Key performance/sustainability indicators

Status of our Libyan operations

From February 22, 2011, liquids and natural gas production at a number of fields in Libya and supplies through the GreenStream pipeline have been halted as a result of ongoing political instability and unrest in the Country. Facilities have not suffered any damage and such standstills do not affect Eni’s ability to ensure natural gas supplies to its customers.
Eni is technically able to resume gas production at or near previous level once the situation stabilizes. The overall impact of the political instability and conflict in Libya on Eni’s results of operations and cash flows will depend on how long such tensions will last as well as on their outcome, which management is currently unable to predict. From April 2011, Eni’s oil and natural gas production was flowing at a rate ranging from 50 to 55 kboe/d, down from the expected level of approximately 280 kboe/d.
Current production mainly consists of gas that is entirely delivered to local power generation plant. Net capital employed in Eni’s upstream activities in Libya amounted to approximately $2.5 billion at year end including Eni’s interest (50%) in the GreenStream BV venture.

Development projects in Iraq and Venezuela

Achieved an increase in production by more than 10% above the initial production rate of approximately 180 kbbl/d at the giant Zubair oilfield, thus beginning cost recovery for its work on the field, including recognition of remuneration fee in the fourth quarter of 2010. Eni, with a 32.8% share, is leading the consortium in charge of redeveloping the Zubair field over a 20-year period, targeting a production plateau of 1.2 mmbbl/d in the next six years.
- Established a joint-venture with the Venezuelan National Oil Company PDVSA for the development of the giant Junin 5 oilfield, located in the Orinoco Oil Belt with certified volumes of oil in place of 35 billion barrels.
First oil is expected in 2013 at an initial rate of 75 kbbl/d, targeting a long-term production plateau of 240 kbbl/d to be reached in 2018.
- Appraisal activities performed in 2010 confirmed Perla as a major gas discovery, one of the most significant in recent years and the largest ever in Venezuela, with volumes of gas in place of over 14,000 bcf. The partners are planning fast track of Perla through an early production phase of approximately 300 mmcf/d, targeted to start-up by 2013.

Portfolio

Reached an agreement with Cadogan Petroleum plc for the acquisition of an interest in two exploration and development licences located in the Dniepr-Donetz basin, in Ukraine. This agreement is part of the development of cooperation initiatives in hydrocarbon exploration and production in the Country also reaffirmed in a Memorandum of Understanding with the Ukrainian Ministry of Ecology and Natural Resources.
- Acquired a 55% stake and operatorship in the Ndunda Block located in the Democratic Republic of Congo.
- Awarded operatorship of two offshore Blocks (Eni’s interest 100%) in the Dahomey Basin as part of its agreements with the Government of Togo to develop the Country’s offshore mineral resources.

- Acquired Minsk Energy Resources operating 3 licences in the Polish Baltic Basin, a highly prospective shale gas play. Drilling operations are expected to start in the second half of 2011.
- Awarded rights to explore and the operatorship of deep offshore Block 35 in Angola, with a 30% interest. This deal is subject to the approval of the relevant authorities.
- Signed a Strategic Framework Agreement with the Egyptian Ministry of Petroleum for new upstream and downstream initiatives.
- Signed a Memorandum of Understanding with the national oil company PetroChina to promote common opportunities to jointly expand operations in conventional and unconventional hydrocarbons in China and outside China.
- Signed with the Government of Ecuador new terms for the service contract for the Villano oilfield, due to expire in 2023. Under the new agreement, the operated area is enlarged to include the Oglan oil discovery, with volumes in place of 300 mmbbl. Development will be achieved in synergy with existing facilities.
- Sanctioned the West Hub project to readily put in production the oil discoveries made in offshore Block 15/06 (Eni operator with a 35% interest), located in Angola. Start-up is expected in 2013 with production peaking at 22 kbbl/d.
- Awarded new exploration leases in Pakistan and Venezuela.
- As part of the rationalization of its upstream portfolio, Eni divested its subsidiary Società Padana Energia to Gas Plus. The divested subsidiary includes exploration leases and concessions for developing and producing oil and natural gas in Northern Italy.

Financial results

In 2010, the E&P Division reported an excellent performance amounting to €5,600 million of adjusted net profit, representing an increase of 44.4% from 2009. This was driven by higher oil realizations in dollar terms, the depreciation of the euro against the dollar and higher volumes sold.
- Return On Average Capital Employed calculated on an adjusted basis was 16% in 2010 (12.3% in 2009).

Production

Reported oil and natural gas production for the full year was 1,815 kboe/d. Production grew by 1.1%, excluding the effect of the updated gas conversion factor. Production growth was driven by the timely delivery of all the 12 planned start ups, particularly the Zubair field in Iraq, and production ramp-ups at fields which were started-up in 2009 for a total increase of 40 kboe/d in 2010. These start-ups will account for 230 kboe/d of production at peak.
- Leveraging on organic growth, Eni expects to deliver a more than 3% compound average growth rate over the next four-year period, targeting a production level in excess of 2.05 mmboe/d by 2014 under a Brent scenario at $70 per barrel.

Reserves

Estimated net proved reserves at December 31, 2010, were 6.84 bboe (up 2.5% from 2009 on comparable basis) based on a 12-month average Brent price of $79 per barrel. The all sources reserve replacement ratio was 125%, net of the gas conversion factor update.
Excluding the price effect, the replacement ratio would be 135%. The reserve life index is 10.3 years (10.2 years in 2009).

Exploration and development expenditures

In 2010, capital expenditures amounted to €9,690 million to enhance assets in well-established areas in Africa, the Gulf of Mexico and Central Asia. Exploration activities (€1,012 million) achieved a number of successes, such as the appraisal activity at the large Perla gas discovery in Venezuela and oil discoveries in Block 15/06 located in the Angolan offshore basin. Further discoveries were made in the North Sea, Egypt, Pakistan, Indonesia, Nigeria and Brazil, through Galp (Eni’s interest 33%).
- A total of 47 new exploratory wells were drilled (23.8 of which represented Eni’s share), in addition to 9 exploratory wells in progress at year end (3.8 net to Eni). The overall commercial success rate was 41% (39% net to Eni).
- Development expenditures were €8,578 million to fuel the growth of major projects in Kazakhstan, Congo, the United States, Algeria, Egypt and Norway.

2010 Highlight