Exploration & Production

In 2006, a total of 68 new exploratory wells were drilled (35.9 of which represented Eni’s share), as compared to 52 exploratory wells completed in 2005 (21.8 of which represented Eni’s share). Overall commercial success rate was 43% (49% net to Eni) as compared to 39.3% (47.4% net to Eni) in 2005.

unrest. Production outside Italy covered 87% of the total (85% in 2005).
Daily oil and condensates production for the year (1,079 kbbl/d) increased mainly in: (i) Angola due to the production ramp-up at the Kissanje and Dikanza fields in Phase B of the development of Kizomba in Block 15 (Eni's interest 20%) and the start-up of the Benguela/Belize/Lobito/Tomboco fields in Block 14 (Eni's interest 20%); (ii) Libya, due to the ramp-up of the Bahr Essalam offshore field (Eni's interest 50%) as part of the Western Libyan Gas Project and the El Feel

Main exploration and development projects

NORTH AFRICA
Algeria Main discoveries for the year were: a) in onshore Block 403a (Eni’s interest 100%), the appraisal wells Rom N2 and N3 found oil at a depth of about 3,300 meters; b) in onshore Block 404a (Eni’s interest 25%), the BBKS-1 discovery well showed the presence of oil at a depth of 3,160 meters which yielded 700 barrels/d in test production; the appraisal well BBKSE-1 showed the presence of oil at a depth of about 3,200 meters and confirmed the eastward extension of the BBKS structure.

The main ongoing development projects are: (i) the ROM flaring down project (Eni’s interest 100%), targeting a 90% decrease in current volumes of flared gas at the ROM satellite center, in accordance with

foresees rates ranging from 5 to 50% depending on the share of production to which a foreign company is entitled and the contractual scheme in force with Sonatrach. In 2006, the application of such tax entailed higher current taxation and a deferred tax charge for a total of euro 328 million impacting Eni’s accounts.

Egypt Main discoveries for the year were in: a) offshore Abu Rudeis permit (Eni’s interest 100%) the Abu Rudeis Marine 4 discovery well showing the presence of liquids at a depth of over 3,000 meters; the well was linked to existing production facilities; b) onshore West Razzak permit (Eni’s interest 80%) the Aghar SW-1X discovery well showed the presence of high quality liquids at a various levels at a depth between 1,800 and 2,300 meters; c) offshore West Baltim permit (Eni’s interest 100%) the Meret 1 and 2 discovery wells showed the presence of natural gas and condensates at various levels at depth between 1,500 and over 3,000 meters; d) offshore Thekah permit (Eni 50%) the Thekah North 1 discovery well showed the presence of natural gas at a depth between 1,350 and 1,650 meters; the well was linked to existing production facilities; e) onshore Meleiha permit (Eni’s interest 56%) the Lotus North 1-X discovery well showed the presence of oil at a depth of over 2,000 meters and has started to produce.
The Nada Ne 1-X discovery well showed the presence of oil and natural gas at a depth of 1,900 meters in the same area and has started to produce.
Development activities are underway in the offshore area of the Nile Delta: (i) in the North Port Said concession (Eni’s interest 100%), the Anshuga gas field was linked to the production facilities of the nearby Nouras field by means of a sea line, starting production in October 2006. Peak production is expected at

drilling activity was completed with 26 production wells linked to the Sabratha platform. Production from Bahr Essalam and Wafa fields is processed at the onshore Mellitah plant on three trains fully operational in 2006. Export of natural gas leverages on the GreenStream gasline, delivering 240 bcf in 2006. This gasline is expected to become fully operational in 2007, exporting some 283 bcf (equal to 77 mmcf/d) supplied to third parties on the Italian natural gas market under long term contracts. In addition, 71 bcf of production gas per year will be sold on the Libyan market. The El Feel field (Eni’s interest 33%) reached peak production at 150 kbbl/d supported by available processing capacity at the Mellitah plant.
As part of development activities in the Bouri Est Area, four producing wells were successfully drilled and linked to existing facilities.

Mali In November 2006, Eni purchased five onshore exploration licenses (Eni operator with a 50% interest) from the companies Baraka Mali Operations Limited and Baraka Mali Ventures Limited, covering a gross acreage of 193,000 square kilometers. Blocks are located in the central part of the Taodueni Basin, a completely unexplored and high potential basin according to recent studies. The life span of this exploration license was fixed at four years.
In March 2006, this operation was approved by Malian Authorities.

Tunisia Main discoveries for the year were in: a) Larish concession (Eni’s interest 50%), the Larish SE-1 well found oil at a depth of about 3,000 meters and was linked to existing production facilities; b) Adam concession (Eni operator with a 25% interest), the Karma-1 well showed an oil formation at a depth of 3,617 meters, which confirmed it as a high potential basin; c) in Bordj el Kadra concession (Eni operator with a 50% interest), the Nakhil-1 discovery well showed the presence of high quality oil at a depth of approximately 4,000 meters.

Kizomba A. Peak production is expected in 2008 at 39 kboe/d (7 net to Eni).
Development activities at the Landana and Tombua oil fields in Block 14 offshore (Eni’s interest 20%) progressed with the drilling of producing wells, one of which has already been started up in June 2006. A few production wells, one of which was started-up in June 2006, shall be linked to existing facilities at Benguele/Belize-Lobito/Tomboco. Peak production at 130 kbbl/d (22 net to Eni) is expected in 2010.

Congo A discovery was made in the Mer Très Profond Sud permit (Eni’s interest 30%) with the Aurige Nord Marine – one well yielding 5 kbbl/d of oil in test production.
In February 2007, Eni acquired certain onshore exploration and production assets operated by Maurel & Prom, entailing a cash consideration of $1,434 million. This transaction includes the producing fields of M’Boundi (48.6%) and Kouakouala A (66.7%), the production concession of Kouakouala B (50%) as well as most of the interests in the Le Kouilou (50%) exploration permit which are subject to a pre-emption right in favor of Burren Energy, partner of Maurel & Prom. Eni and Burren Energy reached an agreement providing for Burren Energy's waiver of the exercise of its pre-emption right and Eni's divestiture to the English oil company of a 5.5% interest in the M'Boundi concession and a 2% stake in the Le Kouilou exploration permit under the same economic terms as the acquisition from Maurel & Prom, for an amount of $154 million. Eni retains the operatorship and participating interests of 43.1% and 48% in the M'Boundi concession and Le Kouilou exploration permit, respectively.
The transaction is subject to approval by the Congolese authorities.

aiming at providing natural gas supplies to the Bonny liquefaction plant. Offshore production facilities have been installed. The onshore project provides for the upgrading of the Okri and North/South Bank flowstations and the realization of a gas compressor plant.

Eni holds a 10.4% interest in the Bonny liquefaction plant located in the eastern Niger Delta. In 2006, the fifth train started operations, increasing plant capacity to 17 mmtonnes/y of LNG (812 bcf/y of natural gas feedstock). A sixth train with production capacity of 4.1 mmtonnes/y is under construction with start-up expected in 2008; the seventh unit is being engineered. When fully operational total capacity will hit approximately 30 mmtonnes/y, corresponding to a feedstock of 1,448 bcf/y. Development initiatives for ensuring natural gas supplies to the plant regard Blocks OML 60, 61, 62 and 63 (Eni’s interest 20%). When the 6-train plant is fully operational, Eni is expected to supply 268 mmcf/d of equity gas (47 kboe/d), of these 169 mmcf/d (30 kboe/d) from Eni’s interest in NAOC JV and 99 mmcf/d (17 kboe/d) from Eni’s interest in SPDC JV. Engineering activities to build a new LNG plant in Brass, with liquefaction capacity of 10 mmtonnes/y on two trains, are underway. In September 2006, Eni signed a Shareholder Agreement with the partners of this project. Project sanction is expected in 2008, with start-up expected in 2011. Supplies to the plant will come from associated upstream projects targeting 50% of gas feedstock requiremets.
In March 2007, Eni obtained the role of operator with a 48% interest in the OPL 135 permit. The exploration plan envisages research for and development of oil and natural gas reserves in the proximity of existing facilities and the Kwale/Okpai power station where Eni is operator.

Ongoing development activities are focused primarily on hydrocarbon bearing structures located near the Kristin field (Eni’s interest 8.25%). Development of the Tyrihans field (Eni’s interest 6.23%) is expected to be profitable through synergies with the Kristin production facilities. In July, the development plan was sanctioned; relevant contracts for building infrastructure and production facilities are being awarded. Production is expected to start in 2009, in coincidence with the expected production decline of Kristin which will make spare capacity available to process production from Tyrihans.

United Kingdom Main discoveries for the year were in: a) the P/011 permit in Block 30/06a (Eni’s interest 33%) in the central section of the North Sea an appraisal well was drilled at a depth between 4,500 and 5,100 meters confirming the presence of hydrocarbons; b) the P/672 permit in Block 30/02c (Eni’s interest 7%) in the central section of the North Sea, a discovery of a natural gas and condensate bearing layer was made at a depth of 5,000 meters; this well was linked to the production facilities of the nearby Jade field (Eni’s interest 7%).
In March 2006, production started at the offshore gas and condensate Glenelg field (Eni’s interest 8%), developed by means of the facilities of the nearby Elgin Franklin production platform (Eni’s interest 21.87%). In 2006 production totaled 12 kboe/d (1 net to Eni).
Development activities are nearing completion at the Blane field in Block 30/3a (Eni’s interest 18%). Production at 12 kboe/d (2.2 net to Eni) is expected to start in the first half of 2007.

Croatia In the offshore Ivana concession (Eni’s interest 50%) the Ana 1 and Vesna 1 discovery wells identified the presence of natural gas at a depth between 650 and 1,200 meters.
Ivana C/K platforms and Ika and Ida fields started production as part of the development of natural gas reserves of the Ivana concession. Production from these fields is gathered at the Ivana K platform from which is sent to the Garibaldi K platform to be sold on the Italian market, through a 67-kilometer long pipeline. Production from these four fields is currently flowing at 152 mmcf/d (49 net to Eni). At the end of 2006, production at the Katarina field started by means of two platforms linked to existing transport facilities.

East Timor In May 2006 following an international bid procedure Eni was awarded the operatorship of five exploration licenses (Eni’s interest 100%) covering contract areas A, B, C, E and H with a gross acreage of about 12,183 square kilometers located in the deep offshore between the Timor island and the international cooperation zone between East Timor and Australia. Relevant Production Sharing contracts were signed.

Kazakhstan Eni is single operator with an 18.52% interest of the North Caspian Sea PSA. Such contract regulates activity in the relevant contractual area where the Kashagan field was discovered, which is deemed to be the most important discovery in the world in the past thirty years. The development plan of this field was sanctioned in February 2004, entailing a three-phase development scheme to produce from 7 to 9 bbbl of recoverable reserves, extendable to 13 bbbl through partial gas reinjection.

The first development phase is progressing leveraging on the use of the most advanced techniques in order to cope with high pressures in the reservoir, the presence of high concentration of hydrogen sulphide and harsh environmental conditions. By the end of 2006, works had been completed corresponding to 59% of the initial scope, with the total amount of contracts awarded at $10.6 billion. Drilling activities and completion of development wells from the two artificial islands already installed have been progressing. In addition, three rigs, two of which being of the most advanced class, were installed on said islands. Three development wells were completed yielding high rates of productivity under test phase.
Production start-up is currently scheduled for the third quarter of 2010 as compared to an initial forecast indicating a start-up in 2008, due also to the need on part of Eni to perform certain studies to define measures intended to enhance the overall level of safety and operability of facilities. As a result of said reconfiguration completed by year-end, the onshore design has been confirmed, while certain enhancements have been identified offshore which do not alter the original development concept. These enhancements are expected to be included in the development plan and implemented. Estimated capital expenditure to reach the 300 kbbl/d production target in first development phase stands currently at $19 billion, representing a remarkable increase over the approved budget of $10.3 billion in real

and Thar/Umarkot - zone III. These blocks are located in the East Sindh near the border with India and cover a gross area of about 9,900 square kilometers.
In March 2006, an expansion plan of the Bhit and Badhra operated permits was sanctioned, envisaging the construction of a third train for increasing treatment capacity of the Bhit plant also enabling to process Badhra field gas production. In the Zamzama field construction of a new treatment plant is underway.

United States - Gulf of Mexico Main discoveries for the year were: a) in Mississippi Canyon Block 546 (Eni’s interest 50%), the Longhorn appraisal well confirmed the presence of natural gas at a depth of about 3,900 meters; b) in Mississippi Canyon Block 502 (Eni’s interest 100%), the Longhorn North discovery well showed the presence of natural gas at a depth of 3,400 meters. A feasibility study to develop this discovery is underway.
The Allengheny South (Eni’s interest 100%) and North Black Widow (Eni’s interest 25.19%) fields started production as part of activities to develop reserves in the Gulf of Mexico.

United States - Alaska In November 2006, Eni started an exploration campaign in the onshore Rock Flour area (Eni’s interest 100%). The approved plan provides for the drilling of three wells.
In March 2006, following an international bid procedure, Eni was awarded 11 exploration blocks near Rock Flour.
Eni signed an agreement with a partner for a swap of interests in 64 exploration blocks (Eni’s interest 60%) located in the Beaufort Sea, offshore North Alaska. Based on this agreement, Eni is entitled to 140 exploration blocks (50% of which operated). Exploration plans provide for 3D seismic surveys and drilling of an exploration well by 2010.
In January 2006, the development plan of the offshore Oooguruk field in the Beaufort Sea started. Production is expected to start at the end of 2007 with production peaking at 17 kboe/d (over 5 net to Eni) in 2010. Drilling activities in Nikaitchuq field (Eni’s interest 30%), located in the Beaufort Sea, are underway.

same day, operations at the Dación oil field are conducted by PDVSA. Eni proposed to PDVSA to agree on terms in order to recover the fair value of its Dación assets. On November 2006, Eni commenced a proceeding before the International Centre for Settlement of Investment Disputes (ICSID) Tribunal (i.e. a tribunal acting under the auspices of the ICSID Convention and being competent pursuant to the Treaty) to claim its rights. In fact, a bilateral investments treaty is in place between the Netherlands and Venezuela (the “Treaty”). Despite this action, Eni is still ready to negotiate a solution with PDVSA to obtain a fair compensation for its assets. Based on the opinion of its legal consultants, Eni believes to be entitled to a compensation for such expropriation in an amount equal to the market value of the OSA before the expropriation took place. The market value of the OSA depends upon its expected profits. In accordance with established international practice, Eni has calculated the OSA’s market value using the discounted cash flow method, based on Eni’s interest in the expected future hydrocarbon production and associated capital expenditures and operating costs, and applying to the projected cash flow a discount rate reflecting Eni’s cost of capital as well as the specific risk of concerned activities. Independent evaluations carried out by a primary petroleum consulting firm fully support Eni’s internal evaluation. The estimated net present value of Eni’s interest in the Dación field, as calculated by Eni, is higher than the net book value of the Dación assets which consequently have not been impaired. In accordance with the ICSID Convention, a judgement by the ICSID Tribunal awarding compensation to Eni would be binding upon the parties and immediately enforceable as if it were a final judgement of a court of

Italy Main gas discoveries for the year were made in: a) the onshore San Polito concession in Emilia, the Longanesi 1 well, at a depth of 2,540 meters; b) the offshore of Sicily (GR.13.AG permit, Argo 1 well, Eni’s interest 60%) at a depth between 1,350 and 1,520 meters; c) the Adriatic Sea (AR.95.EA permit, Benedetta 1 well) at a depth of 2,090 meters which yielded 145 kcm/d of gas in test production; d) the onshore of Sicily (San Teodoro permit, Borgo Giuliano 1 well) at a depth of about 2,000 meters.
Development activities concerned in particular: (i) optimization of producing fields by means of sidetracking and infilling (Barbara A/H, Daria, Basil and Anemone for gas and Rospo for oil); (ii) continuation of drilling and upgrading of producing facilities in the
Val d’Agri. The main oil reserves development project is Miglianico, located onshore in the Abruzzi Region. Production is expected to start in the second half of 2008. This project provides for the construction of facilities intended to treat production volumes of oil, to be delivered to logistic structures of the Refining & Marketing Division, and to desulfurize production volumes of gas to be input into the Italian natural gas transportation network.
Development of onshore gas fields is nearing completion at: (i) Tea, Arnica, Lavanda in the Adriatic offshore where start-up of production is expected in 2007. In 2006, a production platform and linkage facilities have been installed; (ii) Candela, where start-up is expected in 2007; (iii) certain gas fields in Sicily: Pizzo Tamburino, scheduled for the second half of 2007 with expected