In E&P, our consistent track record of exploration success over the past years is the key driver of our growth.

2011 has been an extraordinary year in terms of the size and potential of new discoveries: over the past four years, we have discovered around 4 billion boe of new resources, almost double our cumulated production of 2.5bn boe, with a progressive strengthening of our resource base to 32bn boe.

Meanwhile, with unit exploration costs of around 1.7$/boe over the past four years, our exploration success supports our capacity to deliver sustainable returns on new projects under almost any oil-price scenario.

Our consistent performance confirms the effectiveness of our exploration strategy, with its focus on proven basins and a select number of high-potential frontier themes. Building on this success, over the next four years we will increase our exploration efforts to further strengthen the basis of our long-term growth.

Between now and 2015, we will add around 700kboe/d of new production through over 60 major start ups, including three of our fields in the Yamal Peninsula, Goliat in Norway, Perla and Junin 5 in Venezuela, Block 15/06 in Angola and Kashagan, which we are on track to start-up by the end of 2012.

Of the total new production which will come onstream by 2015, around 70% comes from exploration, while the remaining 30% comes from the acquisition of undeveloped resources, in particular our fields in the Yamal Peninsula and Junin 5.

This solid pipeline of projects will lead to average production growth of at least 3% a year to 2015, at our plan scenario of  90$/bbl  for 2012 and 2013 and 85$/bbl thereafter, and normalising 2011 production for the Libya impact.

Increased scale and the focus on oil, compared to gas, over the plan period, will drive an increase in cashflow per boe of above 10% to 2015.

Following deconsolidation of Snam and of our interests in international pipelines TAG, TENP and Transitgas, the perimeter of our G&P division is going to change.

The resulting business will be made up of two main parts. The first is a semi-regulated business, which is composed of our other international pipelines and some local distribution. This part of G&P, which in 2011 accounted for around €600m of proforma Ebitda, will provide steady profitability over the coming years.

The second is our gas and power marketing business, which has a strong and diversified portfolio of long-term gas supply contracts, power generation capacity of around 5.5GW,  and a leading position in the European gas market.

Our improved cost position will sustain growth and consolidate our position in European retail, on the back of over 1 million net new clients added in 2011.

While we expect that the current market weakness will continue to put pressure on our merchant business in the first part of the plan period, we are confident that from 2014-2015 onwards the European gas market will tighten again.

On the demand front, we see a recovery and then long-term growth in volumes, driven by economic development and fuel switching to gas, in line with the European objective of reducing CO2 emissions. In total, we expect EU demand to increase from around 500 Bcm to over 560bcm by 2015, and to close to 600 Bcm if we look forwards to 2020.

Our refining business continues to face a difficult environment with stable or declining demand for products and persistent overcapacity, especially in our core Mediterranean market. 

We expect the scenario in Europe to show limited improvements from now to 2015. Simple refineries will likely come under pressure from tightening product quality regulations, driving a 15% reduction in refining capacity and a modest improvement in refining margins.

In this context, our strategy to return to profitability is fully based on self help measures.

We are working to support margins through:

• The full exploitation of conversion capacity – with the start-up of our EST plant in Sannazzaro and extensive integration of our refining system;
• greater supply flexibility, to take advantage of opportunities in the pricing of different crudes;
• and enhanced, integrated trading operations.

We will continue to focus on cost reductions, and in particular on energy saving, and labour and maintenance costs.

Meanwhile, we will consolidate the profitability of our marketing business, leveraging on the rebranding of our network, the full automation of stations and the opportunity to expand non oil activities offered by the liberalization process in Italy. 

Overall these actions will improve refining and marketing results by around 550m euro by 2015, at the same scenario we experienced in 2011, with over €400m coming from the refining segment.

IMAGES

Eni's Refining System and Main Supply Flows

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In recent years the European chemicals sector has suffered from increasing price pressure on base chemicals, with ethylene production costs a multiple of those in the Middle East. As a result, despite cumulated efficiency gains of €360m between 2006 and 2011, in positive market conditions our Chemicals business makes limited profits, while in negative market cycles it absorbs cash.  
 To tackle this issue, we have devised a strategy based on three main pillars. 

• Refocusing of the business, increasing our presence in added-value products such as elastomers, styrenics, resins and EVA, where we have a leading market position in Europe. Demand for these products is expected to grow in coming years, and margins are resilient even at higher feedstock prices. In this segment, we target an increase in sales of 50% to 2015, by which time added-value products will make up over 40% of our revenues. .
• International expansion, building a presence in emerging markets – especially in Asia and Latin America - through licensing agreements, production alliances and joint ventures. We target a doubling of extra-European sales to around €700m by 2015.
• Further efficiency and capacity rationalisation. As well as energy saving and further integration of our production cycles, we are planning to close or convert loss-making sites, cutting our polyethylene capacity by 20% and supporting our refocusing on added-value products.

Our growth over the next four years will be fuelled by €59.6bn of investments, of which €6.2bn pertain to Snam and will therefore be deconsolidated within the plan period.

On a deconsolidated basis, this represents an increase of €6.4bn compared to last year's plan.

This increase is driven by our enhanced exploration and development plan in E&P and in particular the new, attractive opportunities we identified last year, including a first tranche of the Mamba project and giant developments in Nigeria, Indonesia and the Barents sea.

Efficiency will continue to be an important part of our strategy.

Our new plan has once again increased our target for cost savings, now expected to be 5 billion euro in total for the 2004-2015 period. This will be achieved through procurement and logistic optimization, energy saving and increased labour efficiencies.

New projects and our strong focus on efficiency will support our cashflow generation over the next four years.

At our plan scenario of $90/bl oil in 2012-13 and $85/bl in the following two years, our strong cash flow from operations will more than fund our increased investments and reduce net debt to well below 40% of equity by 2015.

Under our plan scenario, we confirm the sustainability of our dividend policy of growth in line with inflation, which aims to preserve the real value of the remuneration to shareholders.