All financial data presented in this report is based on consolidated financial statements prepared in accordance with IFRS.
For definitions of certain financial and operating terms see "Frequently used terms" section, on page 46.

This report contains certain forward-looking statements particularly those regarding capital expenditures, development and management of oil and gas resources, dividends, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sale growth, new markets and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and

Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; management’s ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and regulations; development and use of new technologies; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document.

As Eni shares, in the form of ADRs, are listed on the New York Stock Exchange (NYSE), an Annual Report on Form 20-F has been filed with the US Securities and Exchange Commission in accordance with the US Securities Exchange Act of 1934.
Hard copies may be obtained free of charge (see the request form on Eni’s web site – eni.com – under the section "Publications"). Eni discloses on its Annual Report on Form 20-F significant ways in which its corporate governance practices differ from those mandated for US companies under NYSE listing standards.
The term "shareholder’" in this report means, unless the context otherwise requires, investors in the equity capital of Eni SpA, both direct and/or indirect.

Eni shares are traded on the Italian Stock Exchange (Mercato Telematico Azionario) and on the New York Stock Exchange (NYSE) under the ticker symbol "E".

2009

2010

2011

Management will retain a strong focus on pursuing operational excellence, synergies from integration and developing integrated risk management capabilities in order to sustain Eni’s industrial targets and expected returns.
Operational excellence thanks to Eni’s know-how and distinctive competences envisage preventive business conduct when managing the environmental footprint of Eni’s operations and risks to employees and communities’ health and safety. Continuing improvement in efficiency through innovation of business processes will enable the Company to reduce the energy intensity of its productions, optimize plants activities and achieve economies of scale in centralized services.

Integration will enable Eni to capture joint opportunities in the marketplace, reaping the benefits of synergies and maximizing asset returns. Particularly, the new trading unit will develop integrated risk management activities with a view of better coping with the increasingly volatile commodity markets.

2009

2010

2011

Greenhouse gas emissions (total and from flared) reported a steep decline, reflecting the completion of certain gas recovery projects in Nigeria and the reduction in associated gas to feed the ramp-up of two turbo-generators in a power plant in Congo. Performance for the year was also impacted by lowered Libyan activities.

In 2011, the E&P Division reported an excellent performance amounting to euro 6,866 million of adjusted net profit (up 22.6% from 2010), reflecting higher oil prices and the rapid recovery of Libyan output.

In 2011, Eni reported liquids and gas production of 1,581 kboe/d, down by 12.9% from 2010, mainly due to a lowered output in Libya. Performance was also negatively impacted by lower entitlements in the Company’s Production Sharing Agreements due to higher oil prices with an overall effect of approximately 30 kboe/d from 2010. Net of this effect and the above mentioned loss of Libyan output, production for the year was in line with 2010.

In the year oil spills from accidents declined by 23% from 2010, due to significant prevention activities undertaken.

To execute these strategies, we plan to spend approximately euro 37.6 billion to explore for and develop new reserves over the next four years. Exploration projects will account for approximately euro 5.5 billion. Approximately euro 1.7 billion will be spent to build transportation infrastructures and LNG projects through equity-accounted entities.

Liquids

Natural gas

Hydrocarbons

Liquids

Natural gas

Hydrocarbons

Liquids

Natural gas

Hydrocarbons

(kbbl/d)

(mmcf/d)

(kboe/d)

(kbbl/d)

(mmcf/d)

(kboe/d)

(kbbl/d)

(mmcf/d)

(kboe/d)

- 9 -

Actual production volumes will vary from year to year due to the timing of individual project start-ups, operational outages, reservoir performance, regulatory changes, asset sales, severe weather events, price effects under production sharing contracts and other factors.

Estimated net proved reserves at December 31, 2011, were 7.09 bboe (up 3.6% from 2010) based on a 12-month average Brent price of $111 per barrel. Additions to proved reserves booked in 2011 derived from: (i) extensions, discoveries and other factors, with major increases booked in Russia, Venezuela, the United States and Angola; (ii) revisions of previous estimates mainly reported in Norway, Russia, Italy, Egypt, Kazakhstan and Iraq; (iii) improved recovery mainly reported in Norway and Algeria. The reserves life index is 12.3 years (10.3 years in 2010).

Eni intends to pay special attention to reserve replacement in order to ensure the medium to long-term sustainability of the business. In 2011, we achieved a strong reserve replacement ratio of 142% through fast sanctioning and timely start-ups of new projects. We made final investment decisions to develop large projects such as the jointly-operated Samburgskoye and Urengoskoye giant gas fields in Siberia, the Perla project in Venezuela, as well as projects in Norway and the Gulf of Mexico which enabled us to book noticeable amounts of reserves in the year. Eni will continue focusing on well-established areas of presence where we have experience and good knowledge of the geological model. Those areas include Sub-Saharan Africa, Venezuela, Norway, Russia, Kazakhstan and Iraq where availability of production facilities will enable the Company to readily put in production discovered reserves.
Our reserve replacement will be underpinned by our strong focus on exploration and timely conversion of resources into reserves and production, while at the same time fighting depletion and enhancing the recovery factor in existing fields through effective reservoir management.

Exploration projects will attract some euro 5.5 billion to appraise the latest discoveries made by the Company and to support continuing reserve replacement over the next four years. The most important amounts of exploration expenses will be incurred in Mozambique, the United States, Egypt, Nigeria, Angola, Norway and Indonesia; important resources will be dedicated to explore new areas in Sub-Saharan Africa (the Republic of Liberia, Ghana) and on unconventional plays. Over the next four years we aim to discover approximately 1 bboe of resources per year, at an average unit exploration cost of $2 per boe. We will continue to focus on assets with high materiality and fast time to market, concentrating on plays where we have experience and good knowledge of the geological model. We are also renewing our portfolio in new basins close to areas with high demand growth.
As of December 31, 2011, Eni’s mineral right portfolio consisted of 1,106 exclusive or shared rights for exploration and development in 41 Countries on five continents for a total acreage of 254,421 square kilometers net to Eni of which developed acreage of 41,373 square kilometers and undeveloped acreage of 213,048 square kilometers. Acquisition of new leases in Angola, Australia, Ghana, Indonesia, Nigeria, and Norway and in Ukraine further enhanced our upstream portfolio.

n Oil & gas major projects

Block 405b – Algeria (Eni 75%, Op.)
Development activity progressed up the MLE and CAFC projects. The MLE project provides for the construction of a natural gas treatment plant with a capacity of 350 mmcf/d and of four export pipelines with linkage to the national grid system. These facilities will also handle gas from the CAFC field. Production start-up is expected in 2012. The CAFC project provides the construction of an oil treatment plant and will also benefit from synergies with MLE production facilities. Gas and oil production start-up of CAFC field are expected in 2012 and 2014, respectively. The overall Block 405b will target a production plateau of approximately 33 kboe/d net to Eni by 2015.

El Merk, Block 208 – Algeria (Eni 12.25%)
The scope of work provides for the construction of a gas treatment plant with a capacity of approximately 600 mmcf/d, two oil trains with a capacity of 65 kbbl/d and three export pipelines with linkage to the national system for a production of approximately 11 kbbl/d net to Eni. Start-up is expected in 2013.

Kizomba satellites, Phase 1, Block 15 – Angola (Eni 20%)
The Kizomba satellites development targets the Clochas and Mavacola oil discoveries. The project provides for the drilling of 18 producing wells to be linked to an FPSO vessel already deployed in this area. Associated gas will be initially re-injected in the reservoirs in the Kizomba area, and later delivered to the A-LNG liquefaction plant. Start-up is expected by mid 2012 and production to peak at 100 kbbl/d (approximately 21 kbbl/d net to Eni) in 2013.

Kashagan, Phase 1 – Kazakhstan (Eni 16.81%, Op.)
Development activities are progressing at the giant Kashagan oil field located off the Kazakh section of the Caspian Sea, where Eni is operator of Phase 1 of the project (the so-called "Experimental Program"). Phase 1 targets an initial production capacity of 150 kbbl/d. In 2014, the second train of treatment and compression facilities for gas re-injection will be completed and come online enabling to increase production capacity up to 370 kbbl/d. The partners are planning to further increase available production capacity up to 450 kbbl/d by installing additional gas compression capacity for re-injection in the reservoir. The partners intend to submit the scheme of this additional gas compression activity to the relevant Kazakh Authorities in the course of 2012 in order to obtain approval to start the engineering design. The partners are currently assessing the Phase 2 of the development of the Kashagan field with a view of optimizing the development lay-out. The review is expected to be completed by 2012.
The Consortium continues to target the achievement of first commercial oil production by the end of 2012 or in the early 2013.

Eni has a strong pipeline of development projects that will fuel the medium and long-term growth of its oil and gas production, with a break-even price of $45 per barrel.
The pipeline of projects is geographically diversified, with 20% of new production coming from developments in OECD Countries, and 30% from Russia and the Caspian area. However, while our production is geographically diversified it is also focused on a number of key hubs (Yamal Peninsula in Russia, Barents Sea in Norway, Kazakhstan and Venezuela), with synergies in terms of geological and local expertise, infrastructure and relationships with local communities, and which will give a material contribution to long-term production.

We expect that costs to develop and operate fields will increase in the next years due to sector-specific inflation, and growing complexity of

Yamal Peninsula – Russia (Eni 29.4%)
We have 5 giant gas and condensates fields to develop in Russia. In 2011 we finalized our gas sales agreements and took the final investment decision on the Samburgskoye field. Start-up was achieved in April 2012 with an expected peak production of approximately 43 kboe/d (14 kboe/d, net to Eni). In addition, the Final Investment Decision of the onshore gas and condensate Urengoskoye field was sanctioned. Start-up is expected in 2014. Activities are progressing also on the Yaro-Yakhinskoye field. Oil production start-up is expected by the end of 2012, while first gas production in 2014. Lastly the Severo field will be in production by the end of 2015 and the definition of the field development plan is progressing. The Yamal hub will be provide over 120 kboe/d by 2015 and we confirm our expectation of long-term plateau of approximately 200 kboe/d.

Perla – Venezuela (Eni 50%)
Perla is a giant gas field which was discovered by an Eni-participated joint venture in 2009 off the Venezuelan coast in the Gulf of Venezuela. The final investment decision for the first development phase was sanctioned in the year and a Gas Sale Agreement was signed. EPC contracts for the project are being awarded. The early production phase includes the utilization of the already successfully drilled wells and the installation of production platforms linked by pipelines to the onshore treatment plant. The target production of approximately 300 mmcf/d is expected in 2014. The investment plan for the first development phase is estimated at $1.4 billion. The development of Perla is currently planned to continue with two more phases by means of the drilling of additional wells and the upgrading of treatment facilities to reach a plateau production of 1,200 mmcf/d.

2009

2010

2011

Divestment of international pipelines
In 2011, Eni divested its interests in the international pipelines importing natural gas from Northern Europe (TENP and Transitgas) and Russia (TAG) to Italy as part of the agreements made with the European Commission in 2010. Total consideration amounted to approximately euro 1.5 billion.

Belgium
In January 2012, Eni finalized the acquisition of Nuon Belgium NV and Nuon Power Generation Wallon NV for an outlay of euro 214 million. The

2011 performance
The G&P segment posted a 39.8% drop in adjusted net profit to euro 1,541 million, due to sharply lower results of the Marketing business. This was negatively impacted by weak demand and continuing competitive pressures fuelled by oversupply which pressured selling margins and reduced volumes opportunities. The performance was also affected by the disruption in Libyan gas. Furthermore, the results reflected only a part of the benefits associated with the renegotiations of gas supply contracts, certain of which have been finalized after 2011 year-end. These lower results were partly offset by the positive operating performance delivered by the International transport and Regulated businesses in Italy.

Worldwide gas sales were basically stable at 96.76 bcm supported by commercial initiatives, despite lower consumption and competitive pressures. We grew in many European Countries and in international LNG

Our regulated businesses in gas transport, distribution and storage in Italy will continue focusing on network upgrading and efficient operations. However, we expect to exit these businesses due to a changed Italian regulatory environment in the near future. Finally our International transport business was downsized in 2011 following the divestment of our interests in the pipelines and carrier companies which transport gas from Northern Europe and Russia to core European consumer markets, including Italy. We expect that our residual activities in this business will continue to provide steady returns across the plan period.
In the next four-year period, we plan to invest euro 7.2 billion in the business.
Planned expenditures will be largely focused on regulated businesses with guaranteed returns, aiming at improving the system’s flexibility and also at expanding gas storage capacity in Italy. In the Marketing business, we will invest about euro 1 billion, mainly in the power generation sector to increase flexibility and plant efficiency.

2009

2010

2011

In spite of a challenging market environment and rising competitive pressures, over the next four years we intend to strengthen our leading position in the European gas market targeting to gradually recover profitability by leveraging on the following initiatives:
n on the supply side, we intend to improve the competitiveness of our supply portfolio which is the key factor to cope with the ongoing market downturn and regain profitability once the European market tightens. We believe that our supply portfolio has:
- to be competitive with spot prices;
- to be flexible on take or pay volumes; and
- to give both suppliers and buyers the option to renegotiate more frequently if required by market conditions. We have already made good progress on this front. In the last two years, we have closed contract renegotiations with the Libyan NOC, Sonatrach and, in recent weeks, with Gazprom, which between them account for almost 70% of our supply portfolio. Looking forwards, we will continue to work on the competitiveness and market reflectivity of our portfolio. We plan to open negotiations with other of our suppliers in the second part of 2012;
n on the commercial side of our equation we intend:
- to consolidate our leading European position in the business gas market, where we have a well balanced portfolio in terms of geographies, customer segments and contract durations. Over the plan period, we will drive sales and market share gains by leveraging on the multiple presence in a number of markets, the development of a pan-European commercial platform,

term gas purchase contracts with key producing Countries that supply the European gas markets. These contracts have been ensuring approximately 80

Eni, through Snam SpA (Eni’s interest being 52.53%), a company listed on the Italian Stock Exchange, operates most of the Italian natural gas transport network, a re-gasification terminal located in Panigaglia, an extensive grid of local distribution networks and gas underground storage deposits and related facilities.
In the next four years, Snam plans to make capital expenditures in the regulated businesses in the amount of approximately euro 6.7 billion of which 1.4 billion will be spent in 2012. These investments will be aimed at improving the security and flexibility of the gas system, by:
(i) increasing gas transport capacity by adding approximately 1,000 kilometers of new lines to the existing 32,000 kilometer-long network as at end of 2011 and by increasing the installed power of the compression stations by around 4% versus 2011; and (ii) improving the overall flexibility and security of the storage system through an increase in both the modulation and peak capacity and providing storage services to the industrial market.

Transport Activity
Snam, through its subsidiary Snam Rete Gas, is the leading Italian natural gas transportation and dispatching operator, and owns almost all the transportation infrastructures in Italy, with over 32,000 kilometers of high and medium pressure gas pipelines (approximately 94% of the entire transportation system), being the major player in Europe in terms of Regulatory Asset Base (RAB).
Snam Rete Gas network comprises: (i) a national transport network extending over 9,080 kilometers, made up of high pressure trunk-lines mainly with a large diameter, which carry natural gas from the entry points to the system – import lines, storage sites and main Italian natural gas fields – to the linking points with regional transport networks. The national network includes also some interregional lines reaching important markets; and (ii) a regional transport network extending over 22,930 kilometers, made up of smaller lines and allowing the transport of natural gas to large industrial complexes, power stations and local distribution companies in the various local areas served.
The Snam Rete Gas system is completed by: (i) eleven compressor stations with a total power of 883.7 MW used to increase gas pressure in pipelines

Eni’s power generation sites are located in the Italian spots of Ferrera Erbognone, Ravenna, Livorno, Taranto, Mantova, Brindisi, Ferrara and Bolgiano where we have implemented a plan of capacity upgrading by installing new plants for the combined production of steam and electricity.

n INTERNATIONAL TRANSPORT
Eni owns capacity entitlements in an extensive network of international high pressure pipelines enabling the Company to import natural gas produced in Russia, Algeria, the North Sea (including the Netherlands and Norway), and

2009

2010

2011

We continued upgrading our network of retail stations by rebranding, our outlets to the "eni" logo and improving quality standards and layout. Since the start of the program in 2010, 1,700 stations have been rebranded.

Capital expenditure of euro 866 million related mainly to projects designed to improve the conversion capacity and flexibility of refineries, logistics, upgrade of the fuel distribution network in Italy and in the rest of Europe and initiatives in the field of health, safety and the environment.

In spite of a weak outlook for refining margins, management plans to improve results of the Refining & Marketing Division by over euro 550 million by 2015 through efficiency improvements and plant optimizations.

a modest recovery from currently depressed levels. Against this backdrop, we intend to return to profitability and positive free cash flow generation targeting to improve our operating results by around euro 550 million by 2015 assuming a constant trading environment. The levers to achieve this target are continuing efficiency improvements, plant optimizations and selective capital expenditures to expand margins in our refining operations. In marketing we intend to consolidate the profitability of our operations mainly through network upgrading, expansion of our non-oil activities and growing selectively outside Italy.
Our strategic guidelines are:
n Improve profitability of our refining business leveraging on efficiency and optimization
n Consolidate our leading position in the Italian retail market
n Selectively develop our presence outside Italy
n Pursue safe and reliable operations
In the 2012-2015 period, we plan to make capital expenditures amounting to euro 2.8 billion, in line with the previous plan, carefully selecting capital projects. Management plans to invest approximately euro 2 billion to upgrade the Company’s best refineries mainly by completing and starting-up the EST (Eni Slurry Technology) project at the Sannazzaro unit which will upgrade the conversion capacity of the refinery, as well as improving plant efficiency, flexibility and reliability. Retail activities will attract some 25% of the planned expenditure which will be mainly directed to upgrade and modernize our service stations in Italy and in selected European Countries, and to complete the network rebranding.

n Planned actions
In the face of a weak market outlook and high and volatile oil costs, we intend to implement all the necessary actions and initiatives to restore the profitability of our refining operations by:
- pursuing integration of refinery cycles in order to maximize the value of internally-produced semi-finished products and other feedstock;
- maximizing refinery flexibility and conversion to take advantage of the availability of discounted crudes on the marketplace. The start-up of our Eni Slurry Technology conversion unit at the Sannazzaro refinery will significantly upgrade our system and ability to process heavy and extra-heavy crudes;
- improving energy efficiency and plant safety and reliability;
- reducing fixed costs by rationalizing logistics and pursuing other cost measures in maintenance, fixed industrial expenses and labor;
- strictly selecting capital expenditures; and
- boosting margins leveraging on risk management activities.

OUTSIDE ITALY
In Germany, Eni holds an 8.33% interest in the Schwedt refinery and a 20% interest in Bayernoil, an integrated pole that includes the Vohburg and Neustadt refineries. Eni’s refining capacity in Germany amounts to approximately 60 kbbl/d mainly used to supply Eni’s distribution network in Bavaria and Eastern Germany. In the Czech Republic, Eni holds a 32.4% interest in the Ceska Rafinerska pole, which includes two refineries, Kralupy and Litvinov. Eni’s share of refining capacity amounts approximately to 53 kbbl/d.

n Operational efficiency and environmental performance
Eni intends to continue pursuing high levels of operational efficiency and environmental performance at its refineries. Energy saving programs will be

Eni is a primary operator in storage and transport of petroleum products in Italy with its logistical integrated infrastructure consisting of 20 directly managed storage sites and a network of petroleum product pipelines for the sale and storage of refined products, LPG and crude. Eni’s logistics model is organized in a hub structure on five main areas. These hubs monitor and centralize the handling of product flows aiming at driving cost savings by efficiently collecting orders and delivering goods.

We are the leader in the retail marketing of refined products in Italy with a 30.5% market share. We market a wide range of refined petroleum products, through an extensive network of operated service stations, franchises and other distribution systems.
We intend to consolidate our lead in the Italian retail market by continuing investments in network upgrading and modernization, as well as improving quality standards and layout of our outlets. As part of this strategy, we plan to complete our network rebranding and restyling, to increase the automation of stations and to expand non-oil activities under the "eni" brand.
Outside Italy, we intend to continue growing our share in the markets of interest to the Company while assessing a possible divestment of marginal activities.

n Retail - Italy
In 2011, the re-branding of Eni’s service stations continued. We plan that by the end of 2012 80% of our proprietary service stations will have been re-branded to the "eni brand". In the context of weak domestic demand for fuels and rising competition, management plans to preserve the market share achieved in 2011 (30.5%). This target factors in a planned reduction of approximately 500 outlets. We expect that effective marketing campaign, the development of the non-oil offering and continuing network upgrading will underpin our market share and client retention. We will continue leveraging

n Non-oil
Non-oil activities have become an integral part of our retail business. We have been upgrading our offering of non-oil products and services by carefully selecting our partners and improving quality and reach of the offering. Our most important service stations in Italy are equipped with franchised outlets, which market a wide range of food items, services and other merchandise. We have two main format: "enicafé", a format which is present at 350 stations following upgrading of bars and stores; "enicafé&shop", a format including corners for the sale of food and car-care products in 200 Eni outlets.
In 2011 Eni also launched a new self-service option h24 of food, non-food and personal care products by installing Eni branded vending machines in 150 outlets with the aim of extending this service to over 1,000 outlets in the next two years.
Non-oil activities in the rest of Europe are present in 1,101 service stations (Eni owned network), of which 321 are in Germany and 144 in France.

n Wholesale and other businesses
Fuels
Eni markets gasoline and other fuels on the wholesale market in Italy, including diesel fuel for automotive use and for heating purposes, for agricultural vehicles and for vessels and fuel oil. Major customers are resellers, agricultural users, manufacturing industries, public utilities and transports, as well as final users (transporters, condominiums, farmers, fishers, etc.). Eni provides its customers with its expertise in the area of fuels with a wide range of products that cover all market requirements. Along with traditional products provided with the high quality Eni standard, there is also an innovative low environmental impact line, which includes AdvanceDiesel especially targeted for heavy duty public and private transports. Customer care and product distribution is supported by a widespread commercial and logistical organization presence all

LPG
In Italy, Eni is leader in LPG production, marketing and sale with 601 ktonnes sold for heating and automotive use equal to a 18.9% market share. An additional 214 ktonnes of LPG were marketed through other channels mainly to oil companies and traders. Outside Italy, LPG sales in 2011 amounted to 485 ktonnes of which 384 ktonnes in Ecuador where LPG market share is around 37.5%.

Lubricants
Eni operates seven (owned and co-owned) blending plants, in Italy, Europe, North and South America and the Far East. With a wide range of products composed of over 650 different blends Eni masters international state-of-the-art know-how for the formulation of products for vehicles (engine oil, special fluids and transmission oils) and industries (lubricants for hydraulic systems, industrial machinery and metal processing).

Oxygenates
Eni, through its subsidiary Ecofuel (Eni’s interest 100%), sells approximately 1.7 mmtonnes/y of oxygenates mainly ethers (approximately 5.3% of world demand) and methanol (approximately 0.9% of world demand). About 80% of products are manufactured in Italy in Eni’s plants in Ravenna, in Venezuela (in joint venture with Pequiven) and Saudi Arabia (in joint venture with Sabic) and the remaining 20% is bought and resold. Eni also distributes bio-ETBE on the Italian market in compliance with the new legislation indicating the minimum content of bio-fuels. Bio-ETBE is a kind of MTBE that gained a relevant position in the formulation of gasoline in the European Union, due to the fact that it is produced from ethanol from agricultural crops and qualified as bio-component in the European directive on bio-fuels. Starting from March 1, 2010, Italian regulation on bio-fuels content has been changed from 3% to 3.5%. Through bio-ETBE and FAME blending into fossil fuels Eni covered the compliance within 96% in 2011. From January 1, 2012, the compulsory content of bio-fuels has increased to 4.5% from 2011 4%. Eni is addressing the new need through bio-ETBE, FAME and direct blending of ethanol in gasolines.

2009

2010

2011

In 2011 emissions of greenhouse gases NMVOC, NO_x and SO_x decreased due to lower sale volumes and to energy saving interventions performed in the year.

In 2011 the percentage of reused water was approximately 80%, barely unchanged from previous years.

In 2011 the sector reported a significant increase in adjusted net loss (euro 208 million, up euro 123 million) from 2010, due to higher supply costs of oil-based feedstock which were not recovered in sale prices on end markets in a context of substantial decrease in demand.

Petrochemical production volumes were 6,245 ktonnes, decreasing by 975 ktonnes, or down 13.5%, due to a decline in demand for petrochemical products in all business, with the only exception of elastomers (up 1%).

In 2011, the average plant utilization rate decreased from 72.9 to 65.3 due to reduced production in a phase of economic slowdown.

In 2011 overall expenditure in R&D amounted to approximately euro 32 million in line with the previous year. A total of new 13 patent applications were filed.

On April 5, 2012 Polimeri Europa changed its name in Versalis SpA.

in the petrochemical businesses is particularly sensitive to movements in product margins that are mainly affected by changes in oil-based feedstock costs and the speed at which product prices adjust to higher oil prices.
In order to change this challenges in the future years the Company will pursue the following strategic pillars:
n Effectively and efficiently manage operations in order to lower the break-even

n Polymers
In polymers business Versalis is active in the production of:
• Polyethylene that accounts for 40% of the total volume of world production of plastic materials. It is a basic plastic material, used as a raw material by companies that transform it into a range of finished goods.
• Styrenics are polymeric materials based on styrenes that are used in a very large number of sectors through a range of transformation technologies. The most common applications are for industrial packaging and in the food industry, small and large electrical appliances, building isolation, electrical and electronic devices, household appliances, car components and toys.
• Elastomers are polymers characterized by high elasticity that allow them to regain their original shape even after having been subjected to extensive deformation. Versalis has a leading position in this sector and produces a wide range of products for the following sectors: tyres, footwear, adhesives, building components, pipes, electrical cables, car components and sealings, household appliances; they can be used as modifiers for plastics and bitumens, as additives for lubricating oils (solid elastomers); paper coating and saturation, carpet backing, moulded foams, adhesives (synthetic latex). Versalis is one of the world’s major producers of elastomers and synthetic latex.
In 2011 polymer revenues (euro 3,299 million) increased by euro 173 million from 2010 (up 5.5%) due to increases in average unit prices (elastomers up 34%, styrene polymers up 12%; polyethylene up 11%). Sales volumes decreased on average by 11.5% (main decreases were registered in polyethylene, down 16%, lattices down 15%, polybutadiene and thermoplastic rubbers down approximately 9%) due to a steep decline in demand. Sales of ABS and SBR rubbers showed an opposite trend, up 5% and 2%, respectively.
Polymer production (2,144 ktonnes) decreased by 216 ktonnes from 2010 (down 9%), mainly polyethylene (down 15%) due to the delay in the restart of the Dunkerque production lines, planned facility downtimes at Priolo, Ragusa and Gela in the last part of the year as well as a decline in demand.

2009

2010

2011

The overall amount of procurement was euro 8,740 million in 2011, of which euro 6,510 million related to operating projects, 56.4% of which was procured with local suppliers.

In 2011 the injury frequency rate improved from 2010 (down 2% and down 36% for employees and contractors, respectively).

Health and safety expenditures for individual protection equipment and medical assistance increased by 81% from 2010 (from euro 46 million to euro 83 million).

In 2011 the Engineering & Construction sector achieved a positive performance with an adjusted net profit amounting to euro 1,098 million, up euro 104 million, or 10.5%, from a year ago, mainly due to a higher turnover and increasing project profitability.

Orders acquired amounted to euro 12,505 million (euro 12,935 million in 2010), of these projects to be carried outside Italy represented 91%, while orders from Eni companies amounted to 7% of the total.

Order backlog amounted to euro 20,417 million at December 31, 2011 (euro 20,505 million at December 31, 2010), of which euro 9,451 million to be carried out within 2012.

Capital expenditures amounting to euro 1,090 million (euro 1,552 million in 2010) mainly regarded the upgrading of the drilling and construction fleet.

In 2011 overall expenditure in R&D amounting approximately to euro 15 million in line with 2010. A total of 28 new patent applications were filed.

n To maximize efficiency in all business areas at the same time maintaining top execution and security standards, preserve competitive supply costs, optimize the utilization rate of the fleet, increase structure flexibility in order to mitigate the effects of negative business cycles as well as develop and promote a Company culture that endorses identification and management of risks and business opportunities;

n To continue focusing on the more complex and difficult projects in the strategic segments of deepwater, FPSO, heavy crude and LNG (offshore and onshore, for the gas monetization) upgrading;

n To promote local content in terms of employment of local contractors and assets in strategic countries where large projects are carried out supporting the development of delocalized logistic hubs and construction yards when requested by clients in order to achieve a long-term consolidation of its market position in those Countries;

n To leverage on the capacity to execute internally more phases of large projects on an EPC and EPIC basis, pursuing better control of costs and terms of execution adapting with flexibility to clients’ needs, thus expanding the Company’s value proposition; and

n To complete the expansion and revamping program of its construction and drilling fleet in consideration of the future needs of the oil&gas industry, in order to confirm the Company’s leading position in the segment of complex projects with high profitability.

In 2011 revenues amounted to euro 4,908 million, increasing by 10.4% from 2010, due to higher levels of activity in Northern Europe, Kazakhstan and Asia Pacific. Orders acquired amounted to euro 6,131 million (euro 4,600 million in 2010).

n An EPIC contract on behalf of South Oil Co for the expansion of the Basra oil center and related infrastructures within of the Iraq Crude Oil Export Expansion - Phase 2 project;

n An EPIC contract on behalf of Saudi Aramco for building the offshore infrastructures within the development of the offshore fields Arabiyah and Hasbah in the Arabian section of the Persian Gulf; and

n An EPIC contract on behalf of Husky Oil China Ltd for the installation of two 79-kilometer long pipelines and umbilicals as well as the construction of a subsea production system for the development of Liwan 3-1 field in water depths of 1,500 meters in the South China Sea.

n Engineering & Construction Onshore
Saipem is one of the largest operators in the segment of turn-key onshore construction contracts for the Oil & Gas industry. Saipem operates in the construction of plants for hydrocarbon production (extraction, separation, stabilization, collection of hydrocarbons, water injection)

In 2011 revenues amounted to euro 5,369 million, increasing by 13.6% from 2010, due to higher levels of activity in the Middle East, Canada and Australia. Orders acquired amounted to euro 5,006 million (euro 7,744 million in 2010).

The principal orders awarded in 2011 in Engineering & Construction Onshore were:

n The construction of 39 kilometers high-speed/high-capacity railway along the Treviglio-Brescia railway in Northern Italy on behalf of Rete Ferroviaria SpA;

n An EPC contract for the construction of a Secondary Upgrader with a capacity of 43 kbbl/d of Hydrotreated gas oil. The infrastructure will be part of the Horizon Oil Sands Project – Hydrotreater Phase 2 – in Alberta, in the Athabasca Region, Canada; and

n The EPC contract for the realization of a gas pipeline, 42 inches in diameter and 435-kilometer long, which will connect the gas fields in the Bowen and Surat Basins to the Gladstone State Development Area (GSDA), near the city of Gladstone, in the Western Australian coast on behalf of Gladstone Operations Pty Ltd.

n Offshore drilling
Saipem is the only engineering and construction contractor that

In 2011 revenues amounted to euro 833 million, increasing by 11.1% from 2010 mainly due to the entry in full activity of the Saipem 10000 and Saipem 12000 drilling vessels and of the Perro Negro 8 jack up.

The most significant order awarded in 2011 in offshore drilling were:

n A 24-month extension contract, from August 2012, for the lease of the drilling vessel Saipem 10000 on behalf of Eni;

n A 24-month extension contract, from August 2015, for the lease of the drilling vessel Saipem 12000 on behalf of Total E&P Angola; and

n A 36-month extension contract for the lease of the jack-up Perro Negro 7 on behalf of Saudi Aramco.

n Onshore drilling
Saipem operates in this area as a main contractor for the major international oil companies and NOCs executing its activity mainly in South America, Saudi Arabia, North Africa and, at a lower extent, in Europe. In this area Saipem can leverage its knowledge of the market,

In 2011 revenues amounted to euro 724 million, increasing by 9.5% from 2010 mainly due to higher utilization of equipments in South America and entry in operation of new plants in Kazakhstan. Orders acquired amounted to euro 588 million (euro 265 million in 2010).

n A contract on behalf on Saudi Aramco in Saudi Arabia for the lease of nine rigs with a contract duration from one to three years;
n Contracts on behalf of various clients in Peru, Colombia and Bolivia for the lease of fourteen rigs with a contract duration between 4 months and 2 years;
n Two contracts on behalf of Ural Oil and Samek for the lease of 2 rigs with a contract duration of 4 and 12 months, respectively.

  
n Seismic depth migration. Eni has developed a set of proprietary technologies for more accurate image reconstruction of highly complex subsurface structures, e.g., subsalt environments, deep reservoirs below carbonates, and fractured reservoirs.
n Eni Common Reflection Surface Stack (e-crs™). This is a proprietary seismic processing technology that enhances the signal/noise ratio in challenging imaging areas.
n Eni Deep water dual casing running (e-dwdc™). This proprietary technology for simultaneously drilling and then installing the conductor pipe and the first casing has been applied to drill wells in Angola (Cinguvu-2 and Cabaça South East-3 appraisal wells) and Mozambique (Mamba South 1 and Mamba North 1 discovery wells). Its use reduced the drilling time for this phase, while assuring maximum hole verticality and operational safety.
n Eni Circulation Device (e-cd™). Proprietary technology has been used to drill wells in Alaska, Angola, China, Egypt, Ghana, and Italy. Eni Circulation Device technology provides enhanced hydraulic control and has demonstrated excellent capacity also for well bore cleaning, opening new application perspectives.
n e-sight, thin layer reservoirs. Proprietary while-drilling and log interpretation technologies (e-sight™) recently industrialized provide an industry-leading capability to identify, quantify and develop thin layer reservoirs, which are by-passed with conventional approaches. This has led to the identification of important additional resources in Italy and internationally, and increased production in 2011.

  n Total Conversion. Successful results have been obtained from the continuous operation of the Slurry Dual Catalyst pilot plant: this technology, based on the combination of two nanocatalysts could lead to a relevant breakthrough in the EST process, increasing its productivity and improving product quality.