Annual Report 2019

We are an energy company.

We concretely support a just energy transition,

with the objective of preserving our planet

and promoting an efficient
and sustainable access to energy for all.

Our work is based on passion and innovation,

on our unique strengths and skills,
on the equal dignity of each person,
recognizing diversity as a key value for human development,

on the responsibility, integrity and transparency of our actions.

We believe in the value of long-term partnerships
with the Countries and communities where we operate,
bringing long-lasting prosperity for all.

The new mission represents more explicitly the Eni’s path to face the global challenges, contributing to achieve the SDGs determined by the UN in order to clearly address the actions to be implemented by all the involved players.

Eni is an energy company, operating in 66 Countries with about 32,000 employees.

Eni engages in oil and natural gas exploration, fields development and production, mainly in Italy, Algeria, Angola, Australia, Congo, Egypt, Ghana, Kazakhstan, Libya, Mexico, Mozambique, Nigeria, Norway, Oman, the United Arab Emirates, the United Kingdom and the United States, for overall 41 Countries.

Eni sells gas, electricity, LNG and oil products in European and extra-European markets, also leveraging on trading activities. Products availability is ensured by oil and gas production in the upstream business, long-term gas supply contracts, CCGT power plants, Eni's refinery system as well as by Versalis' chemical plants. The supply of commodities is optimized through trading activity.

Integrated business units enable the company to capture synergies in operations and reach cost efficiencies.

Eni engages in the renewable energy business through the development of plants for the production of green energy, also reconverting industrial sites through safety, remediation and environmental restoration.

Eni worldwide presence

Activities

Eni is an integrated energy company looking to the long-term, aiming to play a decisive role in the energy transition to a low carbon future. The main challenge of our industry is to ensure universal access to energy, efficiently and sustainably, combating climate change, maximizing the energy efficiency of its assets and total elimination of flaring and methane leaks, the growth of low carbon sources in its portfolio; zero-emission sources development and the development of circular economy initiatives.

The circular transformation of Eni has been started-up in the downstream businesses, with the first conversion in the world of a traditional refinery in biorefinery, the transformation of waste in energy products, leveraging on proprietary technologies such as the Waste To Fuel and on the realization in the chemical business of new processes and products transforming waste plastics in second raw material. Consolidated skills, technologies, innovation and research geographical differentiation of assets are the levers to strengthen a changing based on the synergies among stakeholders, the industrial symbiosis and the cultural change.

Eni’s business model is focused on creating value for its stakeholders and shareholders through a strong presence along the whole value chain.

Eni, as an integrated energy company, contributes, directly or indirectly, to achieve the goals of Sustainable Development (SDGs) of the UN 2030 Agenda, supporting a socially equal energy transition responding through concrete, quick and economically sustainable answers to the challenge of combating climate change and giving access to the energy resources in an efficient and sustainable way, overall.

To manage this effectively, Eni integrates organically its industrial plan with the principles of environmental and social sustainability, enlarging its actions along three directives:

1. operational excellence
2. carbon neutrality in the long term
3. alliance for development

Operational excellence Carbon neutrality in the long term Alliance for development

Operational excellence

Firstly, Eni’s business is constantly focused on the operational excellence. This is translated into:

• a continuous commitment to the valorization of people and, in HSE, to the safeguard of health and safety and environmental protection;
• the efficiency and resilience of operations, thanks to which Eni has accelerated projects’ time-to-market, reducing their break-even;
• a solid financial discipline;
• the maximum attention to the integrity and respect for human rights.

The Company will leverage on these drivers to catch the opportunities deriving from the possible evolution of the energy market and technological progress and to grow organically.

Carbon neutrality in the long term

Secondly, Eni’s business model envisages a path to decarbonization with the ambition to lead the Company to become carbon neutral in the long-term.
In this context, the Company adopts a life cycle GHG emissions approach and leverage on a set of actions including: maximizing the energy efficiency of its assets; growing low carbon sources in its portfolio (with an increase in gas and bio-fuel share, as well as the production and marketing of bio-methane); growing emission-free sources and developing circular economy initiatives. An important role will also be played by the application of new technologies capturing CO₂ and the development of forestry projects for the forest conservation in accordance with the REDD+ scheme.
This approach and these drivers will enable Eni to considerable reduce its carbon footprint, both in terms of net emissions and carbon intensity.

Alliance for development

Thirdly, Eni’s value creation will leverage on the alliances for the promotion of local development in its Countries of operation. Eni is not only committed to address the valorization of resources of producing Countries, allocating their gas production to the local market and facilitating access to electricity, but also to promote a wide range of community initiatives: from diversification of local economies, to health projects, education, access to water and hygiene. This distinctive approach, called Dual Flag, is based on collaborations with institutions, cooperation agencies and local stakeholders in order to identify certain necessary actions to meet the needs of communities in line with the National Development Plans and the 2030 UN Agenda.

Eni is also committed to creating employment opportunities and transfers its know-how and expertise to its local partners involved in operations.

These distinctive factors are reflected in the Local Development Programs (LDP) in line with the 2030 UN Agenda and consistent with the National Development Plans to foster an inclusive growth, creating long-term value. Initiatives identified in Eni’s Countries of operations leverage on an integrated approach through public-private partnerships and alliances with other internationally recognised players engaged in the territory.

Eni’s business model is designed on these three levers leveraging on internal competences, the deployment of innovative technologies and the digitalization process.

For Eni, a responsible and sustainable approach is the rationale for creating value in the medium and long term for the company and for all stakeholders. This approach is emphasized in the new corporate Mission, which expressly embodies the transformation path undertaken by Eni to play a decisive role in the global process of a “just transition” towards a low-carbon future, facilitating access to energy in an efficient and sustainable way for all and contributing to the achievement of the Sustainable Development Goals (SDGs).

Carbon neutrality in the long term

Combating climate change

Commitment

Eni has defined a medium- and long-term plan in order to take full advantage of the opportunities offered by energy transition and to reduce progressively the carbon footprint of its activities

Main results in 2019

• -27% of GHG emission intensity index (upstream) vs. 2014
• -29% volumes of hydrocarbons sent to process flaring vs. 2014
• -81% upstream fugitive methane emissions vs. 2014 (TARGET REACHED)

Sustainable development goals

Operational excellence model

People

Commitment

Eni is committed to supporting the transition by consolidating and developing skills, enhancing every psychophysical dimension of its people and recognising diversity as a resource

Main results in 2019

• 32,053 employees in service as of December, 31 (reported +1.1% vs 2018, adjusted^(a) 2.0% vs. 2018)

(a) Growth with the same consolidation structure, mainly due to the sale of Agip Oil Ecuador.

• +3.2 percentage point increase in women hired (32.3% in 2019 vs. 29.1% in 2018)

• Approx. 1.4 million hours of training (+16.5% vs. 2018)

• 12,000 professional profiles mapped to date

Sustainable development goals

Safety

Commitment

Eni believes that safety in the workplace is an essential value to be shared among employees, contractors and local stakeholders and it is committed to eliminating the occurrence of incidents

Main results in 2019

• TRIR^(b) 0.34

(b) Total Recordable Injury Rate.

• TRIR -3% vs. 2018 (-52% vs. 2014)

Sustainable development goals

Respect for the environment

Commitment

Eni promotes the eficient use of natural resources and the safeguard of protected areas relevant to biodiversity, identifying potential impacts and mitigation actions and is committed not to carry out hydrocarbon exploration and development activities in UNESCO World Heritage Natural Sites

Main results in 2019

• Formalisation of Eni's commitment not to carry out exploration and development activities in UNESCO World Heritage Natural Sites
• Extension of biodiversity risk mapping to all business lines
• Eni's adhesion to the CEO Water Mandate
• 89% reuse of freshwater
• -12% seawater withdrawn vs. 2018
• -15% waste from production activities generated vs. 2018
• -61% operational oil spills vs. 2018

Sustainable development goals

Human Rights

Commitment

Eni is committed to respecting Human Rights in its activities and to promoting their respect among its partners and stakeholders

Main results in 2019

• First “Eni for Human Rights” report published
• Ranked in the top 4% of the 200 companies evaluated by the CHRB^(c)

(c) Corporate Human Rights Benchmark.

• “CEO Guide to Human Rights” of the WBCSD^(d) signed

(d) World Business Council for Sustainable Development.

• 97% security contracts with Human Rights clauses
• 100% new suppliers assessed according to social criteria

Sustainable development goals

Transparency and integrity in business management

Commitment

Eni carries out its business activities with fairness, correctness, transparency, honesty and integrity in compliance with the law

Main results in 2019

• Membership in EITI^(e) since 2005

(e) Extractive Industries Transparency Initiative.

• 9 countries where Eni supports EITI’s local Multi-Stakeholder Group
• 27 audits with anti-corruption checks

Sustainable development goals

Alliance for the promotion of local development

Cooperation model

Commitment

The cooperation model integrated into the business model is a distinctive feature of Eni, which aims to support countries in achieving their development goals.

Main results in 2019

• €95.3 million invested in local development
• Partnership signed with UNIDO to contribute to SDG 9
• MoUs signed with Angola and Mozambique that combine traditional business with a commitment to diversified and sustainable growth

Sustainable development goals

Technological Innovation

Commitment

For Eni, research, development and rapid implementation of new technologies are an important strategic lever to drive business transformation.

Main results in 2019

• €194 million invested in research and technological development
• 34 applications for first patent filings, of which 15 concern renewable sources

Sustainable development goals

In 2019, Eni achieved excellent results, enhancing the business portfolio through geographical diversification thanks to the expansion in the Middle East both in the upstream segment and through the purchase of the 20% share in ADNOC Refining, the growth in Egypt and Indonesia, the global development of the LNG business, as well as the upgrading of the production platform in Norway with the Vår Energi transaction and the subsequent purchase of the ExxonMobil assets by the JV. The strategic repositioning of R&M and Versalis in the green business and the circular economy has been set with the start-up of the Gela bio-refinery and the launch of a new line of polymers from mechanical recycling of used plastics.

The traditional Oil & Gas business is now more solid also thanks to the acceleration of the decarbonization path with the reduction of the upstream GHG emission intensity at a 6% rate per year from the 2014 baseline (down by a cumulative 26% in the period), the development of the business of power generation from renewable sources in synergy with asset portfolio, the bio-conversion of refineries, the launch of green chemistry and circular economy projects based on the use of sustainable raw materials, the recycling/reuse of waste (organic and non-organic) and, finally, with the launch of the forestry conservation initiatives, complementary to the low carbon strategy.

These positive results were reported in a challenging operating and trading environment, due to the slowdown in global macroeconomic cycle, the reduction in international trade, as well as the adverse geopolitical developments. All these factors negatively affected the demand of commodities and the global consumption of fuels and plastic feedstocks, boosting the negative impact of the oil and gas oversupply in the upstream, the competitive pressure from producers with lower cost structure and the overcapacity in the refining and chemical sector.

Despite the unfavorable scenario and cash constraints, Eni combined growth and financial discipline, leveraging on successful exploration and lower of reserve’s time-to-market. Growth and efficency actions and reduced capex allowed to reach a cash neutrality, at a Brent price of 55 $/barrel at 2019 budget scenario, covering expenses, capex and dividends with the cash flow from operations.

Confirmed the Group’s financial strength with net borrowings at €11.48 billion (before IFRS 16) financing the 20% acquisition of ADNOC Refining amounting to $3.2 billion, paying dividends in the year for overall €3 billion and executing the first tranche of the buy-back program (€0.4 billion).

PRODUCTION VS. CAPEX

ENI'S SHAREHOLDERS RETURN (€ bln)

Eni’s 2019 Consolidated Disclosure of Non-Financial Information (NFI) has been prepared by structuring the report on the three levers of Eni’s integrated business model (Carbon Neutrality In The Long-Term, Operational Excellence Model, Alliances For Local Development) whose objective is to create long-term value for stakeholders, combining financial stability with social and environmental sustainability. The NFI provides an integrated view on the topics set out in Italian Legislative Decree 254/2016, also by providing references to other sections of the Annual Report or to the Corporate Governance Report, if the information is already contained therein or to provide further explanation.

References to the main United Nations Sustainable Development Goals (SDGs) has been included in the various chapters. The UN’s 2030 Agenda for Sustainable Development, presented in September 2015, identifies 17 Sustainable Development Goals, which represent common goals for the current complex social challenges. These goals are a valuable source of guidance for the international community and for Eni in conducting its activities in the Countries in which it operates.

CARBON NEUTRALITY IN THE LONG-TERM

Aware of the scientific evidences of climate change reported by the Intergovernmental Panel on Climate Change (IPCC), Eni intends to play a leadership role in the energy transition process, supporting the objectives of the Paris Agreement.

OPERATIONAL EXCELLENCE MODEL

The Operational Excellence Model is centred on a constant commitment to consolidating and developing skills in line with new business needs, enhancing its people in all areas (professional and non-professional), and ensuring health and safety, environmental protection, respect and promotion of Human Rights and attention to transparency and anti-corruption.

ALLIANCES FOR THE PROMOTION OF LOCAL DEVELOPMENT

In the new Company mission, Eni has charted out even more clearly the path it has been following for several years now to address global challenges, to contribute to the achievement of the SDGs and to create long-term value in the Countries where it operates through business activities that aim to increase access to energy resources while contributing to socio-economic development.