Eni S p A : Report on payments to governments 2023

Eni

Report on payments to governments

2023

Mission

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.

Global goals for a sustainable development

The 2030 Agenda for Sustainable Development, presented in September 2015, identifies the 17 Sustainable Development Goals (SDGs) which represent the common targets of sustainable development on the current complex social problems. These goals are an important reference for the international community and Eni in managing activities in those Countries in which it operates.

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Report on payments to governments

Introduction

Eni's upstream activity Basis of preparation

Report on payments to governments

Europe

Africa

Americas

Asia

Australia and Oceania

Independent limited assurance report

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Introduction

This Report on Payments to Governments of the Eni Group for the year 2023 (hereinafter the "Report") complies with Eni's reporting as per Italian Legislative Decree No. 139 of August 18, 2015, which enacted Directive 2013/34/EU (the EU Accounting Directive - 2013) into the Italian law. These reporting obligations are applicable to EU-based, listed companies that engage in extractive industries as defined by relevant EU provisions.

The consolidation scope is the same as that of the consolidated financial statements of Eni SpA as of December 31, 2023, prepared in accordance with IFRS.

Eni's EU-based subsidiaries included in the scope of consolidation are waived from the equivalent reporting obligations enacted by other member States.

PwC S.p.A has undertaken a limited assurance engagement on this Report in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised).

This Report is available for download at Eni's website: www.eni.com, under the section Publications.

Eni's upstream activity

Eni engages in oil (including condensates) and natural gas exploration, development and extractive activities in 35 countries. Hydrocarbon production amounted to 604 million boe in 2023 and hydrocarbon proved reserves were 6.41 billion boe as of December 31, 2023 (both data include Eni's share of equity-accounted entities).

In 2023, Eni brought an overall value of approximately €9 billion to the host countries where the Company has been conducting its upstream operations.

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Following is a distribution of Eni's main countries of upstream operations according to the size of payments made as reported in the table on page 8:

The main changes to the 2023 consolidation scope related to the full exclusion of Eni's former subsidiaries operating in Angola due to the transaction to establish the Azule Energy Holding JV with another international company, which was consummated in August 2022. Therefore, the comparison of the payments to governments made in 2023 to the previous year was affected by the circumstance that 2022 data included the payments made by the former Angolan subsidiaries in the 2022 months through August 1st.

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Basis of preparation

Legislation

This Report complies with the reporting obligations as per "Chapter I" regarding "Payment transparency provisions" of Italian Legislative Decree No. 139 of August 18, 2015, which implemented Directive 2013/34/EU. The Directive requires companies listed on a regulated market in the EU involved in the extractive industry to prepare and publish a report on payments to governments for each financial year, on a consolidated basis1.

Reporting principles adopted have considered the official interpretations of the regulation issued by national and international bodies, as well as the industry practices.

Applicable rules establish the consolidation scope to be the same as that used in preparing the consolidated financial statements of Eni SpA in accordance with IFRS.

Activities within the scope of the Report

This Report discloses cash payments and in‐kind payments made to governments as part of Eni's activities in the exploration, prospection, discovery, development and extraction of oil (including condensates) and natural gas.

Government

The term Government refers to any national, regional, or local Authority of any Member State of the European Union or Third State (including Ministries, governmental bodies, and agencies) as well as any undertakings controlled by the above‐mentioned public entity. The definition of control is that provided in Directive 2013/34/EU, which identifies control with the obligation of including the accounts of the controlled entity in the consolidated financial statements of the controlling entity2.

Reporting principles

This report discloses cash payments and in‐kind payments made to Governments by the parent company Eni SpA and its consolidated subsidiaries. Payment means an amount paid, whether in cash or in‐kind, for the activities in scope of the regulations. Cash payments are reported in the period in which they are paid. Refunds are also reported in the period they are collected and/or offset by Eni and are shown as negative amounts in the report. Payments made in kind based on the underlying production delivery (production entitlements, tax oil and royalties where applicable) are reported on an accrual basis. In‐kind payments are converted to an equivalent cash value based on the most appropriate and relevant valuation method for each payment, which generally corresponds to market value as stated in the relevant contract. In‐kind payments are reported in both volumes and the equivalent cash value.

The Report comprises direct payments made by Eni to Governments arising from petroleum projects participated by Eni Group's companies. Payments made to Governments in relation to oil activities conducted through joint arrangements are disclosed in this Report if, and to the extent that, the amounts are paid

1. Eni is subject to the provisions of Legislative Decree N° 25 of February 15, 2016, which transposes Directive 2013/50/EU (the so‐called Transparency II Directive) into Italian Law. This Legislative Decree requires companies listed in a regulated market to comply with the provisions of the Directive 2013/34/EU.
2. The notion of control provided in the Art. 22 of the Directive is substantially in line with the one adopted by IFRS. Therefore, the provision refers to the notion of control
   which would trigger the inclusion of the accounts of the controlled entity in the consolidated accounts of the governmental controlling entity should the latter be required to prepare consolidated financial statements.

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directly by Eni. This is the case when Eni is the operator3 of the unincorporated joint venture; in this case payment amounts are reported in full, even where Eni as operator of a project is proportionally reimbursed by its non‐operating venture partners through a partner billing process (cash‐call). When Eni is a non‐ operating partner, payments are disclosed only when Eni has a direct payment obligation towards any governments.

Payments made by entities not subject to Eni's control are excluded from this report. Such non controlled entities comprise equity accounted entities (incorporated joint ventures or associates) holder of a mining license, and incorporated joint ventures acting as operator of a mining initiative on behalf of a subsidiary ofEni and other partners (which can be both state-owned enterprises or public companies), which retain the underlying mining license.

Project definition

Payments are reported at project level, except those tax payments that are not attributable to a specific project are reported at the entity level as "non-allocated amounts". Project is defined as operational activities, which are governed by a single contract, license, lease, concession, or similar legal agreement, and form the basis for one or more payment obligations with a government. If such agreements are "substantially interconnected", those agreements are to be treated as a single project. "Substantially interconnected" means forming a set of operationally and geographically integrated agreements with substantially similar terms that are signed with a government giving rise to payment liabilities. Indicators of integration include, but are not limited to, geographic proximity and the use of shared infrastructure. In this report the integration criteria adopted by Eni include the use of a common infrastructure and in the case of minor projects, geographic proximity.

The disclosure of the payments referred to in this Report reflects the substance of the contracts or the other obligations that give raise to payments.

Payments

Payments are reported according to the following break-down: i) the full amount paid to each governmental authority; ii) the full amount paid to each government by payment type and the total payments for each Country where the extractive activities are carried out; iii) the total amount by type of payment made for each project and the total amount of payments for each project.

The information is reported under the following payment types:

• Production entitlements

Under production-sharing agreements (PSAs) the production is shared between the host government and the other parties to the PSA. The host government typically receives its share or entitlement in kind rather than being paid in cash. This includes the Government's share as a sovereign entity or through its participation as an equity or interest holder in projects within its sovereign jurisdiction (home country). Production entitlements arising from activities or interests outside of its home country are excluded. First party4 entitlement is the share of production after hydrocarbons have been produced and allocated to cover costs and investments incurred by Eni. These entitlements are mainly paid in‐kind and are taken at the source. Such production entitlements are reported on an accrual basis. The monetary value of in-kind

1. The operator of a petroleum project is the entity that based on contractual arrangements with the counterparties, manages field operations and, in this capacity, is actually making payments to governments including situations where the operator determines and communicates the production entitlement due to each party (i.e. under production sharing contracts).
2. Government or National Oil Company which as part of an oil contract transfers to an oil company the right to carry out operations in a geographic area.

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payments is calculated based on market prices, determined on the basis of the contractual mechanisms provided in each PSA. When Eni is the joint‐venture operator, host government entitlements are reported in their full amount. Where the national oil company (NOC) is also an equity partner in the joint venture, their production entitlement is reported in addition to the government's share of production. The NOC's entitlement as a partner will include both their share of production as investor return as well as their entitlement for the reimbursement of their costs, solely in relation to the activities performed in the home country.

In certain PSAs, Eni and the first party agree to entrust the execution of extractive operations to a separate company (incorporated joint venture) that retains the role of operator, while Eni (or a subsidiary of Eni) retains the mineral right. The operator (which is not controlled by Eni) generally maintains the records that determine the sharing of production between the parties. In the process of determining and communicating the production entitlement due to each party and making the arrangements for the parties to physically receive their entitlements, the operator is effectively making the payment to the government. This Report does not include the whole payment calculated based on the government entitlement because the operator is not controlled by Eni. In these types of contracts, Eni's payments generally are limited to corporate income taxes calculated on the pre‐tax profit pertaining to Eni. Finally, in the case of incorporated joint ventures that are at the same time operator of a petroleum project and holder of the underlying mineral rights, no payment amounts are reported by Eni both because those entities are not controlled by Eni and because these joint ventures are obligated to pay taxes on corporate profits to governments.

• Taxes

The Report includes taxes levied on income, profits and production coming from exploration and production of minerals, oil, natural gas and other natural resources. Taxes include in‐kind volumes due by Eni to local tax authorities under PSAs (tax oil), which provide that the tax obligations of the second party are settled by the NOCs out of the share of profit oil of the international oil company. The monetary value of those payments is determined using the same method as per the production entitlements.

Taxes levied on consumption, personnel, sales, procurement (contractor's withholding taxes), environmental, property, customs and excise are not reportable under the Regulations.

Taxes of the Italian companies include the amount paid by Italian upstream activities as an extraordinary contribution tax for the year 2023 enacted in Italy by Law no. 197/2022 (the Italian Budget Law).

• Royalties

These are payments for the rights to extract oil and gas resources, typically a set percentage of revenue or production less any deductions that may be taken.

• Dividends

These are dividends that are paid in lieu of production entitlements or royalties. Dividends paid by Eni to a government as an ordinary shareholder are excluded. For the year ended December 31, 2022, there were no reportable amounts under this type.

• Signature, discovery, and production bonuses

These are one‐off contractual payments to governments for bonuses, e.g. paid upon assignment of exploration permit, or when a commercial discovery is declared or an agreement/contract is signed, or production has commenced or reached a project milestone. Signature, discovery and production bonuses are included in the Report.

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• License fees, rental fees, entry fees and other considerations for licenses and/or concessions

These are payments set by law or contracts for acquiring a license for gaining access to an area where exploration, development and production activities are performed. Administrative government fees that are not specifically related to the extractive sector, or to access to extractive resources, are excluded. Also excluded are payments made in return for services provided by a government.

• Infrastructure construction or improvements

These are payments which relate to the construction or improvement of infrastructure (road, bridge or rail) not substantially dedicated for the use of extractive activities. Payments which are of a social investment in nature, for example building a school or hospital, are excluded because they are not part of the typical streams of payments of the extractive industry towards governments. For the year ended December 31, 2023, there were no reportable infrastructure payments to a government.

Materiality

The regulation provides that payments below €100,000 made in the reporting period are not reported, whether made as a single payment or as a series of related payments. Such a disclosure threshold has been applied in this report, and such payments therefore excluded, when cumulative payments were below €100,000 aggregated. This materiality threshold does not apply to payments made in Italy.

Reporting currency

Payments are reported in thousand Euros. Payments made in currencies other than Euros are conventionally translated at the average exchange rate of the reporting period.

Assurance of the Independent Auditing Firm

PricewaterhouseCoopers S.p.A has undertaken a limited assurance engagement on this Report in accordance with the International Standard on Assurance Engagements (ISAE) 3000 Revised.

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Report on payments to governments 2023 of Eni Group

Payments overview 2023						(€ thousand)
Country	Production	Taxes	Royalties	Bonuses	Fees	Infrastructure	Total
Entitlement	Improvements
Europe
Italy	-	20,803	233,948	4,710	13,147	-	272,608
Cyprus	-	-	-	-	519	-	519
Netherlands	-	5,397	-	-	-	-	5,397
United Kingdom	-	474,505	-	-	2,686	-	477,191
Africa
Algeria	-	753,720	52,144	50,284	2,422	-	858,570
Congo	86,256	146,800	146,436	-	-	-	379,492
Côte d'Ivoire	-	1,500	-	5,549	-	-	7,049
Egypt	-	844,662	-	18,907	-	-	863,569
Gabon	-	-	-	1,664	416	-	2,080
Ghana	244,645	-	93,822	-	1,146	-	339,613
Libya	-	1,670,029	216,347	277,431	-	-	2,163,807
Nigeria	492,298	40,346	91,252	-	28,354	-	652,250
Tunisia	122,370	32,892	9,315	-	-	-	164,577
Americas
Argentina	-	-	-	-	101	-	101
Mexico	217,159	-	72,947	-	15,657	-	305,763
United States	-	24,027	124,896	-	3,096	-	152,019
Asia
China	-	915	-	-	-	-	915
Indonesia	410,811	313,760	-	-	-	-	724,571
Iraq	-	38,025	-	-	-	-	38,025
Israel	-	-	-	7,283	-	-	7,283
Kazakhstan	-	212,770	-	-	-	-	212,770
Oman	-	-	-	-	601	-	601
Timor Leste	7,827	3,422	-	-	333	-	11,582
Turkmenistan	57,769	8,364	6,032	-	-	-	72,165
United Arab Emirates	-	831,003	322,927	-	166	-	1,154,096
Australia and Oceania
Australia	-	(11,566)	-	-	1,213	-	(10,353)
Total	1,639,135	5,411,374	1,370,066	365,828	69,857	-	8,856,260

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