Determination of Reference Prices for non Eligible Customers at December 31, 2002

With a decision of November 13, 2006, the Council of State concluded the dispute between operators of the natural gas business, among which Eni, and the Italian Authority for Electricity and Gas related to Decision No. 248 of 29 December 2004,"Determination of reference prices for non eligible customers at December 31, 2002" confirming the existence of formal flaws impairing the efficacy of the appeal presented by the Authority against the first degree decision that annulled the Authority's decision against operators.

As far as the substance of the appeal is concerned, the Council of State previously stated that the Authority is entitled to hold such powers as to regulate certain activities of the energy sector in Italy which were liberalized by Law No. 239/2004 (in particular the sale of natural gas). Said regulatory powers enable the Authority to preserve competition and protect final clients. Based on these considerations and on the uncertainty of the efficacy of decisions implementing Decision No. 248/2004 (among these No. 298/2005, No. 65/2006 and No. 134/2006) Eni's management prepared its consolidated financial statements for 2006 by assessing the impact of the regulatory regime based on the indexation mechanism set out by Resolution No. 248/2004.

This treatment was consistent with the one adopted in the preparation of quarterly and semi-annual accounts for 2006. In addition, Eni began to renegotiate the terms of supply contracts with its wholesale customers as provided for by Decision No. 134/2006, which obliged Italian wholesalers to offer final clients new pricing terms which take into account the revision of the indexation mechanism of the raw material component as introduced by Resulution No. 248/2004. This provision applies only to wholesale contracts closed after the entry into force of Decision No. 248/2004. The provision accrued in the 2005 consolidated financial statements as an estimate of the impact of the indexation mechanism of Resolution No. 248/2004 in 2005 was deemed partially redundant as a result of the provisions of Resolution No. 134/2006. In fact, Resolution No. 134/2006 granted to companies complying with the renegotiation requirement an amount corresponding to 50% of the difference between the updating of the cost of raw materials calculated under Decision No. 284/2005 and that calculated under the previous regime (under Decision No. 195/2002) for the 2005 fiscal year as well as 50% of the variable compensation component in wholesale contracts.

For further information on this matter see Eni's Report on the First Half of 2006 – Operating Review – Gas & Power – Regulation - Determination of reference prices for non eligible customers at December 31, 2002 - Resolutions No. 248/2004 and No. 134/2006 of the Italian Authority for Electricity and Gas. With Resolution No. 12/2007 of January 23, 2007, the Italian Authority for Electricity and Gas started a procedure to adopt a new indexation mechanism of the cost of raw material effective retroactively as of January 1, 2005. On March 1, 2007, the Authority published a consultative document.