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Fourth Annual Forum on Business Ethics and Corporate Social Responsibility in a Global Economy

RESTORING RESPONSIBILITY: THE ACCOUNTABLE CORPORATION

Milan, 13-14 September 2007

Marco StampaEni – Sustainability office

TRANSPARENCY IN THE OIL & GAS SECTOR:ENI COMMITTMENT

Fourth Annual Forum on Business Ethics and Corporate Social Responsibility in a Global Economy

RESTORING RESPONSIBILITY: THE ACCOUNTABLE CORPORATION

Milan, 13-14 September 2007

Marco StampaEni – Sustainability office

TRANSPARENCY IN THE OIL & GAS SECTOR:ENI COMMITTMENT

Transparency in business means:

1) governance and control system to prevent corruption and non compliant behaviour (Eni Code of Practice (1994, amended with HR principles in 2003, represents the general framework in the fields of business ethics, transparency and accountability, human resources relations, HSE, community relations and Human Rights. Specific Policies-Guidelines set company rules on the single matters)

2) be proactive to engage with stakeholders in a systematic way

3) report on payments to governments and national authorities in areas of operations

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In its Code of Practice Eni prohibits not only corruption and/or illegal practices but also any type of non legitimate behaviour

About business ethics, Eni states that “…activities must be performed in full respect of the law, in fair competition, with honesty, integrity and good faith, with due respect for th legitimate interest of its customers, employees, shareholders, commercial and financial partners and the communities where it is present.”

To fulfil with these principles, Eni adheres to national law and international regulations (i.e. OECD guidelines) on accountability by adopting a specific Model of Organization Control and Management.

Governance and anticorruption system

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The “Model” from Decree 231/2001

Decree 231/2001 defines and regulates the administrative responsibility of persons, companies and partnerships. Current field of application includes:

1.Crimes against Public Administration2.Corporate Crimes3.Crimes against democracy and Public Security (i.e.

terrorism funding!)4.Crimes against individuals5.Market abuse6.Transnational crimes

The Model foresees standards and control measurement for each crime typology

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The Eni Model for Decree 231/2001

• The Model is communicated to all operating units

• All subsidiaries mus adopt their own Model in line with Corporate standards; they have also to identify further measures related to their peculiar activities

• A “Watch Structure” acts as monitoring and verification body to check alignment to Eni Model

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Training and internal communication

Apart from being communicated to all employees and managers, the Model is implemented through an intensive training program:

1. Ad hoc seminars for top managers

2. E-learning initiatives to senior and unit managers and key officers. Attendance is mandatory and you can pass through the test only when 100% score is achieved

3. Other training schemes within the company basic training courses for neo-graduates and junior managers

Information initiatives and discussion groups on Code’s implementation and business ethics are also organized

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Third parties clauses

Legal Dept. has defined clauses for third parties (i.e. contractors) for the compliance to Eni Model; these clauses refer to bid and contract requirements

Non compliance is considered as serious infringement of Eni rules. The company has the power to suspend or even break the contract and ask for remediation and cost remboursement in case of serious non compliance

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Sarbanes Oxley Act (SOA) Control System

To adhere to Security and Exchange Commission (SEC) recommendations, Eni has adopted the “Committee Of Sponsoring Organization Report” as reference model for the assessment of the control system. We consider the system effective when and if are in place the following:

• An adequate control (corporate governance, human resource management, code of practice, etc.) to really influence the sensitiveness of control management

• Actions to identify and assess risks

• Control activities to mitigate identified risks

• Adequate information system and communication flows between top management and operating units (and viceversa)

• Monitoring actions on effectiveness of the whole internal control working and design

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The Whistle Blowing procedure

26 June 2006 Eni has approved a Corporate procedure on “Whistle Blowing, even anonymous, received by Eni and subsidiaries” (external and internal whistle blowing referred to any non compliant behaviour-practice, fraud, irregularity, violation, mobbing etc.)

Aim of the procedure is to establish an unique information channel for all whistle blowing typologies to complete and reinforce the Internal Control System to be compliant with Section 301 of the Sarbanes Oxley Act

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Company Internal Control Bodies

Bodies in charge of control are therefore:

• Internal Control Comittee (5 non executive managers – of which 4 indipendent): it surveilles adequacy of the Internal Control System

• Compensation Committee (4 non executives managers, of which 3 indipendent) it monitors and assesses BoD decisions on top management compensation)

• Board of Statutory Auditors (wthin Italian regulation it has the same functions given by SOA and SEC to the Audit Committee to USA listed companies)

• Code of Practice Guarantor (it is adopted in all operation units. At Eni is an external person)

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Code of Practice Committee (in all subsidiaries)

Watch Structure according to Decree 231/01. It has autonomous powers of control and is established in all subsidiaries who have Decree 231 Model. At Eni corporate is formed by the Internal Audit Senior VP, the Legal Dept. Senior VP and the Organizational Dept. Senior VP

Internal Audit (since July 2005 this position reports to both CEO and Chairman and according to new Italian Stock Exchange Code, to which Eni adheres, he/she reports on his/her work also to Internal Control Committee and to Board of Statutory Auditors; his/her compensation is decided by Board of Directors)

Company Internal Control Bodies

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Transparency on payments

“Transparency” in the areas of operations is, in practical terms, the company attitude to inform the public on the various kind of payments (royalties, bonus, profit shares, etc.) from the companies to governments and national entities in host countries owning natural resources

Stakeholders’ interest (NGOs, Investors, International Financial Institutions), points out that revenues flows are not oriented to illegal activities and/or aims not compatible with socioeconomic development of those countries.

Eni has signed in 2002 an agreement with ICEM – Energy and Chemical sector Trade Unions on transparency and CSR

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Extractive Industry Transparency Initiative (EITI)

To ensure more transparency from extractive companies and governments, UK Prime Minister Tony Blair launched the Extractive Industry Transparency Initiative (EITI) at Johannesburg summit 2002. Goals: address revenues to sustainable development and poverty reduction, reduce risks and conflicts, improve business environment

After a multistakeholders consultation and discussion at G8 summits, in 2003 a set of Criteria and a voluntary reporting template for both companies and governments have been published.See web site: www.eitransparency.org

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Host countries implementing EITI: Azerbaijan, Kazakhstan,Popular Republic of Congo, Ghana, Kirghizistan, Nigeria, Sao Tomé & Principe, Timor East and Trinidad & TobagoHost countries announcing support: Angola, Bolivia, Cameroon, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, Niger, Peru and Sierra Leone.

Major International oil companies are supporting EITI and some of them are implementing the model in local contexts (Azerbaijan; Nigeria; Angola)

Who is doing what

NGOs (Transparency International, Open Society Institute/Soros, Save the Children) and investors are pushing companies to support EITI and country level initiatives.International Financial Institutions (IMF, World Bank) support EITI.

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EITI : Eni commitment

Eni has attended from the very beginning the EITI multistakeholder consultation and on 11 Oct 2005 joined EITI through a formal top management communication To support EITI in countries of operations Eni participates to local multistakeholder consultations and to International Advisory Group to implement and develop reporting schemes, once legal and commercial constraints are removed with general consensus

In Kazakhstan a Memorandum of Understanding (MoU) with Kazakh Government has been signed in 2005 by Agip Caspian Sea B.V. (for Kashagan project) and by Agip Karachaganak In Nigeria figures on payments to Nigerian government on oil related activities have been disclosed in 2006 by Eni subsidiary NAOC (see table below, also published in Eni Sustainability report 2006)