Eni, Gazprom Ink New Agreement on South Stream Project

Gazprom Chairman Alexey Miller and Eni CEO Paolo Scaroni signed, in the presence of Russia's Prime Minister Vladimir Putin and Italy's Prime Minister Silvio Berlusconi, a new understanding on the South Stream project. Eni and Enel also signed an agreement to assign Gazprom 51% of SeverEnergia and the development of the Siberian fields.

The understanding on South Stream will allow to increase the transport capacity from 31 to 47 billion cubic meters per year.

Furthermore, Eni and Gazprom confirmed their full commitment to develop the project, given its strategic relevance to provide, through a new route, significant contribution to secure direct gas supplies to Europe.

Eni and Enel also signed an agreement to assign Gazprom 51% of SeverEnergia, the holding company of the Arcticgaz, Urengoil and Neftegaztechnologia exploration and production licenses. These licenses cover oil and gas reserves estimated at 5 billion boe (barrels of oil equivalent). Once the transaction is completed, Eni's shareholding will decrease from 60% to 29.4%, and Enel's holding will reduce from 40% to 19.6%.

SeverEnergia, which employs over 500 people in the offices of Moscow and Novy Urengoy, will become the first Russian-Italian company actively operating in the Yamal Nenets region (Western Siberia). The region currently produces some 90% of Russian gas.

The parties also agreed to produce first gas by June 2011 from the Samburskoye field and to reach a production level of at least 150,000 boe per day within two years from the start of production. The parties have 90 days to define the plan and obtain all the necessary authorizations, including the extensions of the licenses by Rosnedra, the Russian authority regulating the exploitation of the country's mineral and oil resources.

Gazprom will pay 1.5 billion dollars for the purchase of SeverEnergia (whose closing is set for the end of June 2009). The payment will be made in two tranches during 2009/2010. As a result of the transaction, Eni and Enel's equity will cash in 900 million and 600 million dollars, respectively.