                                                          |   | (Italy)                | 43.26  |
| Saipem Holding France SAS                                                                                                                                                                                       |   | (France)               | 43.26  |
| Saipem India Project        Services Ltd                                                                                                                                                                        |   | (India)                | 43.26  |
| Saipem International BV                                                                                                                                                                                         |   | (the Netherlands)      | 43.26  |
| Saipem Luxembourg SA                                                                                                                                                                                            |   | (Luxembourg)           | 43.26  |
| Saipem (Malaysia) Sdn Bhd                                                                                                                                                                                       |   | (Malaysia)             | 17.56  |
| Saipem Mediteran Usluge        doo                                                                                                                                                                              |   | (Croatia)              | 43.26  |
| Saipem (Nigeria) Ltd                                                                                                                                                                                            |   | (Nigeria)              | 38.68  |
| Saipem - Perfurações e        Contruções Petroliferas America do Sul Lda                                                                                                                    |   | (Portugal)             | 43.26  |
| Saipem (Portugal) -        Comércio Marítimo, Sociedade Unipessoal Lda                                                                                                                                |   | (Portugal)             | 43.26  |
| Saipem (Portugal) -        Gestão de Participações SGPS Sociedade Unipessoal SA                                                                                                                  |   | (Portugal)             | 43.26  |
| Saipem SA                                                                                                                                                                                                       |   | (France)               | 43.26  |
| Saipem Services México        SA De Cv                                                                                                                                                                     |   | (Mexico)               | 43.26  |
| Saipem Services SA                                                                                                                                                                                              |   | (Belgium)              | 43.26  |
| Saipem Singapore Pte Ltd                                                                                                                                                                                        |   | (Singapore)            | 43.26  |
| Saipem SpA                                                                                                                                                                                                      |   | (Italy)                | 43.26  |
| Saipem UK Ltd                                                                                                                                                                                                   |   | (the United Kingdom)   | 43.26  |
| SAIR Construções        Mecanicas de Estruturas Maritimas Lda                                                                                                                                         |   | (Portugal)             | 37.20  |
| SAS Port de Tanger                                                                                                                                                                                              |   | (France)               | 43.26  |
| Saudi Arabian Saipem Ltd                                                                                                                                                                                        |   | (Saudi Arabia)         | 25.96  |
| SB Construction and        Maritime Services BV                                                                                                                                                                 |   | (the Netherlands)      | 43.26  |
| Services et Equipements        Gaziers et Petroliers SA                                                                                                                                                         |   | (France)               | 43.16  |
| Société de Construction        d’Oleoducs Snc                                                                                                                                                    |   | (France)               | 43.16  |
| Société Nouvelle        Technigaz SA                                                                                                                                                                  |   | (France)               | 43.25  |
| Sofresid Engineering SA                                                                                                                                                                                         |   | (France)               | 43.26  |
| Sofresid SA                                                                                                                                                                                                     |   | (France)               | 43.26  |
| Sonsub AS                                                                                                                                                                                                       |   | (Norway)               | 43.26  |
| Sonsub International Pty        Ltd                                                                                                                                                                             |   | (Australia)            | 43.26  |
| Sonsub Ltd                                                                                                                                                                                                      |   | (the United Kingdom)   | 43.26  |
| Star Gulf Free Zone Co                                                                                                                                                                                          |   | (United Arab Emirates) | 43.26  |
| TBE Ltd                                                                                                                                                                                                         |   | (Egypt)                | 30.27  |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Engineering                                                                                                                                                                                                     |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Andromeda Consultoria        Tecnica e Representações Ltda                                                                                                                                            |   | (Brazil)               | 100.00 |
| Engineering &        Management Services SpA (ex Snamprogetti Services SpA)                                                                                                                                 |   | (Italy)                | 100.00 |
| Snamprogetti Canada Inc                                                                                                                                                                                         |   | (Canada)               | 100.00 |
| Snamprogetti France Sàrl                                                                                                                                                                                   |   | (France)               | 100.00 |
| Snamprogetti Ltd                                                                                                                                                                                                |   | (the United Kingdom)   | 99.99  |
| Snamprogetti Lummus Gas        Ltd                                                                                                                                                                              |   | (Malta)                | 99.00  |
| Snamprogetti Management        Services SA                                                                                                                                                                      |   | (Switzerland)          | 99.99  |
| Snamprogetti Netherlands        BV                                                                                                                                                                              |   | (the Netherland)       | 100.00 |
| Snamprogetti Saudi Arabia        Ltd                                                                                                                                                                            |   | (Saudi Arabia)         | 74.99  |
| Snamprogetti SpA                                                                                                                                                                                                |   | (Italy)                | 100.00 |
| Snamprogetti Sud SpA                                                                                                                                                                                            |   | (Italy)                | 100.00 |
| Snamprogetti USA Inc                                                                                                                                                                                            |   | (USA)                  | 99.99  |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Other activities                                                                                                                                                                                                |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Agenzia Giornalistica        Italia SpA                                                                                                                                                                         |   | (Italy)                | 100.00 |
| Eni Corporate University        SpA                                                                                                                                                                             |   | (Italy)                | 100.00 |
| EniTecnologie SpA                                                                                                                                                                                               |   | (Italy)                | 100.00 |
| Ing. Luigi Conti Vecchi        SpA                                                                                                                                                                              |   | (Italy)                | 100.00 |
| Servizi Aerei SpA                                                                                                                                                                                               |   | (Italy)                | 100.00 |
| Sieco SpA                                                                                                                                                                                                       |   | (Italy)                | 100.00 |
| Syndial SpA - Attività        Diversificate                                                                                                                                                                |   | (Italy)                | 100.00 |
| Tecnomare - Società per        lo Sviluppo delle Tecnologie Marine SpA                                                                                                                                     |   | (Italy)                | 62.16  |
|                                                                                                                                                                                                            |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Corporate and financial        companies                                                                                                                                                                        |   |                   |   |
|                                                                                                                                                                                                            |   |                   |   |
| Eni Coordination Center        SA                                                                                                                                                                               |   | (Belgium)              | 100.00 |
| Eni International Bank        Ltd                                                                                                                                                                               |   | (Bahamas)              | 100.00 |
| Eni International BV (ex        Eni Exploration BV)                                                                                                                                                             |   | (the Netherlands)      | 100.00 |
| Padana Assicurazioni SpA                                                                                                                                                                                        |   | (Italy)                | 99.71  |
| Serfactoring SpA                                                                                                                                                                                                |   | (Italy)                | 48.81  |
| Società Finanziamenti        Idrocarburi - Sofid - SpA                                                                                                                                                     |   | (Italy)                | 99.61  |
| Società Finanziaria Eni        SpA - Enifin                                                                                                                                                                |   | (Italy)                | 100.00 |
| Sofidsim - Società di        Intermediazione Mobiliare SpA                                                                                                                                                 |   | (Italy)                | 99.61  |

----

| (1) |   | The        percentage relates to Eni's share of net profit of the        relevant subsidiary and coincides with the percentage of        ownership interest both direct and indirect in the vast        majority of cases. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

----

 

##### 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 Eni

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 No. 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.

 

----

##### 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 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 21, 2006

 

| /s/PAOLO SCARONI                                    |
|-----------------------------------------------------|
|                                                     |
| Paolo Scaroni        Title: Chief Executive Officer |

 

----

##### Table of Contents

**EXHIBIT 12.2**

 

**Certification**

 

I, Marco Mangiagalli, 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 21, 2006

 

| /s/MARCO MANGIAGALLI                                    |
|---------------------------------------------------------|
|                                                         |
| Marco Mangiagalli        Title: Chief Financial Officer |

 

----

##### 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, 2005 (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 21, 2006

 

| /s/PAOLO SCARONI                                    |
|-----------------------------------------------------|
|                                                     |
| Paolo Scaroni        Title: 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, 2005 (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 21, 2006

 

| /s/MARCO MANGIAGALLI                                    |
|---------------------------------------------------------|
|                                                         |
| Marco Mangiagalli        Title: Chief Financial 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.

 

 

 

----

##### Tableof Contents

**Footnotes Item 1-15**

| (1)  |   | For a        definition of margin see "Glossary".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | From 1991 to        2002 DeGolyer and MacNaughton, from 2003 also 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 capital invested (profit oil) after        costs incurred are repaid by cost oil. A similar scheme        applies to buy-back contracts.                                                                                                                                                                                                                                                                                                                                                                                                      |
| (4)  |   | Of these, 5        are owned through affiliates for initiatives in Saudi        Arabia, Russia and Spain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (5)  |   | Of these        27,422 square kilometers are owned through affiliates for        initiatives in Saudi Arabia, Russia and Spain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (6)  |   | Two of these        are not yet operational.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (7)  |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (8)  |   | 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. |
| (9)  |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (10) |   | This        definition applies to the term margin whenever used in        Item 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (11) |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (12) |   | Corresponding        to euro 0.90 per share or $2.17 per ADS converted at the        Noon Buying Rate of 1 euro = 1.2054 U.S. dollar as at the        payment date of June 23, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (13) |   | Corresponding        to euro 0.45 per share or $1.09 per ADS converted at the        Noon Buying Rate of 1 euro = 1.2148 U.S. dollar as at the        payment date of October 27, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (14) |   | Corresponding        to euro 0.75 per share or $1.83 per ADS converted at the        Noon Buying Rate of 1 euro = 1.217 U.S. dollar as at the        payment date of June 24, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (15) |   | Does not        include listed subsidiaries, which have their own stock        grant and stock option plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (16) |   | Does not        include listed subsidiaries, which have their own stock        grant and stock option plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

##### Table of Contents

**Footnotes F pages**

| (1)  |   | Under the        requirements of paragraph 5 of "Preface to        International Financial Reporting Standards", IFRS        (International Financial Reporting Standards) represent        the principles and the interpretations adopted by the        International Accounting Standards Board (IASB), former        International Accounting Standards Committee (IASC) and        include: (i) International Financial Reporting Standards        (IFRS); (ii) International Accounting Standards (IAS);        (iii) the interpretations issued by International        Financial Reporting Interpretation Committee (IFRIC) and        by Standing Interpretation Committee (SIC) adopted by        IASB. The name International Financial Reporting        Standards (IFRS) has been adopted by IASB for the        principles issued afterwards May 2003. |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (3)  |   | "Reversal"        means the effect taken to profit or loss of deferred tax        assets and liabilities entered in previous years        following the effect of the annulment of the temporary        difference which generated them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (4)  |   | 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". Previous Law No. 170/1970 stated:        "concessions can be renewed for ten years        periods".                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (5)  |   | Of which euro        30 million concern gas stored, recorded in fixed assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (6)  |   | Given the        uncertainties related to their payment date, employee        termination indemnities are considered as a defined        benefit plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (7)  |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                     |
| (8)  |   | According to        the requirements of the framework of international        accounting standards, information is material if its        omission or misstatement could influence the economic        decisions that users make on the basis of the financial        statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (9)  |   | Recognition        and evaluation criteria of exploration and production        activities are described in the section "Exploration        and production activities" below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (10) |   | International        accounting principles do not establish specific criteria        for hydrocarbon exploration and production activities.        Eni continues to use the existing accounting policies for        exploration and evaluation assets previously applied        before the introduction of IFRS, as permitted by IFRS 6        "Exploration for and evaluation of mineral        resources".                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (11) |   | Given the        uncertainties related to their payment date, employees        termination indemnities are considered as a defined        benefit plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (12) |   | Actuarial        assumptions relate to, inter alia, the following        variables: (i) future salary levels; (ii) the mortality        rate of employees; (iii) personnel turnover; (iv) the        percentage of plan participants with dependents who are        eligible to receive benefits (e.g. spouses and dependent        children); (v) for medical plans, the frequency of claims        and future medical costs; and (vi) interest rates.                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (13) |   | For stock        grants, the period between the date of the award and the        date of assignation of stock; for stock options, period        between the date of the award and the date on which the        option can be exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (14) |   | Does not        include listed subsidiaries, which have their own stock        grant plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (15) |   | Does not        include listed subsidiaries, which have their own stock        grant plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (16) |   | There are no        material differences between the accounting principles        approved by the European Commission and the ones issued        by IASB in respect of these Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (17) |   | Eni adopted        the requirements of SEC which permit to the companies        that apply IFRS accounting principles to include        comparative figures of one prior period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (18) |   | From 1991 to        2002 DeGolyer and MacNaughton, from 2003 also Ryder Scott        Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |