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, 20058
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

Eni SpA
(Exact Namename of Registrant as Specifiedspecified in Its Charter)its charter)

Republic of Italy
(Jurisdiction of Incorporationincorporation or Organization)organization)

Piazzale1, piazzale Enrico Mattei 1,
00144 Rome, Roma
Italy
(Address of Principal Executive Offices)principal executive offices)
Alessandro Bernini
Eni SpA
1, piazza Ezio Vanoni
San Donato Milanese
20097 Milano
Italy
Tel +39 02 52041730
Fax +39 02 52041765
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
————————————————————

Securities registered or to be registered pursuant to Section 12(b) of the Act:Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None.None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Ordinary shares of euro 1.00 each4,005,358,876

Indicate by check mark whetherif the Registrantregistrant is a well knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act:Act.

If this report is an annual or transition report, indicate by check mark whetherif the Registrantregistrant is nornot required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:1934.

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:days.

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, or a non accelerated filer. See definition of "Accelerated"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act:Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement Itemitem the Registrantregistrant has elected to follow:follow.

If this is an annual report, indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):.

* Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

TABLE OF CONTENTS

Certain Defined Terms

Presentation of Financial and Other Information

Statements Regarding Competitive Position

Glossary

Conversion Table

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Certain disclosures contained herein including, without limitation, information appearing in "Item 4 – Information on the Company", and in particular "Item 4 – Exploration & Production", "Item“Item 5 – Operating and Financial Review and Prospects"Prospects” and "Item 11 – Qualitative and Quantitative Disclosures about Market Risk" contain forward-looking statements regarding future events and the future results of Eni that are based on current expectations, estimates, forecasts, and projections about the industries in which Eni operates and the beliefs and assumptions of the management of Eni. Eni may also make forward-looking statements in other written materials, including other documents filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC"). In addition, Eni’s senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on capital, risk management and competition are forward looking in nature. Words such as ‘expects’, ‘anticipates’, ‘targets’, ‘goals’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Eni’s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 20-F under the section entitled "Risk Factors" and elsewhere. Any forward-looking statements made by or on behalf of Eni speak only as of the date they are made. Eni does not undertake to update forward-looking statements to reflect any changes in Eni’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Eni may make in documents it files with the SEC.

CERTAIN DEFINED TERMS

In this Form 20-F, the termterms "Eni", the "Group", or the "Company" refersrefer to the parent company Eni SpA and its consolidated subsidiaries and, unless the context otherwise requires, their respective predecessor companies. All references to "Italy" or the "State" are references to the Republic of Italy, all references to the "Government" are references to the government of the Republic of Italy. For definitions of certain oil and gas terms used herein and certain conversions, see "Certain Oil and Gas Terms""Glossary" and "Conversion Table".

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The Consolidated Financial Statements of Eni, included in this annual report, have been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and adopted by the European Commission following the procedure contained in Article 6 of the EC Regulation No. 1606/2002 of the European Parliament and Council of July 19, 2002. Until December 31, 2004, Eni prepared its Consolidated Financial Statements and other interim financial information (including quarterly and semi-annual data) in accordance with Italian GAAP. IFRS require adopting companies to restate only one year of past financial statements. Pursuant to SEC Release 33-8567, "First-time Application of International Financial Reporting Standards", Eni is not required to include in this annual report financial statements for any earlier periods. Accordingly this annual report includes financial information prepared in accordance with IFRS as of and for the two years ended December 31, 2004 and 2005.

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

Unless otherwise indicated, any reference herein to "Consolidated Financial Statements" is to the Consolidated Financial Statements of Eni (including the Notes thereto) included herein.

Unless otherwise specified or the context otherwise requires, references herein to "dollars", "$", "U.S. dollars" and "U.S. $" are to the currency of the United States, and references to "euro" and "€" are to the currency of the European Monetary Union.

STATEMENTS REGARDING COMPETITIVE POSITION

Statements made in "Item 4 – Information on the Company", referring to Eni’s competitive position are based on the company’sCompany’s belief, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and Eni’s internal assessment of market share based on publicly available information about the financial results and performance of market participants. Market share estimates contained in this document are based on management estimates unless otherwise indicated.

ii

GLOSSARY

A glossary of oil and gas terms is available on Eni’s web page at the address www.eni.it. Below is a selection of the most frequently used terms.

iii

iv

v

ABBREVIATIONS

CONVERSION TABLE

vi

PART I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

NOT APPLICABLE

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

NOT APPLICABLE

Item 3. KEY INFORMATION

Selected Financial InformationInformation

The Consolidated Financial Statements of Eni have been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and adopted by the European Commission following the procedure contained in Article 6 of the EC Regulation No. 1606/2002 of the European Parliament and Council of July 19, 2002. Until December 31, 2004, Eni prepared its Consolidated Financial Statements and other interim financial information (including quarterly and semi-annual data) in accordance with Italian GAAP. IFRS require adopting companies to restate only one year of past financial statements. Pursuant to SEC Release 33-8567, "First-time Application of International Financial Reporting Standards", Eni is not required to include in this annual report financial statements for any earlier periods. Accordingly the. The tables below show Eni selected historical financial data prepared in accordance with IFRS as of and for the years ended December 31, 2004, 2005, 2006, 2007 and 2005 and in accordance with U.S. GAAP for the five year period ended December 31, 2005.2008. The selected historical financial data for the years ended December 31, 2004, 2005, 2006, 2007 and 2008 are derived from Eni’s Consolidated Financial Statements included herein. IFRS, under which Eni’sin Item 18. All such data should be read in connection with the Consolidated Financial Statements have been prepared, differand the related notes thereto included in certain significant respects from U.S. GAAP. For information on the differences between IFRS and U.S. GAAP as they relate to the Eni, see Notes 33, 34 and 35 to the Eni’s Consolidated Financial Statements.

Item 18.

LiftingWe forecast a significant reduction in costs to develop and development costs are increasingoperate oil and gas fields. If we fail to benefit from this could reduce profitexpected trend, our oil and gas margins will deteriorate due to falling hydrocarbons prices

Due to the current oil downturn, we expect that prices for oilfield services and materials will trend lower in the future. We intend to benefit from this reduction by implementing the needed cost initiatives to preserve our profitability in an environment of low oil prices. Cost initiatives include rescheduling of certain field developments to obtain cost saving and renegotiating contracts for oilfield services with our supplies on more favorable terms. If we fail to achieve the targeted levels of cost reductions, our profits per BOE for the oil industry

Profit margins in the oil industry are being affected by a steady rising trend in lifting and development costs as a result of the following: (i) the increasingly high percentage of complex development projects (such as those in deep and ultra deep waters and in harsh environments) which bear higher development costs as compared to development projects in traditional environments; (ii) inflationary pressure affecting purchase prices of raw materials and services in connection to the worldwide economic recovery; and (iii) lack of specialized resources (such as engineers and other valuable technicians) especially in remote areas. Eni’s management expects this rising trend of lifting and development costs to continue in the medium term and this could lead to a reduction in profit per BOE.Exploration & Production segment will be adversely affected.

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

The exploration and production of oil and gas is a commodity business with a history of price volatility. The single largest variable that affects the Company’s results of operations and financial condition is crude oil prices. Eni generally does not hedge its exposure to variability in future cash flows due to crude oil price movements. As a consequence, Eni’s profitability depends heavily on crude oil and natural gas prices.

Crude oil and natural gas prices are subject to international supply and demand and other factors that are beyond Eni’s control. OPEC member countries control, production ofincluding among other things:

All these factors can affect the worldwideglobal balance between demand and supply offor oil and can exercise substantial influence on its price levels. International geopolitical tensions and political developments, including sanctions imposed on certain oil-producing countries on the basis of resolutions of the United Nations, can also affect world supply and prices of oil. Such factors can also affect the prices of natural gas because natural gas prices for the major part of our supplies are typically tiedindexed to the prices of crude oil and certain crudes and refined petroleum products. Lower crude oil prices could have an adverse impact on Eni’s results of operations and cash flows from operations.

Furthermore, lower oil and gas prices over prolonged periods may also adversely affect Eni’s results of operations and cash flows by: (i) reducing rates of return of development projects either planned or being implemented, leading the Company to reschedule, postpone or cancel development projects; (ii) reducing the Group’s liquidity, entailing lower resources to fund expansion projects, further dampening the Company’s ability to grow future production and revenues; and (iii) triggering a review of future recoverability of the Company’s carrying amounts of oil and gas properties, which could lead to the recognition of significant impairments charges.

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Uncertainties in Estimates of Oil and Natural Gas Reserves

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

Many of these factors, assumptions and variables involved in estimating proved reserves are beyond Eni’s control and may prove to be incorrectchange over time.time and impact the estimates of oil and natural gas reserves. Accordingly, the estimated reserves could be materiallysignificantly different from the quantities of oil and natural gas that ultimately will be recovered. Additionally, any downward revision in Eni’s estimated quantities of proved reserves would indicate lower future production volumes, which could adversely impact Eni’s results of operations and financial condition.

Oil and gas activity may be subject to increasingly high levels of income taxes

In recent years, Eni has experienced adverse changes in tax regimes applicable to oil and gas operations in Italy and in a number of countries where the Company conducts its upstream operations. Management believes that adverse changes are always possible in the tax regimes of any country in which Eni conducts its oil and gas operations, regardless of the level of stability of the political and legislative framework in each country. In recent years, developments in the regulatory framework, mainly regarding tax issues, have been implemented or announced also in EU countries and in North America. In 2008, Italy enacted new tax rules that increased the statutory tax rate applicable to energy companies with annual turnover in excess of euro 25 million by 5.5 percentage points, thus reversing a reduction in the statutory tax rate of the same amount that was enacted the previous year. Early in 2009, the Italian Parliament enacted a supplemental tax rate of 4% that has to be applied to profit before income taxes reported by the parent company Eni SpA associated with the Treaty between Italy and Libya. This supplemental tax rate will entail increased tax payables amounting to approximately euro 300 million for the full year 2009.

Adverse changes in the tax rate applicable to the Group profit before income taxes would translate into negative impacts on Eni’s future results leadingof operations and cash flows. Furthermore, the marginal tax rate in the oil and gas industry tends to increase in correlation with higher oil prices which could make it difficult for Eni to translate higher oil prices into increased depreciation, depletion and amortization charges and/or impairment charges, which would reduce earnings and shareholders’ equity.
net profit. However, the Company does not expect that the marginal tax rate will trend lower in response to falling oil prices.

Political Considerations

A substantial portion of our oil and gas reserves and gas supplies are located in politically, socially and economically unstable countries where we are exposed to material disruptions to our operations

Substantial portions of Eni’s hydrocarbon reserves are located in countries outside the EU and North America, some of which may be politically or economically less stable than EU or North American countries. At December 31, 2005,2008, approximately 73%80% of Eni’s proved hydrocarbon reserves were located in such countries. Similarly, a substantial portion of Eni’s natural gas supplysupplies comes from countries outside the EU and North America. In 2005,2007, approximately 60%70% of Eni’s supplies of natural gas came from such countries. See "Item 4 – Gas & Power – Natural Gas Supplies". Adverse political, social and economic developments in any such producing countryof those countries may affect Eni’s ability to continue operating in that country,an economic way, either temporarily or permanently, and affect Eni’s ability to access oil and gas reserves. In operating in politically unstable countriesParticularly Eni faces risks in connection with the following:following issues: (i) lack of well-established and reliable legal systems;systems and uncertainties surrounding enforcement of contractual rights; (ii) other politicalunfavorable developments in laws, regulations and laws and regulations (such as expropriationcontractual arrangements leading for example to expropriations or forced divestituredivestitures of assets and unilateral cancellation or modification of contract terms), forcontractual terms. For example, in April 2006, Eni’s titles and mineral assets relating to an important oil field were transferred toconjunction with the Venezuelan state oil company following its unilateral cancellationrescheduling of the contract regulating oil activitiesKashagan project in 2007, the field;Kazakh authorities opened a dispute against the international partners of the consortium operating the Kashagan development claiming failure on part of the consortium to fulfill certain contractual obligations. Subsequently, the Kazakh authorities and the international partners of the consortium have agreed on a new contractual framework of the project. See "Item 4 – Exploration & Production – Caspian Sea" for a full description of the material terms of the agreement; (iii) restrictions on exploration, production, imports and exports; (iv) tax or royalty increases (including retroactive claims); and (v) civil and social unrest forleading to sabotages, acts of violence and incidents. For example, in the first quarter of 2006 certain episodes of civilwe have been

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experiencing continuing social unrest in Nigeria causedleading to a number of disruptions at certain Eni oil producing facilities. facilities in the country. As a consequence, our oil and gas production in the country has yet to return to normal production levels. In the first quarter of 2009, security problems have continued to impact our operations.

In 2008 we incurred significant asset impairments in our Exploration & Production business amounting to euro 989 million mainly driven by changes in contractual arrangements and regulatory provisions and environmental obligations leading the Company to reassess the recoverable amounts of a number of its oil and gas properties.

See "Item 4 – Exploration & Production – Oil and Natural Gas Reserves"; and "Item 5 – Recent Developments". While the occurrence of these events is unpredictable, it is likely that the occurrence of such events could cause Eni to incur material losses or facility disruptions, by this way adversely impacting Eni’s results of operations and cash flows.

In August 1996,Our activities in Iran could lead to sanctions under relevant U.S. legislation

Eni is currently conducting oil and gas operations in Iran. The legislation and other regulations of the United States adoptedof America impose sanctions on this country and may lead to the imposition of sanctions on any persons doing business in this country or with Iranian counterparties.

Under the Iran and Libya Sanctions Act (the "Sanctions Act"of 1996 (as amended, "ISA"), which implements sanctions against Iran with the objective of denying Iran and Libyait the ability to support acts of international terrorism and fund the development or acquisition of weapons of mass destruction. On April 23, 2004destruction, upon receipt by the U.S. authorities of information indicating potential violation of this act, the President of the United States terminated the application of the Sanctions Actis authorized to Libya, with the remaining economic sanctions against Libya lifted on September 23, 2004. The Sanctions Act still applies to Iran and authorizes the President of the United States to imposestart an investigation aiming at possibly imposing sanctions from a six-sanction menu under certain circumstances against any person includingfound in particular to have knowingly made investments of U.S. $20 million or more in any foreign company, making investments in Iran, thustwelve-month period, contributing directly and significantly to the enhancement of Iran’s ability to develop its hydrocarbons resources. The Sanctions ActFurthermore, the ISA envisages that the President of the United States is scheduledbound to expireimpose sanctions against any persons that knowingly contribute to certain military programs of Iran, effective on August 5,June 6, 2006. Eni does not believe that enforcementcannot predict interpretations of, or the implementation policy of the Sanctions Act againstU.S. Government under ISA with respect to Eni’s current or future activities in Iran or other areas. Eni has incurred capital expenditures in excess of U.S. $20 million in Iran in each of the last 9 years. Management expects to continue investing in Iran yearly amounts in excess of that threshold in the foreseeable future. Eni’s current activities in Iran are primarily limited to carrying out residual development activities relating to certain buy-back contracts it wouldentered into in 2000 and 2001 and no sanctions have a material adverse effectever been imposed on its financial condition or results of operations. However,Eni’s activities in the country.

Adding to Eni’s risks arising from this matter, a bill to amend and extend the extra-territorial reach of the economic sanctions imposed by the United States with respect to Iran has been passed by the U.S. House of Representatives and may lead to the passage of new laws in this area. Iran continues to be designated by the U.S. State Department as a State sponsoring terrorism. For a description of Eni’s operations in Iran and Libya see "Item 4 – Information on the Company – Exploration and& Production – North Africa and Rest of World".
It is possible that in future years Eni’s activities in Iran may be sanctioned under relevant U.S. legislation.

We are aware of initiatives by certain U.S. states and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations or policies requiring divestment from, or reporting of interests in, companies that do business with countries designated as states sponsoring terrorism. These policies could adversely impact investment by certain investors in our securities.

Cyclicality of the Petrochemical Industry

The petrochemical industry is subject to cyclical fluctuations in demand, with consequentconsequential effects on prices and profitability exacerbated by the highly competitive environment of thethis industry. Eni’s petrochemicalspetrochemical operations which are located mainly in Italy, have been in the past and may be adversely affected in the future be adversely affected by worldwide economic slowdowns and excess installed production capacity, as well as by economic slowdowns in many industrialized countries. The dislocation ofcapacity. Furthermore, Eni’s petrochemical activities to geographic areas like the Far Eastoperations face increasing competition from Asiatic companies and national oil producing countriescompanies’ petrochemical divisions which providecan leverage on certain long-term competitive advantages has weakenedin terms of lower operating costs and feedstock purchase costs. In particular, Eni’s petrochemical operations are located mainly in Italy and Western Europe where regulatory framework and public environmental sensitivity are generally more stringent than in other countries, especially Far East countries, resulting in higher operating costs of our petrochemical operation compared to the competitiveness ofCompany’s Asiatic competitors due to the need to comply with applicable laws and regulations in environmental and other related matters. In 2008 our petrochemicals operations in industrialized countries, including Eni’s petrochemical operations. Petrochemical operations in industrialized countries are also less competitive than those locatedposted operating losses of euro 822 million due to sharply higher feed-stock costs in the above-mentioned areasfirst half of the year and lower product volumes and margins in the second half due to stricter regulatory frameworksthe current economic downturn and growing environmental concerns which prevailrelated asset impairments. Impairment losses were recorded amounting to euro 278 million as the recoverable amounts of certain petrochemicals plants were lower than their carrying amounts due to deteriorating profitability prospects on the back of lowered expectations for industry fundamentals and unfavorable trends in industrialized countries.
the trading environment. As

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the downturn is expected to continue for the full year 2009, we do not project any significant improvement in our petrochemicals business profitability.

Liberalization of the Italian Natural Gas Market

Legislative Decree No. 164/2000 opened completelyup the Italian natural gas market starting onto competition as from January 1, 2003. This means thatAs a result, all customers in Italy are free to choose their supplier of natural gas. The decree, among other things, introduced rules which have a significant impact on Eni’s activity, as the companyCompany is present in all the phases of the natural gas chain, in particular:chain:

The newFurthermore, on June 30, 2008 provisions came into effect on the unbundling of regulated entities in the Italian gas sector on the basis of a Code that was adopted by the Authority for Electricity and Gas in 2007. According to unbundling rules, controlling entities as in the case of the parent company Eni SpA are forbidden from interfering in the decision-making process of its subsidiaries running gas transport, storage and distribution infrastructures.

Eni expects that a combination of regulatory regime has the effect of limiting the sizeeffects and increasing competition will limit growth prospects and profitability of Eni’sour natural gas business in Italy.Italy as discussed below.

Eni’sEni has been experiencing significant pressure on its natural gas marginmargins¹ since the inception of the liberalization process in Italy may decrease permanently comparedItaly. In the current economic downturn, margin pressures could worsen also considering an expected increase in supplies of natural gas to historical levelsthe Italian market in light of new import capacity that has been completed or is expected to come on stream in the next one to three years

In order to meetSince the expected growthinception of the liberalization process in the Italian natural gas market, over the medium and long-term, Eni entered into long-term purchase contracts with producing countries that currently have a residual average term of approximately 15 years. Existing contracts, whichhas been experiencing rising competition in general contain take-or-pay clauses, will ensure total delivery of approximately 67.3 BCM/y ofits natural gas (Russia 28.5, Algeria 21.5,business leading to lower selling margins due to the Netherlands 9.8, Norway 6 and Nigeria 1.5)entry of new competitors into the market. Certain competitors of Eni are supplied by 2008. The above quantities are basedthe Company itself, generally on the annual contract quantitybasis of the relevant contract. The average annual minimum quantity that Eni is committed to purchase under its take-or-pay obligations is approximately 85% of said quantities.long-term contracts. In fact, in order to comply with the above mentioned regulatory thresholds relating to volumes input intosupplied through the national transport network and sales volumes in Italy, Eni signed multi-yearsold part of its gas availability under its take-or-pay supply contracts withto third party importers inparties importing said volumes to Italy and started implementing a strategy of increasing naturalmarketing them to Italian customers. For more information on Eni’s take-or-pay contracts, see "Item 4 – Gas & Power – Natural gas sales in the rest of Europe in order to sell outside Italy natural gas volumes available under its take-or pay contracts, exceeding mandatory thresholds. In prior years Eni sold the majority of its natural gas availability on the Italian market. This change in the sale mix is structural and is adversely affecting Eni’s results of operations. Further, managementpurchases".

Management expects Eni’s gas selling margins on natural gas in Italy to comeremain under pressure in the foreseeable future years due toconsidering deteriorating demand fundamentals in the entry into the market of new competitors, including the impact of thecurrent economic downturn, Eni’s gas availability under its take-or-pay supply contracts, build-up of Eni’s supplies to the above mentioned competitors and new competitors entering the Italian importers.market also in light of ongoing or already implemented capital projects designed to expand the transport capacity of import pipelines to Italy and to build new import infrastructures, particularly LNG terminals. In fact, Eni is currently implementing its plans to upgrade its natural gas import pipelines mainly from Algeria and Russia to Italy to achieve an increase of 13 BCM/y in import capacity reaching full operation in 2010. Specifically, the upgrading of the TTPC pipeline from Algeria was completed in 2008 and is expected to be fully operational in 2009. The upgrade of the Russian pipeline is ongoing. Further 3 BCM/y of new import capacity will be added by upgrading the GreenStream gasline from Libya with expected start up in 2012. A large portion of the new capacity deriving from Eni’s upgrading projects has been or is planned to be sold to third parties. In addition, a third party project has been implemented to build a new LNG terminal with an 8 BCM/y capacity in the Adriatic Sea and is expected to commence operations by late 2009. These new or upgraded gas infrastructures will considerably increase supplies to the Italian natural gas market at a time when demand is falling due to the economic downturn.

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Despite the fact that an increasing portion of natural gas volumes purchased by Eni under its take-or-pay contracts is planned to be marketed outside Italy, management believes that unfavorable trends in the Italian demand and supply for natural gas on both the short and the longer-term, also due to the reaching of full operation at new supply infrastructures, and the evolution of Italian regulations of the natural gas sector, represent risk factors to the fulfillment of Eni’s obligations in connection with its take-or-pay supply contracts and may result in a downward pressure on the Company’s gas selling margins. Based on the foregoing, Eni’s future results of operations and cash flows might be adversely affected.

Eni growth prospects in Italy are limited by regulation

Dueis committed to the antitrust threshold on direct sales in Italy, management expects Eni’sincreasing natural gas sales in Italy to increase at a rate that cannot exceed the growth rate of natural gas demand in Italy. Management believes this development might have a material adverse impact on Eni’s results of operations.

Europe. If Eni fails to grow natural gas sales in Europe as planned,achieve this target, future growth prospects may be adversely affected. Furthermore, Eni may be unable to fulfill its minimum take obligations under its take-or-pay purchase contracts and this could adversely impact results of operations and liquidity

Over the medium term,medium-term, Eni plans to increase its natural gas sales in Europe also to absorbleveraging on its natural gas availability under take-or-pay contracts.purchase contracts it has entered into with major natural gas producing countries (namely Russia, Algeria, Libya, Norway and the Netherlands) and synergies from the acquisition of the Belgian gas operator Distrigas that was completed in 2008. Should Eni fail to increase natural gas sales in Europe as planned due to poor strategy execution or competition, Eni’s future growth prospects, results of operations and cash flows might be adversely affected also taking account that Eni maymight be unable to sell all the volumesfulfill its contractual obligations to purchase certain minimum amounts of natural gas purchased underbased on its take-or-pay purchase contracts and this could adversely impact results of operations.currently in force.

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

Over the next few years,medium-term, Eni plans tohas scheduled its import certain volumes of natural gas usingto Italy based on the highestassumption to use the purchase flexibility ascontractually provided for by its take-or-pay purchase contracts.contracts during periods in which demand is expected to peak. These import programs are also based on the assumption that Eni also assumes that it will be entitled toobtain the necessary transport capacity entitlements on the Italian transport infrastructure.network. However, EniEni’s planning assumptions are inconsistentmay be considered to be not fully in line with current rules regulating the access to the Italian transport infrastructureinfrastructures as provided for by the Network Code currently in force which has been drafted underin accordance with Decision No. 137 of July 17, 2002 of the Authority for Electricity and Gas. Such rules establishedestablish certain priority criteria for the entitlement to transport capacity of natural gasentitlements at points where the Italian transport infrastructure connects with international transport networksimport pipelines (the so-called entry points to the Italian transport system). In particular current rules establish thatSpecifically, Eni’s gas volumes purchased under take-or-pay contracts entered into before 1998, as in the case of Eni, have the rightare entitled to a priority in the entitlement toallocation of available transport capacity equal tofor amounts not exceeding average daily contractual volumes. There is therefore no guaranteed access priority forAccordingly, Eni’s contractedpurchase volumes exceeding average daily contractual volumes. In fact, take-or-pay contracts entered intovolumes are not entitled to any priority in gaining access to the Italian transport infrastructures. The contractual flexibility represented by Eni before 1998 envisage Eni’s right to offtakeuplift daily volumes larger than the average daily contractual volume; this contractual flexibility provided by the difference between the maximum daily volume Eni is allowed tovolumes under its take-or-pay purchase and the average daily contractual volumecontracts is used when demand peaks, usually during the winter.wintertime. In the event of congestion occurs at entry points natural gas volumes not receiving priority are entitled to the Italian transport network, under current regulation available transport capacity would be entitled firstly to operators having a priority right, i.e. holders of take-or-pay contracts within the limits of average daily contractual volumes. Then any residual available transport capacity would be allocated in proportion with requests from operators.to all pending capacity requests. Eni considers Decision No. 137/2002 to be inconsistent with the overall rationale of the European natural gas legislativeregulatory framework, especially with reference to Directive 98/30/CE (superseded and replaced by Directive 03/55/CE) and Legislative Decree No. 164/2000, and is challenginghas opened an administrative procedure to repeal Decision No. 137/2002 before the competentan administrative courts.court. See "Item 4 – Regulation of the Italian Hydrocarbons Industry – Gas & Power". However, Eni cannot rule out a negative outcome infor this matter. Accordingly,However, management believes that Eni’s results of operations and cash flows could be adversely affected should market conditions and/orin light of current regulatory constraints prevent Eni from selling its whole availability of natural gas purchased to fulfill take-or payits minimum take contract obligations (i.e.,(e.g. in case a congestion occurs at the entry points of the Italian transport infrastructure, whichEni would force Enibe forced to offtakeuplift a smaller volume of gas than the minimum contractual off take). See "Item 5 – Management Expectations of Operations".

The Italian Government, Parliament and the regulatory authorities in Italy and in Europe may take further steps to improveincrease competition in the Italian natural gas market and such regulatory developments may adversely affect Eni’s results of operations and cash flows

Eni cannot predict future developmentsItalian institutional and political forces are urging a higher degree of competition in the regulation of the Italian natural gas market. Also an institutional debate is ongoing in Italy regarding the liberalization of the natural gas market and this may produce significant developments onin this matter.area. A brief description follows of certain recently enacted laws and certain proceedings before the Authority for Electricity and Gas and the Italian Antitrust Authority in order to allow investors to gain some insight ofinto the complexity of this matter. For a full discussion of laws and procedures described herein see "Item 4 – Regulation of the Italian Hydrocarbons Industry – Gas & Power ".Power".

In 2003, Law No. 290 was enacted which prohibits Eni from holding an interest higher than 20% in undertakings owning natural gas transport infrastructure in Italy (Eni currently holds a 50.07%50.04% interest in Snam Rete Gas, which owns and manages approximately 97% of the Italian natural gas transport infrastructure). A decree is expected to be enacted by the Italian Prime Minister to establish the relevant provisions to implement this mandatory disposal. The deadline for the disposal, which was initially scheduled for December 31, 2008, is to be re-

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scheduled in a 24-month term starting from the date in which this decree from the Italian Prime Minister becomes effective. Currently, Eni is unable to foresee a deadline for this disposal.

On the basis of the findings of a joint inquiry conducted from 2003 through June 2004 on the Italian natural gas market, the Authority for Electricity and Gas and the Italian Antitrust Authority (the "Antitrust Authority") acknowledgedconcluded that the overall level of competition of the Italian natural gas market is unsatisfactory due to the dominant position held by Eni in many phases of the natural gas chain. According to both the Authority for Electricity and Gas and the Antitrust Authority, the vertical integration of Eni in the supply, transport and storage of gas has restricted the development of competition in Italy notwithstanding the antitrust ceilings introduced by Legislative Decree No. 164/2000. It was further stated that the price of natural gas in Italy (in particular for the industrial sector) is higher than in other European countries.

In October 2005,order to implement a Law Decree defined by the Italian Government to face the economic downturn, in March 2009 the Authority for Electricity and Gas startedproposed certain rules on the Italian gas market designed to increase competition. These rules provide that Eni supplies to the market preset amounts of natural gas at fixed prices. Implementation of these rules could materially and adversely affect the Company’s results of operations and cash flow.

In November 2006, the Authority for Electricity and Gas concluded an inquiry concerning the competitive behavior of operators selling natural gas to residential and commercial customers withcustomers. This inquiry found that the aimretailing market for natural gas in Italy lacked a sufficient degree of defining measurescompetition due to improve competition.current commercial practices and the existence of both entry and exit barriers.

In February 2006,November 2007, the Italian Authority for Electricity and Gas and the Italian Antitrust Authority closedopened an inquiry concerning Eni’s competitive behavior concluding that Eni abused its dominant positionto gain insight into the functioning of the natural gas storage activity in Italy, particularly with regard to its decisionlack of investments by operators directed to suspend a plan for the upgrading of the import pipeline from Algeria and to unilaterally cancel certain contracts to sell the relevant transportexpand capacity to third parties. Contracts were signed earlystore natural gas in 2003 andItaly. Eni through its wholly-owned subsidiary Stogit Italia owns almost the relevant upgrade is expected to become effectiveentire storage capacity currently existing in 2007. The Antitrust Authority fined Eni by an amount of euro 290 million.

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.Italy.

Management believes the institutional debate on the degree of competition in the Italian natural gas market and the regulatory activity to be areas of attention for management and cannot exclude negative impacts on Eni’s financial condition or results of operations in future years deriving from developments on these matters.

Eni believes an oversupplymatters on Eni’s future results of natural gas is likely to occur in the long-term (beyond 2009)

Eni plans to upgrade its natural gas import infrastructure from Algeriaoperations and Russia to Italy, with expected start-up in 2008 and late 2008/2009, respectively. Taking into account the build-up of supplies of natural gas from Libya through the Greeenstream gasline and of Eni’s fourth long term take-or-pay purchase contract from Russia, an additional import capacity of 883 BCF/y is expected to be available for the Italian natural gas market starting in 2009. A large portion of this expected import capacity has been or is planned to be awarded to third parties. In addition, certain operators in the Italian natural gas market have publicly announced plans to develop LNG terminals in Italy. Eni expects at least one new LNG terminal with a 283 BCF/y capacity to start operations by 2009 thus adding new import capacity to the Italian market. Management believes the pace of demand growth in the Italian natural gas market may not meet the expected increase in supplies of natural gas market starting in 2009 and beyond. If this projections materialize, a decrease in natural gas margins is likely to occur.cash flows.

Decisions of the Authority for Electricity and Gas inon 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 Authority for Electricity and Gas ("the Authority") holds a general monitoring power on pricing in the natural gas market in Italy and the power to establish selling tariffs in thefor supplying natural gas to residential and commercial segmentsusers consuming less than 200,000 CM/y (qualified as non eligible customers at December 31, 2002 as defined by Legislative Decree No. 164/2000) taking into account, among other things, the public interest goal of containing the inflationary pressure due to a rise inrising energy costs. The decisions of the Authority for Electricity and Gas on these matters may limit the ability of Eni to pass an increase in the purchase cost of fuelsnatural gas on to the final consumers of natural gas. In particular,consumers. Following a complex and lengthy administrative procedure started in 2004 and finalized in March 2007 with DecisionResolution No. 248/200479/2007, the Authority established a new indexation mechanism for Electricityupdating the raw material cost component in supplies to residential and Gas established,commercial users consuming less than 200,000 CM/y, establishing, among other things: (i) that an increase in the international price of Brent crude oil is only partially transferred on to residential and commercial users of natural gas in case international prices of Brent crude oil exceed the 35 dollars per barrel threshold; and (ii) that Italian natural gas importers – including Eni – must renegotiate wholesale supply contracts to wholesalers in order to take account of this new indexation mechanism. Management cannot exclude the reductionpossibility that in the future the Authority could implement similar measures that may negatively affect Eni results of operations and liquidity.

Certain provisions of law may also limit the priceCompany’s ability to set commercial margins. Specifically, Law Decree No. 112 enacted in June 2008 forbids energy companies such as Eni to transfer on to customers, through higher prices, the higher income taxes incurred in connection with a supplemental tax rate of natural gas sold to residential and commercial users. A proceeding has commenced between5.5 percentage points introduced by the same decree on energy companies with a yearly turnover in excess of euro 25 million. The Authority for Electricity and Gas is in charge of monitoring compliance with the rule. The Authority has subsequently that energy companies have to adopt effective operational and Eni, which appealed Decisionmonitoring systems in order to prevent the transfer to customers by means of unlawful variations of final prices of gas.

For more information on these issues (particularly the Authority’s Decisions No. 248/2004, to an administrative court.

Eni’s management expects a negative outcome of this matter. Eni has accrued a material provision in its 2005 Consolidated Financial Statements in order to reflect the risks associated with this matter. In 134/2006 management expects Eni’s results of operations to be adversely impacted by a material amount in light of the high Brent crude oil prices, in the event Decision 248/2004 is implemented in its original form. Seeand 79/2007) see "Item 4 – Regulation of the Italian Hydrocarbons Industry – Gas & Power".

Antitrust and "Item 5 –competition law

The Group’s activities are subject to antitrust and competition laws and regulations in many countries of operations, especially in Europe. In the years prior to 2008, Eni recorded significant loss provisions due to unfavorable developments in certain antitrust proceedings before the Italian Antitrust Authority, and the European

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Commission. It is possible that the Group may incur significant loss provisions in future years relative to ongoing antitrust proceedings or possible new proceedings. The Group is particularly exposed to this risk in its natural gas and refining and marketing activities due to its large presence in these markets in Italy and in Europe. See Note 29 to the Consolidated Financial ReviewStatements for a full description of Eni’s main pending antitrust proceedings. Particularly, as a result of an inquiry on the level of competition in the European natural gas market, on March 9, 2009 the European Commission sent Eni a Statement of Objections related to a proceeding under Article No. 82 of the EU Treaty and Prospects"Article No. 54 of the SEE agreement with reference to an alleged unjustifiable refusal of access to the TAG and TENP/Transitgas gas pipelines, that are interconnected with the Italian gas transport system through actions intended to "capacity hoarding, capacity degradation and strategic limitation of investment" with the effect of "hindering the development of a real competition in the downstream market and […] harming the consumers".
The European Commission envisages the possible imposition of a fine and of structural remedies. Based on available information and its knowledge of the proceeding, the Company is currently unable to determine the outcome of the matter.

Furthermore, based on the findings of antitrust proceedings, plaintiffs could seek payment to compensate for any alleged damages as a result of antitrust business practices on part of Eni. Both these risks could adversely affect the Group’s future results of operations and cash flows.

Environmental, Health and Safety Regulation

Eni may incur material operating costsexpenses and liabilitiesexpenditures in relation to compliance with applicable environmental, regulationshealth and future environmental developmentssafety regulations

Eni is subject to numerous EU, international, national, regional and local environmental, health and safety laws and regulations concerning its oil and gas operations, products and other activities, including legislation that implements international conventions or protocols.activities. In particular, these laws and regulations require the acquisition of a permit before drilling for hydrocarbons may commence, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with exploration, drilling and production activities, as well as refining, petrochemicals and other Group operations, limit or prohibit drilling activities onin certain protected areas, provide for measures to be taken to protect the safety of the workplace and health of communities involved by the company’s activities, and impose criminal or civil liabilities for pollutionpolluting the environment or harming employees or communities health and safety resulting from oil, natural gas, refining, petrochemical and petrochemicalother Group’s operations.

These laws and regulations may also restrict emissions and discharges to surface and subsurface water resulting from the operation of natural gas processing plants, petrochemicalspetrochemical plants, refineries, pipeline systems and other facilities that Eni owns.owned by Eni. In addition, Eni’s operations are subject to laws and regulations relating to the production, handling, transportation, storage, disposal and treatment of waste materials. Breach of environmental, health and safety laws exposes the Company’s employees to criminal and civil liability and the Company to the incurrence of liabilities associated with compensation for environment health or safety damage. Additionally, in the case of violation of certain rules regarding safety in the workplace, the Company can be liable as provided for by a general EU rule on businesses liability due to negligent or willful conduct on part of their employees as adopted in Italy with Law Decree No. 231/2001.

Environmental, health and safety laws and regulations have a substantial impact on Eni’s operations. Some riskManagement expects that the Group will continue to incur significant amounts of operating expenses and expenditures to comply with environmental, costshealth and liabilities is inherent in certain operations and products of Eni, and there can be no assurance that material costs and liabilities will not be incurred.

Although management, considering the actions already taken with the insurance policies to cover environmental risks and the provision for risks accrued, does not currently expect any material adverse effect on Eni’s Consolidated Financial Statements as a result of its compliance with suchsafety laws and regulations, therealso taking into account possible future developments in environmental regulations in Italy and in other countries where Eni operates, particularly the implementation of increasingly strict measures decided at both international and country level to reduce greenhouse gas emissions.

Eni’s results of operations and financial condition are exposed to risks deriving from environmental, health and safety accidents and liabilities

Risks of environmental, health and safety incidences and liabilities are inherent in many of Eni’s operations and products. Notwithstanding management believes that Eni adopts high operational standards to ensure safety of its operations and to protect the environment and health of people and employees, it is always possible that incidents like blow-outs, spillovers, contaminations and similar events could occur that would result in damage to the environment, employees and communities. In particular, Eni is performing a number of remedial actions to restore and clean-up certain industrial sites that were contaminated by the Group’s industrial activities in previous years, mainly in Italy. Management expects further remedial actions to be implemented in future years. The Group has accrued risk provisions to cope with all existing environmental liabilities whereby both a legal or constructive obligation to perform a clean-up or other remedial actions is in place and the associated costs can be reasonably estimated. The accrued amount represents the management’s best estimates of future environmental expenses to be incurred. Notwithstanding this, management believes that it is possible that in the future Eni may incur significant costsenvironmental expenses and liabilities in future yearsaddition to the amounts already accrued due to: (i) the chance of as yet

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unknown contamination; (ii) future developments in environmental regulation; (iii) the results of on-going surveys or surveys to be carried out on the environmental status of certain Eni’s industrial sites as required by the applicable regulations on contaminated site; (iii) unfavorable developments in ongoing litigation on the environmental status of certain Company’s site where a number of public administrations and other possible effects deriving from the implementation of Decree No. 471/1999 of theItalian Ministry of Environment;for environment act as plaintiffs; (iv) the possible effects deriving from the implementation of certain enacted regulations such as the ones deriving from Decree No. 367 of the Ministry of Environment published in January 8, 2004, regarding the fixing ofpossibility that new quality standards for aquatic environment in relation to dangerous substances, and those deriving from the application of European directive 2004/35/EC concerning environmental responsibility for prevention and reclamation of environmental damage;litigation might arise; and (v) the possibility of litigationprobability that new and the difficulty of determining Eni’s liability, if any, as against other potentially responsible parties with respect to such litigation and the possible insurance recoveries.
stricter environmental laws might be implemented.

Legal Proceedings

Eni is a party to a number of civil actions and administrative proceedings arising in the ordinary course of the business. Although Eni’s management does not currently expect a material adverse effect on Eni’s financial position and results of operations on the basis of information availableIn addition to date and taking account of existing provisions Eni’s management cannot rule outaccrued as of the balance sheet date to account for ongoing proceedings, it is possible that in future years Eni may incur materialsignificant losses in addition to amounts already accrued in connection with pending legal proceedings due to: (i) uncertainty regarding the final outcome of each proceeding; (ii) the occurrence of new developments that management could not take into consideration when evaluating the likely outcome of each proceeding in order to accrue the risk provisions as of the date of the latest financial statements; (iii) the emergence of new evidence and information; and (iv) errors in the estimateunderestimation of probable future losses.

Risks deriving from changesrelated to Changes in oil pricesthe Price of Oil, Natural Gas, Refined Products and in natural gas, refined and petrochemical products prices and marginsChemicals

Operating results in certain of Eni’s businesses, particularly the Exploration & Production, Refining & Marketing, Gas & Power and Petrochemical segments are affected by changes in the price of crude oil and by their impactmovements in crude oil prices on prices and margins of natural gas and refined and petrochemical products.

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

Overall, lower oil prices have a net adverse impact on Eni’s results of operations. The effect of lower oil prices on Eni’s average realizations offor produced oil prices is generally immediate. HoweverFurthermore, Eni’s average realizationrealizations for produced oil differsdiffer from the price of Brent crude marker crude Brentprimarily due primarily to the circumstance that Eni’s production slate, which also includes heavy crudes,crude qualities, has a lower API gravity compared with Brent crude (when processed the latter allows for higher yields of valuable products compared to heavy crudes,crude qualities, hence higher market price).

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

AThe impact of changes in crude oil prices on Eni’s downstream businesses, including the Gas & Power, the Refining & Marketing and the Petrochemical businesses, depends upon the speed at which the prices of gas and products adjust to reflect these changes. Wholesale margins in the Gas & Power business are substantially independent from fluctuations in crude oil prices as purchase and selling prices of natural gas are contractually indexed to prices of crude oil and certain refined products according to similar pricing schemes. However, quarterly performance and year-to-year comparability of results of Eni’s natural gas business may be somewhat affected by the indexation mechanism of the raw material component in gas supplies to residential customers and certain resellers to residentials in Italy in accordance with applicable regulations from the Italian Authority for Electricity and Gas as outlined above in the risk factor describing the "Liberalization of the Italian Natural Gas Market". Specifically, this indexation mechanism provides a certain time lag between movements in the price of crude oil and the related adjustment to the selling price of natural gas. For a detailed discussion of this indexation mechanism in Italy see "Item 4 – Regulation – Gas & Power – Natural gas prices".

In the Refining & Marketing and Petrochemical businesses a time lag exists between movements in oil prices and movements in the prices and margins of natural gas and refined and petrochemical products. In particular, trends of natural gas margins in Eni’s natural gas business tend to mitigate the impact of changes in oil prices on Eni’s operating results due to different movements in prices of certain energy parameters to which natural gas purchase and sale prices are contractually indexed in different proportions and as measured over different reference periods.finished products.

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 in European refining margins which reflect changes in relative prices of crude oil and refined products. Generally, a time lag exists between changes in oilproducts as outlined above. The prices and movements inof refined products prices.in turn depend on global and regional supply/demand balances, inventory levels, refinery operations, import/export balances and weather. Furthermore, Eni’s realized margins are also affected by relative price movements of heavy crude qualities vs. light crude qualities, taking into account the ability of Eni’s refineries to process complex crudes that represent a cost advantage when market prices of heavy crudes are relatively cheaper than the marker Brent price. In 2009, Eni expects that weak demand for products and narrowing price differentials between heavy and light crudes ones will negatively affect the performance of Eni’s refining operations.

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

Eni’s margins on petrochemical products margins are affected by trends in demand for petrochemical products and changes in oil prices which influence changes in costpurchase costs of petroleum-based feedstock. Generally, an increase in oil price determines a decrease inGiven the commoditized nature of Eni petrochemical products, it is difficult for the Company to transfer higher purchase costs for oil-based feedstock to selling prices to customers. In 2008, the profitability of Eni’s petrochemical segment was significantly affected by lower selling margins for commodity petrochemical products due to higher purchase costs for oil-based feedstock that were not fully transferred to selling prices of products in the short-term. Prolonged weaknessfirst half of the European economy as well as Eni’s own structural weaknesses have prevented Eni’s Petrochemical segment from returning to profitability in recent years due to the inability to transfer increases of oil-based feedstocks into selling prices. Due to industry conditionsyear and, subsequently by weak economic growth in Europe,demand for petrochemical products. These negative factors also triggered asset impairments. Management’s outlook for 2009 is also challenging, and management does not expect any significant and durable improvement in Petrochemicals segment profitability over the foreseeable future.
trading environment from 2008 and possibly a further contraction in margins on petrochemical products.

Risks from Acquisitions

Eni constantly monitors the oil and gas market in search of opportunities to acquire individual assets or corporations in order to achieve its growth targets or complement its asset portfolio. Acquisitions entail an execution risk – the risk that the acquirer will not be able to effectively integrate the purchased assets so as to achieve expected synergies. In addition, acquisitions entail a financial risk – the risk of not being able to recover the purchase costs of acquired assets, in case a prolonged decline in the market prices of oil and natural gas occurs. We also incur unanticipated costs or assume unexpected liabilities and losses in connection with companies or assets we acquire. If the integration and financial risks connected to acquisitions materialize our financial performance may be adversely affected.

Credit risk

Credit risk is the potential exposure of the Group to losses in case counterparties fail to perform or pay amounts due. Credit risks arise from both commercial partners and financial ones. Although the Group has never experienced material non-performance from its counterparties, due to the severity of the current economic and financial crisis it is possible that we may experience a higher than normal level of counterparty failure. In our consolidated financial statements for the year 2008, we accrued an allowance against doubtful accounts amounting to euro 251 million more than doubling the allowance made a year earlier.

Exchange Rates

Movements in the exchange rate of the euro against the U.S. dollar can have a material impact on Eni’s results of operations. Prices of oil, natural gas and refined products generally are denominated in, or linked to, U.S. dollars, while a significant portion of Eni’s expenses are denominated in euro.euros. Similarly, prices of Eni’s petrochemical products are generally denominated in, or linked to, the euro, whereas expenses in the PetrochemicalsPetrochemical segment are denominated both in euroeuros and U.S. dollars. Accordingly, a depreciation of the U.S. dollar versusagainst the euro generally has an adverse impact on Eni results of operations.
operations and liquidity because it reduces booked revenues by an amount greater than the decrease in dollar-denominated expenses. The Exploration & Production segment is particularly affected by movements in the U.S. dollar vs. the euro exchange rates. In 2008, Eni’s operating profit in this business segment has been impacted by an estimated amount of euro 1.2 billion due to a 7.3% depreciation of the U.S. dollar versus the euro.

Risks deriving from Eni’s Exposure to Weather in Italy and SeasonalityConditions

Significant changes in weather conditions in Italy and in the rest of Europe from year to year may cause variations inaffect demand for natural gas and some refined products; in colder years, demand is higher. Accordingly, the results of operations of the Gas & Power segment and, to a lesser extent, the Refining & Marketing segment, as well as the comparability of results over different periods may be affected by such variationschanges in weather conditions. In addition, Eni’s results

Furthermore, our operations, particularly offshore production of operations reflect the seasonality in demand foroil and natural gas, are exposed to extreme weather phenomena that can result in material disruption to our operations and certain refined products used in residential space heating, the demand for which is typically highest in the first quarterconsequent loss or damage of the year, which includes the coldest months,properties and lowest in the third quarter, which includes the warmest months.
facilities.

Interest Rates

Interest on Eni’s financialfinance debt is primarily indexed at a spread to benchmark rates such as the Europe Interbank Offered Rate, "EURIBOR""Euribor", and the London Interbank Offered Rate, "LIBOR""Libor". As a consequence, movements in interest rates can have a material impact on Eni’s financialfinance expense in respect to its financialfinance debt.

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Critical Accounting Estimates

The preparation of financial statements entailsrequires management to make certain accounting estimates that are characterized by a high degree of uncertainty, complexity and judgment. These estimates affect the reported amount of the Company’s assets and liabilities, as well as the reported amount of the Company’s income and expenses for a given period. Although management believes these critical accounting estimates are thoroughly applied and underlying amounts are fairly determined, management cannot rule out thatto represent the best outcome of the estimation process, actual outcomes mayresults could differ from such estimates, due to, among other things, the following factors: uncertainty, lack or limited availability of information; the availability of new informative elements, variations in economic conditions such as prices, significant factors (e.g., removal technologies and costs) and the final outcome of legal, environmental or regulatory proceedings. See "Item 5 – Critical Accounting Estimates".

Item 4. INFORMATION ON THE COMPANY

History and Development of the Company

Eni SpA with its consolidated subsidiaries is engaged in the oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries. Eni has operations in about 70 countries and 72,25878,880 employees as of December 31, 2005.2008.

Eni, the former Ente Nazionale Idrocarburi, a public law agency, established by Law No. 136 of February 10, 1953, was transformed into a joint stock company by Law Decree No. 333 published in the Official Gazette of the Republic of Italy No. 162 of July 11, 1992 (converted into law on August 8, 1992, by Law No. 359, published in the Official Gazette of the Republic of Italy No. 190 of August 13, 1992). The Shareholders’ Meeting of August 7, 1992 resolved that the company be called Eni SpA. Eni is registered at the Companies Register of Rome, register tax identification number 00484960588, R.E.A. Rome No. 756453. Eni is expected to remain in existence until December 31, 2100; its duration can however be extended by resolution of the shareholders.

Eni’s registered head office is located at Piazzale Enrico Mattei 1, Rome, Italy (telephone number: +39-0659821). Eni branches 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 Viscusi Enzo, 666 FifthDe Luca Vincenzo, 485 Madison Ave., New York, NY 1010310002.

Eni’s principal segments of operations and subsidiaries are described below.

Eni conducts its exploration and production activities through its Exploration & Production Division and certain operating subsidiaries. Eni’s exploration, development and production activities commenced in 1926, when Agip SpA was established by the Italian Government with a mandate to explore for and develop oil and natural gas. Agip SpA was merged into Eni SpA effective as of January 1, 1997 to become Eni’s Exploration & Production Division.

Eni is engaged in exploration and production of hydrocarbons in Italy, North Africa, West Africa, the North Sea, the Gulf of Mexico, Australia, South America and areas with great development potential such as the Caspian Sea, the Middle and Far East, India and Alaska. In 2005, Eni’s hydrocarbon production available for sale averaged 1,693 KBOE/d and, at December 31, 2005, Eni’s estimated proved reserves totalled 6,837 mmBOE with a life index of 10.8 years. In 2005, Eni’s Exploration & Production segment hadengages in oil and natural gas exploration and field development and production, as well as LNG operations in 39 countries, including Italy, Libya, Egypt, Norway, the UK, Angola, Congo, the U.S., Kazakhstan, Russia, Algeria, Pakistan and Australia. In 2008, Eni’s production of oil and natural gas amounted to 1,748 KBOE/d on an available-for-sale basis. As of December 31, 2008, Eni’s proved reserves of subsidiaries stood at 6,242 mmBOE; Eni’s share of reserves of equity-accounted entities amounted to 666 mmBOE. In 2008, Eni’s Exploration & Production segment reported net sales from operations (including intersegmentinter-segment sales) of euro 22,47733,318 million and operating profit of euro 12,57416,415 million.

Eni conducts its natural gas and electricity generation activities through its Gas & Power Division and certain operating subsidiaries. Eni’s natural gas supply, transmission and distribution activities commenced in the 1940s with the commercial sale of natural gas to industrial users in Northern Italy. Snam SpA was merged into Eni SpA effective as of February 1, 2002 to become Eni’s Gas & Power Division.segment engages in supply, transport, distribution and marketing of natural gas, as well as of LNG. This segment also includes the activity of power generation that enables Eni to extract further value from gas, diversifying its commercial outlets. In 2005,2008, Eni’s worldwide sales of natural gas amounted to third parties totalled 52.47104.23 BCM, including 6.00 BCM of gas sales made directly by the Eni’s Exploration & Production segment in Europe and the U.S. Sales in Italy and 23.44amounted to 52.87 BCM, in the rest of Europe; Eni’s share of natural gas volumes sold by its affiliates totalled 8.53 BCM (of which 7.85 billion was sold in the rest of Europe). Natural gas volumes consumed in operations by Eni and Eni’s subsidiaries – mainly in electricity generation, refining and petrochemicals operations – totalled 5.54 BCM. Natural gaswhile sales in Italy include: (i) salesEuropean markets were 43.03 BCM that included 11.25 BCM of gas sold to wholesalers, mainly local companies selling natural gascertain importers to residential and commercial customers, andItaly. Sales to large industrial and thermoelectric customers which are supplied by amarkets outside Europe amounted to 2.33 BCM. Through its 50.03 per cent-owned subsidiary Snam Rete Gas, Eni operates an Italian network of high and medium pressure pipeline network; and (ii) sales to residential and commercial customers which are supplied by a low pressure pipeline network. Eni’s high and medium pressure gas pipeline networkpipelines for natural gas transport that is about 30,700-kilometerapproximately 31,474-kilometer long, in Italy, while outside Italy Eni holds transmission rightscapacity entitlements on a network of European pipelines extending for approximately 5,0004,400 kilometers made up of high pressure pipelines. Eni’s naturalpipelines to import gas transport network in Italy is ownedfrom Russia, Algeria, Libya and managed by Snam Rete Gas SpA. Snam Rete Gas is listed on the Italian Stock Exchange, Eni’s share being 50.07%. Snam Rete Gas transports natural gas on behalf of Eni and third parties ("shippers"); in 2005 its transported volumes were 85.10 BCM, of which 30.22 billion were on behalf of third parties.North Europe production basins to European markets. Eni, through its 100%100 percent-owned subsidiary Italgas and other subsidiaries, is engaged in natural gas distribution activity in Italy serving 1,2821,320 municipalities through a low pressure network consisting of approximately 48,00049,400 kilometers of pipelines as of December 31, 2005.

2008. Eni conductsproduces electricity and steam at its electricity generation activities through its wholly-owned subsidiary EniPower SpA, which owns and manages Eni’s power stationsoperated sites of Livorno, Taranto, Mantova, Ravenna, Brindisi, and Ferrera Erbognone and Ferrara with a total installed capacity of approximately 4.5 gigawatt4.9 GW as of December 31, 2005.2008. In 2005, sold production2008, sales of electricity totalled 22.77 terawatthours.totaled 29.93 TWh. Eni owns other minor power stations locatedoperates a re-gasification terminal in Eni’s petrochemical plantsItaly and refineries whose production is mainly for internal consumption. The accountsholds indirect interest or capacity entitlements in a number of these power stations are reported within Eni’s Refining & MarketingLNG facilities in

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Europe, Egypt and Petrochemicals segments.

in certain projects under construction in the U.S. In 2005,2008, Eni’s Gas & Power segment hadreported net sales from operations (including intersegmentinter-segment sales) of euro 22,96936,936 million and operating profit of euro 3,3213,933 million.

Eni conducts its refining and marketing activities through the Refining & Marketing Division and certain operating subsidiaries. Activities commenced in the 1930s, when Eni initiated the development of the industrial and retail markets for refined products in Italy. AgipPetroli SpA was merged into Eni SpA effective December 31, 2002 to become Eni’s Refining & Marketing Division. Eni’ssegment engages in refining and marketing activities are located primarilyof petroleum products mainly in Italy and in the rest of Europe. In 2005,2008, processed volumes of crude oil and other feedstock amounted to 35.84 mmtonnes and sales of refined products were 50.68 mmtonnes, of which 28.92 mmtonnes in Italy. Retail sales of refined product at operated service stations amounted to 12.67 mmtonnes including Italy and the rest of Europe. In 2008, Eni’s retailingretail market share for refined products in Italy through its Agip-branded network of service stations was 29.7%30.6%. In 2005, Eni divested its wholly-owned subsidiary Italiana Petroli which is engaged in the retail marketing of refined products through a network consisting primarily of leased service stations, under the IP brand. In 2005, sales of refined products totalled 51.63 million tonnes, of which 30.29 million were in Italy. The balanced refining capacity of Eni’s wholly-owned refineries totalled 524 KBBL/d as of December 31, 2005. In 2005,2008, Eni’s Refining & Marketing segment hadreported net sales from operations (including intersegmentinter-segment sales) of euro 33,73245,083 million and operating profitnet loss of euro 1,8571,023 million.

Eni’s petrochemical activities commenced in the 1950s, when it beganinclude production of basic petrochemicals at its Ravenna industrial complex. Through Polimeri Europa SpA and its subsidiaries, Eni operates in olefins and aromatics, basic intermediate products, chlorine derivatives, polyethylene, polystyrenes, and elastomers. Eni’s petrochemical operations are concentrated in Italy and in Western Europe. In 2005,2008, Eni sold 5.4 million tonnes4.7 mmtonnes of petrochemical products. In 2005,2008, Eni’s PetrochemicalsPetrochemical segment hadreported net sales from operations (including intersegmentinter-segment sales) of euro 6,2556,303 million and an operating profitnet loss of euro 202822 million.

Eni’s oilfield services, construction and engineering activities commenced in the late 1950s. Throughare conducted through its 42.91 per cent-owned subsidiary Saipem SpA (a 43% owned subsidiary) and its subsidiaries, Eni operates inSaipem’s controlled entities. Activities involve offshore construction, in particularparticularly fixed platform installation, subseasub-sea pipe laying and floating production systems. Through Snamprogetti SpA (a wholly owned subsidiary)systems and its subsidiaries Eni is a provider ofonshore construction. Offshore and onshore drilling services and engineering and project management services are also provided to the oil and gas, refining and petrochemical industries. In 2005,2008, Eni’s Oilfield Services,Engineering & Construction and Engineering segment hadreported net sales from operations (including intersegmentintra-group sales) of euro 5,7339,176 million and operating profit of euro 3071,045 million.

A list of subsidiaries of Eni is included as an exhibit to this Annual Report on Form 20-F.

Strategy

Eni’s strategy is to grow the Company’s main businesses, over both the medium and the long-term, with improving profitability. This strategy has remained unchanged in spite of the current economic downturn and an uncertain outlook for the global energy demand. In executing this strategy, management intends to preserve a solid capital structure targeting an optimal mix between net borrowings and shareholders’ equity. By this means, management expects to maintain the Company’s current credit rating. Over the next four-years, Eni plans to deployexecute a capital expenditure program amounting to euro 48.8 billion to support organic growth. Eni plans to fund this capital expenditure program mostly by means of cash flows provided by operating activities. Capital projects will be assessed and implemented in accordance with tight financial criteria. The Company intends to remunerate its shareholders through significant dividend distributions so as to ensure to its shareholders competitive dividend yields (measured as the ratio of dividend to the share price recorded on average in the month of December on the Italian stock exchange). Management intends to support the Company’s profitability by focusing on cost reduction initiatives, including a number of actions that will be implemented in order to benefit from the expected reduction in purchase costs for oilfield materials, equipment and services in the Exploration and Production segment. For a description of risks and uncertainties associated with the Company’s outlook and the capital expenditure program See "Item 5 – Management’s Expectations of Operations".

Eni’s strategy of organic growth intended to sustain the group’s business over the long-term.

In thein its Exploration & Production activities, Eni plansoperations is to grow production leveraging on the development of oil and natural gas through organic growth, targetingthe Company’s asset portfolio. Eni targets to achieve a production level of more than 2 mmBOE/d in 2009, which corresponds to a compound average growth rate of approximately 4% under certain trading environment assumptions (See3.5% on average over the 2009-2012 period, assuming Eni’s Brent price scenario of 55 U.S. dollar per barrel in 2012. For a discussion of Eni’s production volume sensitivity to oil prices see "Item 5 – ManagementManagement’s Expectations of Operations"). Eni plans to reach said production target by leveraging in particular on the contribution of recently completed large development projects and projects in the development phase in Angola, Libya, Nigeria, Egypt, Iran, Algeria and Kazakhstan. Management will continue to evaluateassess opportunities to increase production through the purchase of corporations or individual assets.acquisitions. Eni intends to pay special attention to reserve replacement in order to ensuresecure the medium to long-term sustainability of its business.

In its Gas & Power activities, Eni intends to grow natural gas sales in the international market, preserve the profitability of the Italian marketing business, effectively manage regulated businesses, and develop a global LNG business. Due to the current economic downturn, the Company has revised down its long-term growth expectations for the European gas demand from 3% to 2% per annum until 2020. For a description of trends in the natural gas markets see "Gas & Power" below. The impact of a worsening demand outlook and increasing competitive pressure on Eni’s results of operations on the domestic market is expected to be offset by the contribution of regulated businesses and continuing growth in European markets, mainly driven by the integration of the recently acquired Belgian company Distrigas. Eni targets worldwide gas sales of 124 BCM in 2012, including E&P sales in Europe and the U.S. In particular, Eni targets to achieve an annual average growth rate of 7% in international sales in the four-year period 2009 to 2012. The Company’s strategy contemplates a further strengthening of Eni’s presence in the European market, leveraging on the synergies expected from the acquisition of Distrigas (for further details see below – "Significant business and portfolio developments"). The integration with upstream activities will provide the Gas & Power business with opportunities to monetize the equity gas reserves and develop LNG sales.

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In its Refining & Marketing activities, the Company’s strategy focuses on improving the business profitability and reducing the cash requirements of the business by means of strict capital discipline also in light of a weak outlook for refined products demand. The Company intends to selectively upgrade its refinery system and improve quality standards in marketing activities as well as increase operating efficiency. In refining Eni plans to increase the conversion index and flexibility of plants in order to achieve a higher yield of middle distillates and increase the ability of its refineries to process less valuable crudes. In marketing, Eni intends to strengthen its leadership position in the Italian retail market trough plant upgrading, loyalty programs and enhanced non-oil service formats. In Europe, Eni’s growth strategy will continue to be selective, focusing on those markets where it can leverage on scale, supply and logistic synergies and brand awareness.

In its Engineering & Construction activities, Eni aims at developing and expanding its geographical reach and technical characteristics of its world class fleet in order to maintain its strong competitive position and reduce its exposure to the cyclicality of the oil industry.

In technological research and innovation activities, Eni plans to implement significant capital expenditures amounting to euro 1.1 billion in the next four years to develop such technologies that management believes may ensure competitive advantages in the long-term. Eni plans to continue developing ongoing programs focused on reducing costs to find and recover hydrocarbons, developing clean fuels, upgrading heavy crude (in particular the EST project), monetizing natural gas through projects such as high pressure high distance gas transmission (TAP) and Gas to Liquids (GTL), and protecting the environment by investing in the fields of renewable sources of energy and reduction of GHG emissions.

Significant business and Portfolio Developments

The significant business and portfolio developments that occurred in 2008 and to date in 2009 were the following:

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In addition, in 2008 Eni completed the following transactions:

Recent developments are described below.

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In 2008 capital expenditures amounted to euro 14,562 million, of which 84% related to the Exploration & Production, Gas & Power and Refining & Marketing segments and mainly related to: (i) the development of oil and gas reserves (euro 6,429 million) deployed mainly in Kazakhstan, Egypt, Angola, Congo and Italy and exploration projects (euro 1,918 million), primarily in the United States, Egypt, Nigeria, Angola and Libya; (ii) the purchase of proved and unproved property for euro 836 million related mainly to the extension of mineral rights in Libya following an agreement signed in October 2007 with the state company NOC and the purchase of a 34.81% interest in the ABO project in Nigeria; (iii) the development and upgrading of Eni’s natural gas transport and distribution networks in Italy (euro 1,130 million and euro 233 million, respectively) and upgrading of natural gas import pipelines to Italy (euro 233 million); (iv) the ongoing construction of combined cycle power plants (euro 107 million); (v) projects designed to upgrade the conversion capacity and flexibility of Eni’s refineries, including construction of a new hydrocracking unit at the Sannazzaro refinery, and to build of new service stations and upgrade of existing ones in Italy and outside Italy (totaling euro 965 million); and (vi) the upgrading of the fleet used in the Engineering & Construction division (euro 2,027 million).

In 2008, Eni’s acquisitions amounted to euro 5.85 billion (euro 4.3 billion net of acquired cash of euro 1.54 billion) and mainly related to: (i) the acquisition of the 57.243% majority stake in Distrigas NV; (ii) the completion of the acquisition of Burren Energy Plc; (iii) the purchases of certain upstream properties and gas storage assets, related to the entire share capital of the Canadian company First Calgary operating in Algeria, a 52% stake in the Hewett Unit in the North Sea, a 20% stake in the Indian company Hindustan Oil Exploration Co; and (iv) other investments in non-consolidated entities mainly related to funding requirements for an LNG project in Angola.

In 2007, capital expenditures amounted to euro 10,593 million, of which 84.7% related to the Exploration & Production, Gas & Power and Refining & Marketing businesses, and primarily related to: (i) the development of oil and gas reserves (euro 4,788 million) deployed predominantly in Kazakhstan, Egypt, Angola, Italy and Congo, and exploration projects (euro 1,659 million) particularly in the Gulf of Mexico, Egypt, Norway, Nigeria and Brazil; (ii) development and upgrading of Eni’s natural gas transport and distribution networks in Italy (euro 886 million) as well as upgrading of natural gas import pipelines to Italy (euro 253 million); (iii) the ongoing construction of combined cycle power plants (euro 175 million); (iv) projects designed to upgrade the conversion capacity and flexibility of Eni’s refineries, including construction of a new hydrocracking unit at the Sannazzaro refinery, and to build and upgrade service stations (totaling euro 979 million); and (v) the upgrading of the fleet used in the Engineering & Construction segment (euro 1,410 million).

In 2007, Eni’s acquisitions amounted to euro 9.7 billion and mainly related to: (i) a 60% interest in three Russian gas companies as part of the liquidation procedure of bankrupt Russian company Yukos. Through the same transaction Eni also purchased a 20% stake in the oil and gas company OAO Gazprom Neft. Gazprom was granted a call option to purchase a 51% interest in those three gas companies and the 20% stake in OAO Gazprom Neft; (ii) the purchase of upstream assets in the Gulf of Mexico; (iii) the purchase of upstream assets onshore Congo; (iv) the purchase of a 24.9% interest in Burren Energy; (v) the acquisition of a further 16.11% stake in the Ceska Rafinerska in the Czech Republic increasing Eni’s ownership interest to 32.4%; (vi) the purchase of 102 retail fuel stations and related marketing assets located in the Czech Republic, Slovakia and Hungary; and (vii) the purchase of a 13.6% stake in the Angola LNG consortium.

BUSINESS OVERVIEW

Exploration & Production

Eni’s Exploration & Production segment engages in oil and natural gas exploration and field development and production, as well as LNG operations, in 39 countries, including Italy, Libya, Egypt, Norway, the UK, Angola, Congo, the U.S., Kazakhstan, Russia, Algeria, Pakistan and Australia. In 2008, Eni produced 1,748 KBOE/d on an available for-sale basis. As of December 31, 2008, Eni’s proved reserves of subsidiaries stood at 6,242 mmBOE; Eni’ share of reserves of equity-accounted entities amounted to 666 mmBOE.

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Eni’s strategy in its Exploration & Production operations is to increase production leveraging on the development of its asset portfolio. Eni plans to achieve a production growth rate of 3.5% on average over the 2009-2012 period, under certain trading environment assumptions (See "Item 5 – Management’s Expectations of Operations"). A description of Eni’s production volume sensitivity to oil prices is disclosed under "Item 5 – Management’s Expectations of Operations".

Future growth will be driven by the development of new projects located in a number of strategic oil and gas basins in the world, namely the Caspian Region, North and West Africa and the Gulf of Mexico. A high-quality portfolio geographically focused and resilient, with one of the lowest breakeven prices in the industry, high exposure to the most competitive giant projects and long-standing relationships with key host countries will enable any to deliver industry-leading growth even in current market conditions. Management will continue to evaluate opportunities to increase production through focused acquisitions. Eni intends to pay special attention to reserve replacement in order to guarantee the medium-to long-term sustainability of its business. Eni intends to optimize its portfolio of development properties by focusing on areas where its presence is established, seeking for new opportunities and divesting marginal assets. Eni also intends to develop its LNG business also through the purchase of interests in liquefaction plants in order to better exploitmonetize its naturallarge base of gas reserves in North and West Africa. In exploration activities Eni intends to renew its portfolio of properties focusing on such areas where management believes a high mineral potential exists, on assets in areas where its presence is established (in particular Egypt, Nigeria, the United States, Italy and Norway) and to start exploration in newly acquired areas (in particular Alaska, Libya and India).

In the Gas & Power activities, Eni plans to grow natural gas sales in the rest of Europe and to develop its presence in the LNG business in order to compensate for lower growth opportunities on the domestic market due to the limits imposed on operators by the sector regulation and increasingly intense competition. In Italy, Eni plans to comply with regulatory limits on direct sales and input volumes to the national transport network by optimizing allocation of supplies between direct sales in Italy and in the rest of Europe and by using natural gas at its own electricity generation plants and, at the same time, leveraging on the expected consumption growth. In the medium term, management expects its natural gas sales in Italy to decline from the 58 BCM level recorded in 2005 as a consequence of increasing competition from third parties. Eni plans to implement a more attractive commercial offer than Eni’s competitors’ on the basis of the quality of services, pricing formulas including different indexation schemes to suit various customers’ purchasing profile and the integration of supply of gas and electricity. Management plans to grow natural gas sales on European markets by leveraging on the availability of Eni’s equity gas and on a diversified portfolio of supply contracts, an extensive gas pipeline network, which allows for the supply of natural gas from several sources, and long standing relationships with producing countries. Eni intends to strengthen its 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 and profitability prospects (in particular France and the United Kingdom).

In the Refining & Marketing activities, Eni intends to maximize returns from its existing assets. In the refining activity Eni plans to invest in new primary distillation capacity and in new conversion capacity to make its refining system flexible enough to obtain a higher yield of middle distillates and to achieve a greater vertical integration with its upstream activities. In marketing Eni aims to improve its competitive position in Italy and to increase sales in selected neighboring countries in the Rest of Europe.

Eni’s oilfield services construction and engineering activities play an essential role in contributing to technological innovations and in the implementation of world-scale projects thus supporting Eni’s growth process in the oil & gas business.

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

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

Key Developments

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

In 2005, capital expenditure amounted to euro 7.4 billion, of which 91% related to the Exploration & Production, Gas & Power and Refining & Marketing segments, and was primarily related to: (i) the development of oil and gas reserves (euro 3,952 million) in particular in Kazakhstan, Libya, Angola, Italy and Egypt, exploration projects (euro 656 million) and the purchase of proved and unproved property (euro 301 million); (ii) upgrading of Eni’s natural gas transport and distribution networks in Italy (euro 825 million); (iii) the continuation of construction 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 gasification plant at the Sannazzaro refinery, and the upgrade of the refined product distribution network in Italy and in the rest of Europe (overall euro 656 million); and (v) upgrading of vessels and other equipment and facilities in Kazakhstan and West Africa in the Oilfield services and construction business (euro 346 million).

In 2005 capital expenditure decreased by euro 85 billion over 2004, or 1.1%, due to a euro 299 billion reduction, or 20.6%, in the Gas & Power business due principally to the completion of the Greenstream underwater pipeline project and the nearing to completion of the power generation development plan.

In 2004, capital expenditure amounted to euro 7.5 billion (of which 94% related to the Exploration & Production, Gas & Power and Refining & Marketing segments) and concerned: (i) development of hydrocarbon fields (euro 4,369 million) in particular in Libya, Iran, Angola, Italy, Kazakhstan, Egypt, Nigeria and Norway, and exploration (euro 499 million); (ii) upgrading of Eni’s natural gas transmission and distribution network in Italy (euro 721 million); (iii) the construction of the tar gasification plant at the Sannazzaro refinery, actions on refineries for the adjustment of automotive fuel characteristics to new European specifications and the upgrade of the refined product distribution network in Italy and in 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 Greenstream underwater pipeline project (euro 159 million).

BUSINESS OVERVIEW

Exploration & Production

Eni operates in the exploration and production of hydrocarbons in Italy, North Africa, West Africa, the North Sea, the Gulf of Mexico, Australia and South America. It also operates in areas such as the Caspian Sea, the Middle and Far East, India and Alaska where management believes a great mineral potential exists. In 2005, Eni produced 1,693 KBOE/d; as of December 31, 2005, Eni’s proved reserves totalled 6,837 mmBOE. Eni plans to grow production of oil and natural through organic growth, targeting a production level of more than 2 mmBOE/d in 2009 which corresponds to a compound average growth rate of approximately 4% under certain trading environment assumptions (See "Item 5 – Management Expectations of Operations"). Eni plans to reach said production target by leveraging in particular on the contribution of recently completed great development projects and projects in the development phase in Angola, Libya, Nigeria, Egypt, Iran, Algeria and Kazakhstan. Management will continue to evaluate opportunities to increase production through the purchase of corporations or individual assets. Eni intends to pay special attention to reserve replacement in order to guarantee the medium to long-term sustainability of its business. Eni intends to optimize its portfolio of development properties by focusing on areas where its presence is established, seeking for new opportunities and divesting marginal assets. Eni intends to develop its LNG business also through the purchase of interests in liquefaction plants in order to better exploit its natural gas reserves in North and West Africa.

In exploration activities, Eni intends to renew its portfolioconcentrate resources in well established areas of properties focusing onpresence where availability of production facilities, existing competencies and long-term relationships with host countries will enable Eni to readily put in production discovered reserves, reducing the time-to-market and capturing synergies. Approximately 80% of planned capital expenditures will be directed to such core areas where management believes a high mineral potential exists, assets(located mainly in areas where its presence is already established (in particular Egypt, Nigeria, the United States, Egypt, Libya, Nigeria, Angola, Italy, Norway and Norway)Congo). Eni also plans to selectively pursue high risk/high reward opportunities arising from expansion in areas with high mineral potential. Eni expects to purchase new exploration permits and to startdivest or exit marginal or non strategic ones.

In order to execute these strategies, Eni intends to invest approximately euro 32.6 billion on reserve development and field optimization as well as exploration in newly acquired areas (in particular Alaska, Libyaprojects over the next four-year period; euro 1.8 billion of which will be spent to build transportation infrastructures and India).execute LNG projects through equity-accounted entities.

In 2009, oil and gas prices are expected to be significantly lower than 2008. In response Eni plans to improve profitability of its performanceoperations by searchingimplementing a number of initiatives designed to reduce costs to develop and operate oil and gas fields by leveraging on the expected reduction in purchase costs of oilfield services, materials and equipment due to the economic downturn. Management has yet to commit a large amount of future development expenditures and plans to be able to benefit from ongoing downward trends in rates of oilfield services and purchase costs of goods and equipment. Additional cost control measures will address ongoing operations. The amount of planned capital expenditures for operating solutionsthe years 2009-2012 already factors in the benefits associated with lower operating costs and synergies.
cost control. See "Item 3 – Risk Factors".

Oil and Natural Gas Reserves

Eni continues to exercisehas always exercised rigorous control over the booking of proved reserves. The Reserve Department of the Exploration & Production segment reporting directly to the General Manager, is entrusted with the task of keeping reserve classification criteria ("criteria") constantly updated and of monitoring theircontinuously updating the Company’s guidelines regarding reserves evaluation. The department monitors the periodic process of estimate. The criteriaestimation process. Company guidelines follow Regulation S-X ruleRule 4-10 of the U.S. Securities and Exchange Commission (SEC) as well as on specific issues not regulated by the SEC rules, the consolidatedestablished practice recognizedendorsed by qualified reference institutions. The current criteria applied by Eniinstitutions on the marketplace. Company guidelines have been examinedreviewed by DeGolyer and MacNaughton (D&M), an independent oil engineerspetroleum engineering company, which confirmed that they are complianthas certified their compliance with theapplicable SEC rules. D&M has also stated that the criteriaCompany guidelines regulate situations for which the SEC rules are less precise, providing a reasonable interpretation in line with the generally accepted practices in international markets. When participating in exploration and production activities operated by other entities, Eni also estimates its proved reserves on the basis of the mentioned criteria also when it participates in explorationabove guidelines.

The process for evaluating reserves involves: (i) business unit managers (geographic units) and Local Reserve Evaluators (LRE) who perform the evaluation and classification of reserves including estimates of production activities operatedprofiles, capital expenditures, operating costs and costs related to asset retirement obligations; (ii) geographic area managers at head offices checking evaluations carried out by other entities.business unit managers; and (iii) the Reserve Department, which provides independent reviews of the fairness and correctness of classifications carried out by business units, aggregates worldwide reserve data and performs an economic assessment of reserves to calculate equity volumes. Moreover, the Reserve Department has the responsibility to ensure the periodic certification process of reserves and to update continuously the Company guidelines on reserves evaluation and classification.

Beginning inSince 1991, Eni has requested qualified independent petroleumoil engineering companies to carry out an independent evaluation² of its proved reserves on a rotationrotational basis. Eni believes those independent evaluators to be experienced

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and qualified in the marketplace. In particularthe preparation of their reports, those independent evaluators relied, without independent verification, upon information furnished by Eni with respect to property interest, production, current cost of operation and development, agreements relating to future operations and sale, prices and other factual information and data that were accepted as represented by the independent evaluators. This information was used by Eni in 2005determining its proved reserves and included log, directional surveys, core and PVT (Pressure Volume Temperature) analysis, maps, oil/gas/water production/injection data of wells, reservoir, and field, reservoir studies; technical analysis relevant to field performance, reservoir performance, long-term development plans, future capital and operating costs. In order to calculate the economic value of reserves net present value (NPV), actual prices received from hydrocarbon sales, instructions on future prices, and other pertinent information are provided. Accordingly, Eni believes that the work performed by the independent evaluators is to be considered an evaluation of Eni’s proved reserves carried out in parallel with the internal evaluation. The circumstance that the independent evaluations achieved the same results as those of the Company for the vast majority of fields support management’s confidence that the company’s booked reserves meet the regulatory definition of proved reserves which are reasonably certain to be produced in the future. When the assessment of independent engineers is lower than internal evaluations, Eni revises its estimates based on information provided by independent evaluators. In any case, those differences were not significant.

In 2008, a total of 1.641.5 BBOE of proved reserves or about 24%of subsidiaries have been evaluated, representing approximately 25% of Eni’s total proved reserves of subsidiaries at December 31, 2005, have been evaluated. The results of this independent evaluation confirmed Eni’s evaluations, as they did in past years.2008. In the 2003-2005 three year2006-2008 three-year period, independent evaluations concerned 84%76% of Eni’s total proved reserves; in particular evaluations concerned allreserves of subsidiaries were subject to independent evaluations. As at December 31, 2008 the new development projects, including Kashagan,most important of Eni’s properties which were not subject to an independent evaluation were: Bouri and most large-sized mature fields.Bu Attifel (Libya), Barbara (Italy), M’Boundi (Congo) and Elgin-Franklin (United Kingdom).

Eni’s proved reserves of oil and natural gassubsidiaries at December 31, 2005 totalled 6,8372008 totaled 6,242 mmBOE (oil and condensates 3,7733,243 mmBBL; natural gas 17,59117,214 BCF) representing a decreasean increase of 381232 mmBOE, or 5.3%3.9%, from December 31, 2004. The reserve replacement ratio was 40% in 2005; the average reserve replacement ratio for the last three years was 89%. The average reserve life index is 10.8 years (12.1 at December 31, 2004). The reserve replacement ratio was calculated dividing additions to proved reserves for year 2005 by total production, each as derived from the tables of changes in proved reserves prepared in accordance with SFAS No. 69 presented in Note 35 to the Consolidated Financial Statements. Management considers the reserve replacement ratio to be a key measure of the ability of the company to sustain its growth prospects. However, the ratio measures past performance and cannot be used to forecast the ability of management to replace produced reserve in future years.

Addition2007. Additions to proved reserves booked by Eni’s subsidiaries in 20052008 were 253850 mmBOE derived from :deriving from: (i) extensions and discoveries (156 mmBOE), in particular in Nigeria, Norway, Kazakhstan and Algeria; (ii) revisions of previous estimates (down 98of 746 mmBOE, partly related to higher entitlements reported in certain PSAs (up 340 mmBOE) resulting from lower year end oil prices from a year ago (Brent price was $36.55 per barrel at December 31, 2008 compared to $96.02 per barrel at December 31, 2007), net of downward revisions associated with marginal productions in certain mature fields such as Angola, Kazakhstan and Libya; (ii) extensions and discoveries (71 mmBOE) with major increases booked in Angola, Egypt, Nigeria, Norway and United States; and (iii) improved recovery (33 mmBOE) mainly reported in Algeria, Angola, Congo and Libya. Acquisitions amounted to 91 mmBOE reflecting the contribution of the acquired Burren assets in Congo, Turkmenistan and India. Sales of reserves (59 mmBOE) related to lower entitlementthe divestment of a 1.71% stake in certain Production Sharing Agreements (PSAs)³the Kashagan project following the finalization of the agreements implementing the new contractual and buy-back contracts due to higher oil prices recorded mainly in Kazakhstan, Angola and Libya; (iii) improved recovery (89 mmBOE), in particular in Algeria, Angola and Kazakhstan; and (iv) purchasegovernance framework of proved property (106 mmBOE) in Kazakhstan, Australia, Italy and Angola. The increase offset in part the decline related to production forproject effective January 1, 2008 (information on the year (634 mmBOE)Kashagan agreements is provided below under the section "Caspian Area" on page 39). Due to risks inherent in the exploration and production business, a degree of uncertainty still exists as to whether these additions will actually be produced. See "Item 3 – Risks associated with exploration and production of oil and natural gasgas" and – Uncertainties"Uncertainties in estimates of oil and natural gas reserves.reserves".

As of December 31, 2008 Eni’s share of proved reserves of equity-accounted entities amounted to 666 mmBOE. The 2008 year end amounts comprise 60% of proved reserves of the three Russian gas companies purchased in 2007 as part of a bid procedure for assets of bankrupt Russian company Yukos. Terms of the call option granted to Gazprom to purchase a 51% interest in the share capital of OOO SeverEnergia (Eni’s interest being 60%), which owns 100% of these three Russian companies engaging in the development of gas reserves, are currently under review by Eni, Enel and Gazprom.

The reserve replacement ratio for Eni’s subsidiaries was 136% in 2008 (38% in 2007 and 38% in 2006). The average reserve life index for Eni’s subsidiaries was 9.6 years at December 31, 2008. The reserve replacement ratio was calculated by dividing additions to proved reserves by total production, each as derived from the tables of changes in proved reserves prepared in accordance with SFAS No. 69 (see the supplemental oil and gas information in the Consolidated Financial Statements). The reserve replacement ratio is a measure used by management to assess the extent to which produced reserves in the year are replaced by reserve additions booked according with SEC criteria under Rule 4-10 of Regulation S-X. Management considers the reserve replacement ratio to be an important gauge of the ability of the Company to sustain its growth prospects. However, this ratio measures past performances and is not an indicator of future production because the ultimate development and production of reserves is subject to a number of risks and uncertainties. These include the risks associated with the successful completion of large-scale projects, including addressing ongoing regulatory issues and completion of infrastructure, as well as changes in oil and gas prices, political risks and geological and other environmental risks. Specifically, in recent years Eni’s replacement produced reserves has been affected by the impact of higher year-end oil prices on reserves entitlements in the Company’s Production Sharing Agreements (PSAs) and similar contractual schemes. In accordance with such contracts, Eni is entitled to a portion of field reserves, the sale of which should cover expenditures incurred by the Company to develop and operate the field. The higher the reference prices for Brent crude oil used to determine year-end amounts of Eni’s proved reserves, the lower the number of barrels necessary to cover the same amount of expenditures. In 2008 this negative trend reversed resulting in a higher amount of booked reserves associated with the Company’s PSAs as the oil price recorded at 2008 year-end was lower than the previous year.

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The table below show Eni’s calculations of its reserve replacement ratios for the years ended December 31, 2006, 2007 and 2008.