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SAIPEM / HEALTH SAFETY ENVIRONMENT REPORT 2005

MISSION STATEMENT

"Pursuing satisfaction of our clients in the energy industry, we tackle each challenge with safe, reliable

and innovative solutions. We entrust our competent and multi-local teams to provide sustainable

development for our company and for the communities where we operate".

Core Values

Commitment to Safety, Integrity, Openness, Flexibility, Integration Commitment, Innovation, Quality,

Competitiveness, Teamwork, Humility, Internationalisation.

Countries of activity

EUROPEItaly, France, Belgium, Croatia,

Germany, Ireland, Luxembourg,

Netherlands, Norway, Portugal,

Romania, Spain, Switzerland, Turkey,

United Kingdom

CSI

Astrakan, Azerbaijan, Georgia,

Kazakhstan, Russia

SOUTH EAST ASIA AND OCEANIA

Australia, China, Indonesia, Malaysia,

Singapore, Thailand

AMERICAS

Argentina, Brazil, Canada, Ecuador,

Mexico, Peru, United States, Venezuela

AFRICA

Algeria, Angola, Cameroon, Congo,

Egypt, Gabon, Libya, Morocco, Nigeria,

Sudan

MIDDLE EAST

Abu Dhabi, Dubai, Iran, Kuwait, Oman,

Qatar, Saudi Arabia, Sharjah, United

Arab Emirates

CENTRAL ASIA

India

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4

6

12

16

16

18

18

19

21

21

22

23

23

25

29

32

33

35

35

3739

44

44

45

45

47

47

51

52

52

54

61

61

65

67

70

71

74

Health Targets

Safety Targets

Environment Targets

Sustainability Targets

Health

Safety Plan 2006 / 2007

Environment

Sustainability Program 2006

Building Common Accountability Framework

Health Reporting System and Expenditures

Medical Services Rendered in 2005Health Main Activities

Commitment to Safety

Safety performance analysis

Accidents analysis

Accomplishments and Failures

Pro-active indicators

Safety Expenses

Commitment to environment

Environmental Performance Data

Dolphin project: respect for the sea

Kizomba B project: Saibos in angolan deep water

ERHA Project: a huge challenge called FPSO

Letter from the Chairman

The methodology

About us: SAIPEM Group Structure and Activities

Performance Overview

Priorities and Plans

HSE Management System

HSE Training year 2005 for Saipem

Corporate Responsibility

Health

Safety

Environment

Main focus on

Saipem at a glance: 2005 results

Definition of Terms

Verification of the Report

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Once again I have the pleasure of presenting the Health,

Safety and Environmental (HSE) report by the Saipem

Group on our 2005 HSE performance covering all

operations worldwide. This report reflects a desire by

Saipem to remain open and accountable to the communityfor its HSE performance. It provides an overview of our

achievements, considers challenges and establishes goals

for the future. Although progress was made progress during

2005, with statistically the safest year in terms of Lost Time

Injury frequency rate since records began, and considerable

improvements in the environmental area have been

achieved, we are in no position to celebrate these

successes. Indeed, in 2005 six of our colleagues died as a

result of our activities. Our thoughts should be with their

families and our efforts must increase to ensure that these

tragic events never occur. The loss of life as a result of our

work is simply unacceptable and our targets cannot be

anything but Zero Fatalities. I expect all our personnel to

keep this in mind by ensuring that we take safety very

seriously in every task we undertake in our activities.

Everybody needs to be a leader in safety, therefore

personally accountable for it. Our focus in 2006 will be on

developing these leadership themes and cascading specific

training programs at various levels of our organization. OurQHSE Department has a key function in supporting all our

managers and operatives in the fulfillment of their HSE

responsibilities and the various tools and initiatives

launched by the company shall be fully embraced by

everybody. The protection of the health and safety of

personnel and the environment is not only a top priority for

the Group. It is a core value of the company and needs to

be a personal value and commitment of each employee.

These expectations are also demanded by our key clients

who hold us to the highest HSE standards as well as to

developing a positive safety culture. In line with the

industry culture of continuously seeking opportunities to

improve, the companys performance in 2005 saw

improvements in a number of important areas which

Letter From The Chairman

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included risk and incident analysis, emergency

management, environmental protection and sustainable

development. Saipem has implemented several methods

to determine root causes, improve management systems

and share lessons learnt from each incident. Precautionshave been taken to limit risks by appropriate analyses and

by adapting our assets to technological progress. Besides

the continuously monitoring of our plants and processes

and complying with internal and external regulations, we

have an incident management of and an emergency

organization with detailed alert and hazard control plans.

In 2005 Saipem took steps to improve the quality of our

reporting, and a new software, the Environmental Web

Report, was created. Further improvement has been

achieved in the air emission factors methodology based on

fuel consumption reports. Saipem has also focused its

attention and efforts on improving and developing its

Environmental Management System aimed at managing

the potential environmental impacts connected to

construction activities. Sustainability has once again been a

central part of Saipems way of doing business.

I do not want to go into more details, but I invite you to

read the in-depth analysis on the various topics offered in

this comprehensive Annual HSE Report which I welcome,and which presents a very good overview of our

commitment, performance and challenges for the future.

Our Corporate QHSE Department, who prepared this

analysis, and all our worldwide HSE network have, as I said

before, an important role in supporting, advising and

facilitating the effective fulfillment of the HSE

responsibilities which each of you holds as a Company

employee. I wish to extend this concept to all Saipem

stakeholders who are reading this report and are directly or

indirectly involved with our operation. I sincerely believe

that only our joint efforts and commitment can make this

journey to safety the most effective possible and will lead

us to the achievement of our vision of zero fatalities. I look

forward to your feedback.

The Chairman Pietro Franco Tali

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The aim of the Annual HSE Report is to describe our own

major HSE performances by means of statistical data and

parameters. The present HSE Report analyses all the main

activities over which Saipem had exercised its operative

control during the twelve-month period from 1 January to

31 December 2005.

This document, drawn up yearly and distributed to the

public (shareholders, financiers, public opinion,environmental groups, national and local authorities,

clients, etc.), tends to provide a comprehensive overview of

the following principles:

Saipem's Health, Safety and Environmental policy;

Importance that the Company assigns to these issues;

How Saipem has structured its HSE system to implement

the policies and achieve the set objectives;

Way the Company operated in 2005 to assure workers'

health and safety and to preserve the environment in the

Countries where it operated;

HSE Performance in 2005; Particular initiatives undertaken in the HSE area during

the year. The Report contains both a qualitative description

of the above principles and quantitative HSE data, such as

consumption of natural resources, production of waste,

atmospheric emissions, safety related indicators, expenses

incurred for actions in favour of workers' health, safety and

environmental protection.

In order to collect and process these data, Saipem uses an

IT system introduced in 2002 which is improved year by

year. The major innovation introduced in 2005 is the

specific software (i.e. Environmental Web Report) custom

made for Environmental data collection and available on

intranet by the majority of Saipems sites, projects and

companies. This new software has been introduced in order

to improve the monitoring and the evaluation of the

environmental performance and results, as well as to

identify the aspects that can be better dealt with.

The continuous improvement of our system has enhanced

the accounting methodology in terms both of the

comprehensiveness of the area of consolidation and

accuracy of measurements. Whenever necessary, the

historical sequences are updated using the same methodsfor the purposes of data comparison.

In particular, the present report contains a revision of the

emission factor for atmospheric pollutants: for this reason

the data concerning the previous years has been

recalculated on the basis of the new coefficients. Generally,

the evaluation of atmospheric emission can be determined

following two methods: the direct one, by continuous

measuring of pollutant concentration at the points of

emission; and the indirect one, by estimates based on

emission coefficients which consider both combustion

systems as well as the quality of fuels used. Because of thenumerous and diverse sources of emissions related to

Saipems activity, the only reasonable way that can be to

obtain a reliable quantification of the atmospheric

emissions is the indirect estimation based on fuel

consumption. The introduction of a new methodology, based

on evaluation models and criteria set up by international

organizations, leads to an improvement of the accuracy and

reliability of the emissions quantification and, at the same

time, allows Saipem to align with the International Standards

for the calculation of the air emissions such as CORINAIR

(methodology issued by the United Nations Economic

Commission), UKOOA (methodology issued by United

Kingdom Offshore Operators Association) and IES

(methodology developed by ENI).

The methodology

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The methodology generally used for the indirect estimation

of atmospheric emissions is based on "successive

approximation" starting from the resources available:

recalculations should result in an improvement of the

accuracy and completeness of the inventory and ensure the

consistency of the historical series.

Moreover, as from this year, in addition to the usually

monitored pollutants (i.e. CO, CO2, SO2 e NOX), CH4,NMVOC and PM are also considered.

The environmental indicators used in this report can be

divided into two main groups (i.e. absolute indicators and

relative indicators). The former refer to objective physical

parameters (such as tons of consumed fuel, m3 of

consumed water, expenditure in euros, etc) while the latter

are obtained from the ratio between the absolute indicator

and the production of the relevant activity (for example

tons of consumed fuel / km of pipeline laid, m3 of consumed

water / tonnes of structure lifted, etc). The relative

indicators attempt to eliminate the natural' variation of theabsolute ones caused by production changes: the relative

indicator thus measures only genuine changes in efficiency

and can be profitably used to evaluate the improvement of

an activity from an environmental point of view, offering

the possibility of a comparative analysis through the years.

In view of the considerable diversification of Saipem's

business, it was considered appropriate to continue the

usual practice of presenting quantitative data aggregated

by type of activity (offshore constructions, onshore

constructions, logistic bases / offices, etc.).

A further innovation, specific to environmental/safety

expenses and investment accounting, was introduced in

2005. The required data are now extracted directly from

the SAP or SPSPC database, thus providing a more accurate

expenditure recording method. Such software is used

extensively in most process-based companies, and

currently involves about 80% of Saipems structure.

An important part of the self-improving process mentioned

above is represented by a new revision of the Corporate

Standard for the Annual HSE Report, whose target is

improving our reporting system in order to present ever

more useful and accurate information.As for the past years, also in 2005 we have decide to check

the reliability of the information contained in the present

Report by a third part audit conducted by an external

verification company. Moreover this check provides us

some valuable indications and suggestions for the

continuous improvement of data clarity and Report

readability. The list provided with the following map

includes all the Sites/Projects involved in the collection of

the HSE data.

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Projects

Offshore Construction B.U.

Saipem Projects and Sites of activities

AIOC Transport &

Installation

Sabratha Platform

SaiWoo - Sable Tier II

Canada

Saipem SpA - Bahr

Essalam

Saipem America - BP

projects

Sonsub Ltd Worksites

Sonsub A.S.

Sonsub PTY

Peciko IV

Bayu Darwin

Bongkot

TTM Project

Lamma project

TL Offshore Project

BP Tangguh TTP project

Sakhalin Pipelines &

Cables

Sakhalin Topsides

East Area EPC 2

Yoho

Amenam AMP 2 Project

Kizomba B Project

West Espoir

Rosa- Lirio

Marimba

AKPO

DP4 AGIP Bour RIG

remooval

PS1 Persian Gulf

Dolphin project

Baltim North

Engineering projects

BP Rhum

Conocophilips

Ormen Lange

Tullow Oil

Maersk Dan 949020

Nexen Buzzard pipelines

& subsea structures

949290 Nexen Buzzard transport

& Installation 949310

Shell BRFD

Frigg Cessation 949480

Langeled 949330

Vessels

Saipem 355

Bar Protector

Castoro 2

Castoro 6

Castoro 8

Castoro 10

Crawler

FDS

Saipem 3000

Saipem 7000

Semac 1

SB 230

Polar Prince

Grampian Surveyor

HOS Innovator

HOS Dominator

Normand Cutter

Highland Navigator

Maersk Reliance

DP Reel

Maersk Explorer

Far Sovereign

Onshore Construction B.U.

Oil & Gas Upstream

EWRB Pipeline Project

EWG-1 Pipeline

Conversion To Sales Gas

Okpai Power Plant

NLNG Phase3 Gas Supply

Soku Gas Debottlenecking

GTS-4 Gas Suply Pipeline

GTS-2/4 Slug Catcher

Karachaganak MainWorks

MAF - Sohar Crude Oil

Pipeline Project

ROD Project Algeria

TCHAD Cameroun

SOFRESID FRANCE

BOS Sofresid Algerie

OSBL - Offsite Battery

Limits - Total Gonfreville

OCP -Office Cherifien de

Phosphates Morroco

Rosa Lirio E&P -

Adaptation of FPSO for

Girassol

Berroughia Power PlantAlgeria

Sakhalin II Onshore

pipeline

Transporto Gas ad Alta

Pressione -Italy Gela

LNG, Maritime Works& Floaters B.U.

Hazira Port and LNGTerminal Project

Huelva IV LNG Tank -

Cartagene LNG tank -

Guangdong LNG

Receiving Terminal

Fos de Cavou LNG tank

Freeport

Zeebrugge Extension

LNG tank

Tanger Port

Soyo Angola Quay SideExpansion

Caucedo Puerto Mtce

Monaco II - maritime

works

Gela Italy

Costa Azul - Mexic

ERHA - EPC & Towing for

FPSO

Dalia EPC for FPSO

Fabrication Yard

Intermare Sarda -Arbatax

Rumoulumeni

DLH Kwanda & Exxon

Petromar Malongo

Petromar Soyo Boscongo

Saipem Mediteraneean

Services- BOS Shelf

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Offshore Drilling

Maintenance ModificationOperations B.U.

CAMOM

Techoprojecto

Internacional

CPC Maintenance -

Russia Office

Petromar MMO projects

Cameroun Maintenance

Tchad Maintenance

Energy Maintenance

Services

Integrated Projects

Katran-K Beregovaya

Compression Station

Kashagan Trunk and

Production Flow Lines

Kashagan Piles & Flares

Kashagan Drilling

ERSAI Kuryk Fabrication

yard

Drilling B.U.

Saipem 10000

Scarabeo 3

Scarabeo 4

Scarabeo 5

Scarabeo 6

Scarabeo 7

Perro Negro 2

Perro Negro 3

Perro Negro 4

Perro Negro 5

AZ 5820

Onshore Drilling

AZ 5825 AZ 5889

AZ 5892

AZ 5893

AZ 5894

AZ 5832

AZ 5898

Rig 101

Rig 102

Rig 201

Rig 202

AZ 5829 AZ 5846

AZ 5891 AZ 5895

Rig 2

Rig 216

Petrex Peru

Petrex Venezuela

Az 5843

Rig G 125

AZ 5863

AZ 5870

AZ 5827

Logistic Bases

Saipem Jakarta - Sitiwan

PT Ninda - Batam

SanVitale Ravenna - Italy

Saipem Spa Sharjah

Branch - UAE

SCNL - Nisco & Onne

Nigeria

Saipem Algeria - Hassi

Messaud - Algeria

Saudi Arabia Saipem -

Dammam Base

Cortemaggiore Italy

SaiPar - Drilling Camp -

Kazakhstan

ERS Schiedam Base

Head Offices

San Donato

San Giuliano

Saipem Energy

International

Saipem Aktau Office

Sonsub Aberdeen Facility

Office

SonSub AS Stavanger -

onshore SaiBos Onshore

Saipem Malaysia - Kuala

Lumpur office

Saipem - Perth Office -

Australia

Saipem Jakarta Office

Global Petroprojects

Services - Zurich

Saipem Portugal

Comercio Maritimo

Saipem Mediterranean

Services (office &

workshop Rijeka)

Moss Maritime A.S.-

Norway

SaiPar Aksai Office

Base Pointe Noire

Saipem America Inc

Saipem FPSO Marghera(office & workshop)

CEM Sandouville

Saipem SA Head Office

Petromar Office - Luanda

& Kwanda

Saipem India (SIPS)

Saipem UK Office

Saipem Egypt - Cairo

Office

Leased FPSO

Firenze

Mystras

FPSO Magdelaine - Dubai

FPSO Vitoria

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Yards & Main Logistic Bases/Offices

Main Areas of Activities

Engineering Centers

Drilling Activity

LEGENDA

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About us: SAIPEM GroupStructure and Activities

Saipem Group operates as a global contractor in the oil

industry services market, in the onshore and offshore

Constructions and Drilling sectors. It is also involved in the

field of Infrastructures and Floating Production. Saipem

Group operates nationally and internationally through a

structured and integrated network of operating structures.The Group is organized into six business units, three of

which Onshore Constructions, Maintenance Modification

& Operation (M.M.O.), and Liquefied Natural Gas (L.N.G.)

are based in Paris, where there is also the knowledge centre

for engineering, procurement, and project management,

and three Offshore Constructions, Offshore and Onshore

Drilling, and Leased FPSO are in Milan, where the technical

services and special projects task force are based as well.

Offshore Construction

Saipem Group possesses a strong, technologically advanced

and high versatile fleet in addition to a comprehensive

spread of sector-leading engineering and project

management expertise.

These unique capabilities and competences, together with

a long-standing presence in strategic frontier markets

comprise an industrial model that is particularly well suited

to EPIC (Engineering, Procurement, Installation and

Construction) projects. Amongst the semi-submersible

fleet equipped with the most advanced state-of-the-arttechnologies, the most noteworthy vessel is Saipem 7000

thanks to it s dynamic positioning system, 14,000-tonne

lifting capacity and its capability to lay subsea pipelines in

ultra deep waters using the J-lay system, which can handle

a suspended load of up to 4,500 tons during pipelay

operations. Other vessels include Castoro Sei, capable of

laying large diameter subsea pipelines; the Field

Development Ship (FDS), a special purpose vessel used in

the development of deep water fields, equipped with a

dynamic positioning system and a 600-tonne lifting

capacity crane, in addition to a vertical pipelaying system

able to work in water depths of up to 2,000 metres; the

vessel Saipem 3000, is capable of laying flexible pipelines

and installing umbilicals and mooring systems in deep

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waters and installing subsea structures of up to 2,200 tons.

Saipem also boasts a strong position in the subsea market,

operating highly sophisticated and technologically

advanced vehicles, such as subsea ROVs (Remotely

Operated Vehicles), i.e. purpose-equipped robots, able tocarry out complex deep-water pipeline interventions.

Group companies operating in the Offshore Construction

sector, in addition to the parent company, are: Saipem s.a.,

its directly controlled companies SaiBos Construes

Maritimas, Bos Congo, Petromar, PT Sofresid Engineering

and its associated company Offshore Design Engineering.

Also: Saipem UK, Saipem America., Saipem (Malaysia),

Saipem Asia, PT Saipem Indonesia, Saipem Luxembourg,

Saipem (Portugal) Comrcio Martimo, Sonsub Ltd, Sonsub

A/S, Intermare Sarda, Saipem Contracting (Nigeria), Saipem

Energy International, Saipem FPSO, ERS Equipment Rental

& Services, Saipem Mediterranean Services, StarGulf, ER SAI

Caspian Contractor, Bos Shelf Moss Maritime.

Offshore drilling

In 2005, the Group operated in the Offshore Drilling sector

in West and North Africa, the Persian Gulf, Norway, Peru and

India. Amongst the Groups fleet, the following vessels are

of particular interest: Saipem 10000, capable of working at

depths of up to 3,000 metres using its dynamic positioning

system; Scarabeo 7, a semi-submersible vessel capable of

operating at depths of up to 1,500 metres and Scarabeo 5,

a fourth generation semi-submersible vessel, capable ofworking at depths of over 1,800 metres and drilling to a

depth of 9,000 metres. Besides the parent company, other

Group companies operating in this sector are: Saipem

Nigeria, with headquarters in Lagos, presiding over the

strategic area of West Africa; Petrex, operating in South

America; Saudi Arabian Saipem, operating in the Persian

Gulf; and Saipem (Portugal) Comrcio Martimo, which

manages all drillships, apart from Scarabeo 5, managed by

Saipem SpA, Sonsub Ltd also operates in this Sector,

supporting operations with its remotely operated vehicles

(ROVs).

Leased FPSO

Significantly strength in design expertise in the floating

production sector and ability to manage turnkey projects,

have led Saipem Group to won the first contract on a

standalone basis in the high growth leased FPSO market.

The fleet comprises: FPSO Firenze, and FPSO vessel, Mystras.

All initiatives of the year have being developed in joint

venture with Single Buoy Moorings. In addition to Saipem

SpA, companies operating in the Leased FPSO sector are:

FPSO - Firenze Produo De Petrleo Lda, FPSO - Mystras

Produo De Petrleo Lda. Furthermore, the following

companies provide support in respect of engineering,

procurement and project management: Moss Maritime,

Saipem s.a., Saipem Energy International SpA, Saipem Fpso

SpA and Saipem Luxembourg SA.

Onshore Construction

The Groups strengths in the Onshore Construction sectorare its construction capabilities allied to its engineering and

project management competencies, which allow the Group

to focus on challenging projects such as the laying of large

diameter pipelines and the construction of upstream plants

in difficult areas.

The regions in which the Group has a long-term presence

and operates consistently are the Arabian Peninsula,

Nigeria, Russia and Algeria. The Group is also still engaged

in Kazakhstan, where it operates in joint venture with

another international contractor. Moreover, the Group

operates in Oman and Franca. In addition to the parent

company (individually or in association with other

international operators), the following subsidiaries carry

out onshore construction activities: Saipem s.a. and its

subsidiaries Saipem Contracting Algeria, Sofresid

Engineering, SIPS, and associated companies Starstroi and

Lipardiz Construao de Estruturas Maritimas Lda.

Furthermore, Saipem Contracting Nigeria, Saudi Arabian

Saipem and Katran K also operate in this sector.

Onshore Drilling

In the Onshore Drilling sector, the Group operates in Italy,

Algeria, Egypt, Nigeria, Saudi Arabia, Kazakhstan, Russia,Peru and Venezuela through the parent company as well as

Saipem Nigeria, Petrex, Saudi Arabian Saipem, Sadco (an

Indian company jointly owned and managed with Aban

Drilling Co.) and SaiPar (jointly owned and managed with

Parker Drilling Co and operating in Kazakhstan).

Liquefied Natural Gas (LNG)

In the last few years, the Saipem Group has developed a

strong presence in this sector. Operations are mostly

carried out by Saipem s.a., which operates in this sector

through its controlled companies: Technigaz, world leaderin EPC projects, Guangdon Contractor, Hazira Cryogenic

Engineering and Costruction Management and Hazira

Marine Engineering and Construction Management; and

through its associated companies GTT (Gaz Transport et

Technigaz), leader, with Moss Maritime, in the LNG

transport segment thanks to innovative and highly

advanced technology, Societ pour la realisation du Port de

Tanger Mditerrane and Servicios De Construcciones

Caucedo, Saimexicana and Saigut. Furthermore, Saipem

SpA and Saipem America also operate in this sector.

Operational activities are focused mainly in the Mediterranean

area in addition to two particularly challenging and demanding

projects currently underway in India and China. Two new

projects have just started in United States and Mexico.

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Maintenance modification and operation (MMO)

The Saipem Group has only recently started operating in this

sector, which completes the range of services offered to oil

companies. In this sector, Saipem s.a. currently provides

services mainly in Western Europe and Russia, inpetrochemical plants and refineries, and in West Africa in

upstream oil infrastructure. Operations are carried out

through the companies Camom, Tecnoprojecto

Internacional Projectos e Realizacoes Industriais and

Petromar. Also operating in this sector is Energy

Maintenance Services SpA a company jointly owned and

managed with Eni Exploration & Production, which focuseson maintenance activities for all industrial plants of Eni

E&Ps industrial plants in Italy.

Offshore Construction - Laid pipelines

2000 Km

1750

1500

1250

1000

750

500

250

2001 2002 2003 2004 2005

Onshore Construction - Laid pipelines

Km1400

1200

1000

800

600

400

200

2001 2002 2003 2004 2005

Offshore Drilling - drilled meters

m14000

12000

10000

8000

6000

4000

2000

2001 2002 2003 2004 2005

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Offshore Construction - Installed structures

200000 ton

175000

150000

125000

100000

75000

50000

25000

2001 2002 2003 2004 2005

Onshore Construction - Industrial palnts

ton35000

30000

25000

20000

15000

10000

5000

2001 2002 2003 2004 2005

Onshore Drilling - drilled meters

m700000

600000

500000

400000

300000

200000

100000

2001 2002 2003 2004 2005

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Health Performance Indicators (HPI-s) are for the Medical

Department not only a control tool but also a means by

which to assess the way that specific medical activities are

carried out in peripheral units and Companies as well as at

corporate level. HPI-s reflect the current state-of-art, as they

highlight points needing to be improved, indicating theareas where, by concentrating efforts and resources, results

can be obtained.

Each year the indicators are adjusted in order to cover as

completely as possible all health issues. In 2005, for

instance, ten indicators were used. Seven indicators were

used in peripheral units and Companies. Six of them are:

pro-active indicators which monitor exposure, or other

factors, which may influence health before an illness occurs:

accomplishment of the Medical Fitness Examination system

for expatriate and local personnel within the Saipem group

of Companies; the number of vaccinations provided to

expatriate employees, linked to work-related biological

risks; the number of personnel involved in STD (sexually

transmitted disease) prevention training and information

courses; the number of medical personnel attending

specific training courses; the number of performed

medevac drills recorded on the standard format and sent

to the medical coordinator and the number of

health/hygiene inspections carried out. One of them is a

reactive indicator, which monitors the consequences ofexposure (incidents): the frequency of repatriations due to

sickness per million manhours.

Corporate indicators used were: number of News&Updates

issued, development of health risk assessment software and

completion of the Saipem Med Sheet Summary. Total

number of Saipem employees included in HPI database is

17802 in 77 working sites.

Medical Fitness Examination system for expatriate and

local personnel.

As part of the preventive activities for workers, the medical

certification of expatriate employees, conducted as pre-

employment and periodical medical fitness examination,

reached the percentage of 94% of employees (against the

Performance Overview

Health Targets

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target of 90%).

The medical fitness for local personnel reached the percentage

of 91% (the target being of 80%). Both targets established for the

number of medical fitness certificates for expatriate and local

personnel were accomplished.

Vaccination campaign against communicable diseases

Vaccination campaigns were always considered to be a key

factor in the prevention of communicable diseases that can be

acquired in and out of industrial premises.

According to local peculiarities, project/site clinics had different

inoculation programs. A number analysis shows that 82% of all

expatriate employees are vaccinated against the communicable

diseases considered a risk for a certain area. The target for 2005

was set at 75%.

Accomplishment of repatriation system

The target for frequency rate of cases repatriated for health

reasons from Saipem operating sites in 2005 was set at a value

of below 0.7. The target has not been achieved by the deadline,

with 1.29 repatriations per 1 million MWH. The main cause for

not reaching the target is that in 2005 14 new Doctors have

been employed by Saipem mainly on offshore sites. At the

beginning, they didnt have much experience of Saipem, its

structures and operating procedures, therefore, in some casesthey repatriated personnel without having used all the facilities

and support that Saipem makes available.

Training courses and information on the sexually

transmitted diseases

First aid induction courses, educational programs for sexually

transmitted diseases and awareness courses about the health

risks present in certain areas are programs deemed to increase

the level of health education of our employees and to encourage

them to adopt the correct behavior and lifestyles that will

improve and safeguard their health. The target for the number

of employees attending the educational courses on STD

prevention was 75%. The percentage of employees who

attended the STD courses was 51%. The objective has almost

been achieved, if we consider that the target takes into

Description of the indicator Target Result on december 2005 Note

PROACTIVE HPI

Percentage of employees with valid A) Expatriates 90% 94%

medical fitness examination B) Locals 80% 91%

Percentage of expatriates vaccinated against diseases >75% 82% Not interfering with

considered to be at risk in the working geographical region national vaccination

programs for local

employees

Percentage of personnel (expatriates and locals) >75% 51% Percentage of the

who attended training in the prevention of Sexual employees on the

Transmitted Disease (STD) working sites who

attended the STD course

Medical personnel who attended Advanced Trauma Life 25% 38% The validity of the

Support (ATLS) and/or Advanced Cardiac Life Support ATLS and ACLS

(ACLS) training courses this year course is 4 years

Conducted MEDEVAC (Medical Evacuation) drills at operating 1/month/site 0,62/month/site Reflecting

sites/projects the emergency

preparednessNumber of conducted hygiene inspection 1/month/site 1,64/month/site Prevention of the

communicable

disorders

REACTIVE HPI

Frequency of case repatriated for health reasons from

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consideration only employees that were involved in courses in

2005, not those who did them previously, and has thus been

inaccurately defined.

Training courses for medical personnelIn order to maintain emergency preparedness levels and

to keep medical personnel working for Saipem

worldwide up-to-date with latest theoretical and

practical information regarding Emergency Medicine, the

Head Office Medical Department has organized, and will

continue to organize, specific refresher courses. The

training follows international guidelines for emergency

medicine and is structured around two main thematic

groups: ATLS (AdvancedTrauma Life Support) and ACLS

(Advanced Cardiovascular Life Support). According to the

HPI summary report for 2005, the percentage of medical

personnel who attended these courses this year reached

38%, surpassing the set target of 25%.

Performed medevac drills recorded on the standard

format and sent to the medical coordinator

Emergency drills should be conducted on every site once a

month. Drills simulate actual emergencies where

practicable, and confirm response and action times. The

drills are an essential part of the overall safety program and

ensure that everyone fully understands their role in case of

emergency. The target for 2005 was of 1 medevac drill per

site (100%). The target has not been achieved with the finalscore of 0,62/month/site (62,33%). One of the main goals

for 2006 will be to improve performance in the

achievement of this target.

Conducted health/hygiene inspections

The health/hygiene inspections should be conducted as a

prevention measure for communicable disorders. The

target was 1/month/site (100%), meaning that in every site

should have at least 1 health/hygiene inspection per month.

The target was fully achieved with the result of

1,64/month/site (100%).

Safety Targets

In 2004, we recorded safety improvements achieving a

reduction of more than 22% in our Lost Time Injury Frequency

(LTIF). A LTI is recorded when an injury causes a worker to miss

a day or more of work. Since 2001, our LTIF has declined from

around 4.7 cases per 1 million man-hours to 1.21 in 2005.

This is a considerable achievement which, added to the about

10% reduction of our Total Recordable Injury Frequency (TRIF),

fulfills the overall target for the Group. However some of the

single Business Units did not accomplish their individual goal,

with Onshore Construction, Drilling Operations, Leased FPSO

and LNG business units not achieving an improvement in their

LTIF rates. A breakdown of safety statistics for each Business

Unit can be found in Chapter on safety Despite the progress

made in reducing injury rates, serious incidents continue to

occur. In 2005, there were 6 fatalities, compared with 8 in2004. The 6 consisted of four employees and two contractors.

As underlined by our Chairman in his opening letter to this

report, these figures are simply unacceptable and all our

efforts must be directed to achieving the target of Zero

fatalities. However, we keep working on the development of

positive safety culture across the organization and our Pro-

active Indicators, fully shown in Chapter on safety, are a clear

demonstration of this focus.

With reference to the target to increase the number of

internal and external HSE training hours, in 2005 we have

managed to achieve an impressive 92% increase. Further

analysis of this data can also be found in Chapter on safety.

Environment Targets

Saipems strong commitment to environmental protection

in 2005 can only be fully appreciated by looking at the

day-to-day environmental management of each and

every project in progress around the world. If it were

possible to illustrate sites and projects comparing

relative environmental performances now with those of

some years ago, such commitment would be clearlyperceived immediately . The signals would be improved

waste management, the controlled use of water

resources and fuels, spill prevention practices and

planning, environmental training carried out among the

entire workforce, and the awareness, in a word, of the

importance of performing daily activities aimed at

minimizing and preventing potential negative impact to

the environment. It is therefore difficult to focus on any

single initiative to illustrate environmental management

for 2005. The first real witness of the development of

environmental awareness in all Saipem projects andCompanies is the issuing of the Corporate Environmental

Policy. It expresses the commitment undersigned by

Saipem Top Management to the protection of the

environment, and the will of the entire Group to strive to

apply criteria and sound practices aimed at ensuring that

the projects are realized with a view to preventing or

minimizing the disturbance to the environment. An

important initiative is the program of air emission

reduction on Saipem fleet vessels. Following the Marpol

requirement on air pollution prevention, which came

into force in 2005, Saipem has taken the opportunity not

only to plan action aimed at ensuring compliance with

such requirements, but also to identify action aimed at

air emission reduction also in those cases which were not

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covered by the regulation (e.g. on engines, incinerators,

etc.) Also related to air emissions is the other important

environmental initiative of 2005. It consists in a study

that has been carried out in order to compare the

emission factors being used by Saipem to estimate airemissions due to fuel consumption, with the most

internationally recognized air emission modeling, i.e.

Corinair, Ukooa, and IPCC. This study led to the

identification of the best set of air emission parameters

most properly resembling Saipem activities, and also to

the widening of the range of air pollutants considered.

Not only CO, CO2, NOx and SO2 are estimated, but also

CH4, non-methan organic volatile compounds and

particulate matter. Finally, the other important

environmental initiative carried out during 2005 is the

creation of a new Software (i.e. Environmental Web

Report), a specific software that has been developed and

implemented in order to obtain a reliable and effective

instrument for monitoring and evaluating environmental

performance and achievements. The time required to

create this new data reporting method underlines once

more the importance attributed by Saipem to the

environmental aspects of its activity: through the analysis

of the collected data, it is in fact possible to evaluate the

effectiveness of the investments and the measures

adopted, and to point out the aspects that can be

improved. Moreover, as the Environmental Web Report isrun on intranet, it allows real-time transmission of the

environmental data from the peripheries to the

Corporate, wider distribution of the Software to the Sites

projects/Companies, and easier communication of

updates and changes from the Corporate to the

Sites/projects/Companies.

Sustainability Targets

Following the publication of the Sustainability Case

Studies on Saipem activities in Azerbaijan, Kazakhstan,

Nigeria and Peru in 2005, the sustainability team focused

its efforts on the analysis of other countries in the Asia

Pacific Region and Angola. The target was to develop also

in these areas an assessment of social, environmental and

economic factors in order to understand and evaluate

Objective 2005 Target Result

Health

Employees medical fitness certificates 90% of international personnel 80% of local personnel

Vaccination campaign for expatriate personnel >75% of expatriated personnel exposed to risks

Reduction for the total frequency rate

of repatriation in respect to the previous year 10% reduction = 75% of total workforce

on Sexually Transmitted Diseases (STD) and HIV (local & expatriates) at project sites

Safety

Zero fatalities Zero fatalities

Reduction of all types of accidents 10% reduction for Drilling Operations, Offshore Constructions,LNG, Maritime Works & Floaters, Head Offices,

Logistic Bases & MMO. Achievement of 2004 target

for Onshore Constructions & Leased FPSO

Increase of internal and external HSE training +10% vs 2004

Environment

Significant Environmental incidents Zero significant incidents

Environmental prosecutions and fines Zero fines and prosecutions

ISO 14001 certification for Groups companies Development of ISO14001 compliant

Environmental Management System for Saipem Nigeria

Sustanibility

Key Studies on Sustainability Two Key Study on Indonesia and Angola

= target achieved = target nearly achieved = target not achieved

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Saipems operational impact within the local context.

Information collected during the assessment exercises

makes up the case studies of the previous years experience

which were produced following the same methodologies.

Moreover, in 2005 also Saipems operation in Oman was

taken into consideration and represents the third case

study produced in the year. This unexpected result was

achieved thanks to strong project management

commitment and the valuable collaboration of HSE staff

on-site.

Saipems second time QHSE award has

been announced at all its sites around

the world. As part of the ongoing

process of integration between HSE

and quality, from 2005 the award also

includes the evaluation of the quality

performance of companies, sites and

projects, thus becoming the QHSE

award.

Saipem QHSE performance evaluation

is avhieved by means of analysis of

specific parameters identified in the

four issues. Regarding quality,

parameters were related to: QHSE

Management System and specific

quality performance indicators, such as

internal audit plan, process and target

indicators, quality training, client

satisfaction information etc.

Health parameters considered in the

evaluation of companies and projects

were: the development of health

programs, the development of Health

care documentation system, alcohol &

drug policy, health certificates,

Vaccinations, MEDEVAC Procedures,

health training and information

courses, medical reporting.

Safety performance was evaluated

through the training programs onsafety, risk management, client

satisfaction, safety reporting &

communication, sub-contractor

management, safety campaign and

quantitative parameters such as LTI

Frequency Rate.

Finally, environmental performance

evaluation was based on parameters

such as the implementation of an

environmental management system,

monitoring / measuring campaigns /

survey, environmental audit,

environmental reporting, training and

the obtainment of the ISO 14001

Certification.

Evaluation methodology included

individually weighted QHSE themes;

Saipem 10000 came first, Saudi

Arabian Saipem Ltd second and

Saipem Norway, Scarabeo 5 and

Saipem Contracting Nigeria Ltd.jointthird.

The QHSE awards ceremony was held

in May 2005 at the head office in San

Donato Milanese and was an

opportunity for Saipems Top

Management to express and exchange

views on QHSE during operations.

After showing the methods used to

evaluate candidates, trophies were

awarded to the managements of the

winning organizations.

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Priorities and Plans

Health Performance has been positive and the objectives

defined in 2005 have been confirmed in 2006.

In some cases, the need has arisen to modify objective

measurement in order to allow improved monitoring. In

other cases, more restrictive targets have been defined to

continually improve process efficiency. For instance, targetsset to measure the objective of the accomplishment of

medical fitness examination certificates for all local and

expatriate personnel, which was achieved in 2005, will be

confirmed in 2006 with more restrictive targets,

respectively 92 % and 90%. The vaccination campaign

objective for expatriate personnel, which has been

satisfactorily achieved, will also be reinforced in 2006, with

a more challenging target of more than 78 % of expatriate

personnel exposed to risks being vaccinated. On the other

hand, the 10% reduction of the total repatriation frequency

rate has not been achieved, with a final score of 1.29. This

performance indicator represents the repatriation

frequency per million work man-hours. The main cause for

not reaching this objective can be linked to the

employment of 14 new Doctors in 2005, mainly assigned

to Saipem offshore sites. On taking up their duties within

our organization they did not have much experience of

Saipems operating procedures, which resulted in some

personnel being repatriated without full use having been

made of all facilities and support that Saipem makesavailable to them.

However, the Medical Personnels Health Education and

Training Activities objective was achieved, with specific

ACLS/ATLS (Advanced Cardiac Life Support/Advanced

Trauma Life Support) training offered to 37% of medical

personnel. However, in 2006 the measure will be better

defined to Number of Medical personnel trained with a

specific training course at least once during the past four

years. With these measures, the target will be 100%.

The objective to enhance training programs on Sexually

Transmitted Diseases, inclusive of AIDS prevention courses,

has been nearly achieved.

We should admit that the target has not been correctly

defined, because it takes into consideration only employees

Health

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that have been involved in courses in 2005, not counting

employees that previously received the training. In fact the

objective has as its main goal the monitoring of employees

who have been involved in the courses at least once in their

Saipem working life. This objective has been confirmed in2006, but the measure will be changed to the ratio of the

number of employees involved in STD prevention courses

(AIDS-inclusive prevention courses) at least once in their

Saipem working life and the total number of the work force

present in Project sites. The target will be >70%.

Safety Plan 2006 / 2007

At the beginning of the year the Saipem Corporate

Overseas Safety & Environment Co-ordination team

formulated the Safety Plan for 2006 identifying the key

areas which deserved particular focus and intervention.

Past performance was taken into consideration and the

need for a change in safety culture was identified.

A two-year plan was developed and presented to the

Company Top Management. The Top Level Saipem safety

objectives can be summarized as follows:

Zero Fatalities

Enhance Group Safety Culture

Reduce the number of Total Recordable Injuries

In order to achieve the above objectives a detailed

management program inclusive of six key supportingobjectives was developed.

Before entering into details, it is important to review some

key facts (better explained in the relative chapter on safety

performance analysis) which supported the identification

of the abovementioned key areas.

Over the past three years no substantial improvement

on accidents frequency rates has been achieved. Instead,

safety statistics show a plateau, as in line with overall

industry performance.

Accident investigations revealed that about 80% of all

injuries are due to unsafe actions, with incorrectbehavior and poor attitude as main causes.

Almost half of all major injuries, including fatalities,

involve subcontractor personnel.

Over the past years all our major clients have increased

their focus on Leadership in Safety and launched various

related programs and initiatives.

It is a key expectation of all major operators that their

subcontractors implement similar programs. A pro-active

approach towards these themes does not only help Saipem

enhance safety culture and performance, but can also bring

a competitive advantage.

Having identified and analyzed these facts, it was decided

to pay particular attention to the following key supporting

safety objectives, which constitute the heart of Saipem

Safety Plan 2006 / 2007, and only the implementation of

which can contribute to the achievement of the Top level

Objectives earlier identified.

Each Business Unit is expected to work towards the

Corporate Top Level Objectives and Targets and developsafety management programs in line with, but not limited

to, the following key supporting objectives:

1. Enhance Leadership in Safety

Management at all levels in the Group is responsible for

leading and engaging the workforce in safety and

demonstrating visible commitment to the safety initiative.

A Leadership in Safety Workshop program will:

- enhance senior and line management awareness on

safety responsibilities

- help them demonstrate how they can pro-actively lead

safety

- promote leadership and safe behavior at all levels within

the Group

A Saipem key client has confirmed full support to share with

us their experience and their Leadership in Safety Program,

and to facilitate the development and execution of a

tailored Saipem Workshop.

2. Enhance Field HSE Training

Employees need to be competent to perform tasks that

may impact on safety in the workplace. Training helps

people acquire the skills, knowledge and attitudes to makethem competent in the HSE aspects of their work.

Focus on this area will help raise the level of safety

competency and training in the most hazardous of Saipems

environments.

3. Re-energize Sites / Units Safety Auditing Program

Auditing is a key element of the safety management system

as it constitutes the feedback loop which enables Saipem

to reinforce, maintain and develop its ability to reduce risks

and to ensure the continued effectiveness of the HSE

management system.The purpose is to formalize an auditing program with the

aim of ensuring that appropriate management

arrangements are in place, adequate risk control system

exits and compliance with Saipem SMS and regulatory

standards (i.e. ISM) are assured.

4. Work with Key Subcontractors to improve their HSE

Performance

Around of 50% of Saipems major injuries (including

Fatalities) involve subcontractors. Comprehensive and

systematic subcontractor safety programs can improve the

HSE performance of both Saipem and subcontractors.

Saipem subcontractors need to work towards the overall

objective of No harm to people or the environment as

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result of their activities and manage HSE through a

continuous improvement approach.

Saipem should make a pro-active contribution to improved

subcontractor HSE performance.

5. Implement Program for Improved Risk Assessment

Management

Risk Assessment is the foundation of an effective Safety

Management system as it provides the necessary

information to reduce risks and mitigate the impact of

Saipems operations on HSE.

The purpose of this objective is to standardize the

expectations and techniques to be used for an effective and

adequate risk assessment process across the Group, and

ensure they are systematically used for the identification of

hazards, assessment of risks, and identification of

appropriate mitigation activities.

6. Improve Group safety Network Communication

The sharing of safety experience, lessons learnt and best

practice is recognised as a modern and effective way to

achieve improvements on safety performance.

A repeat of the Group QHSE Managers meeting event

organised in 2002 is planned with the aim of facilitate the

sharing of Operating Companies HSE experiences and re-

affirming Corporate HSE expectations with the involvement

and contribution of key clients (i.e. ENI, Exxon, Total).

Saipems vision of safety, commitment to the above

summarized 2006 / 2007 Safety Plan, and our continuous

striving towards an incident and injury free workplace is

illustrated by the picture below and may be summed up

with the motto: Climb to Succeed.

Environment

Following the Commitment expressed in the Saipem

Environmental Policy, issued in August 2005, improvement

in environmental protection and management is to bepursued and has to be the ultimate objective to strive for

in 2006. Such improvement will be sought by means of

various activities. First of all, it will be important to carry on

the program of air emission reduction on Saipem fleet

vessels. Following the Marpol requirement on air pollution

prevention, Saipem has started planning a series of actions

that will continue in 2006, aimed at reducing emissions

produced by engines and incinerators. Moreover, besides

actions deriving from the Marpol requirement, Saipems

intention is to make measurements of air emissions and

water discharge emissions on board some of the vessels ofthe fleet. These analyses have the scope of knowledge of

the real impact generated by the vessels and will be also

used to validate the new air emission factors developed in

2005. Another target activity for 2006 consists in

monitoring the level of use and clear understanding of

the Environmental Web Report by all peripheral

Companies/Branches/Sites and Projects throughout the

Saipem Group. On the basis of the results thus obtained,

the need for a training program will be evaluated and

implemented should it prove necessary. Finally, the focus

will have to remain on the continuation of activities of

environmental protection on all projects and particularly

for those taking place in sensitive areas and with the

presence of endangered species, such as the Sakhalin

projects and the Dolphin project in Qatar.

Sustainability program 2006

The Sustainability program for 2006 will focus both on the

internal management of improvement rates for Corporate

Sustainability and on the external communication of

analysis of the impact of Saipem operations on social,

environmental and economic factors.

An internal multifunctional team will be formed according

to the definition of a new sustainability data accounting

methodology. The possibility of collecting at Saipem

Corporate all available and pertinent information from the

operational sites is the first attempt to complete the

analysis of Saipem operations from the point of view

Sustainability in all Saipem contexts. Saipem will try todefine at site level specific programs to be implemented in

order to monitor and manage the positive and negative

impact of the operations in relation to the country in which

the work is taking place.

New countries within the Saipem sphere will be involved in

the development of specific analyses at a local level that

will lead to the publication of new case studies on

sustainability. A more defined procedure for the Social

Impact Assessment will be another target for the

sustainability team aimed at satisfying Saipem clients and

monitoring from the outset of main projects the possibilityof embracing these issues. All related activities,such as the

Monthly Sustainability Newsletter, the internal training and

updating according to the new international literature, will

be maintained and improved in 2006.

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Target 2006

Health

Accomplishment of the medical fi tness examination Number of expatriates with valid medical fitness 92%

system for the personnel within the group companies Number of local personnel with valid medical fitness 90%

Vaccination campaign for expatriate personnel Number of expatriates vaccinated employees >78%

Reduction for the total frequency rate of repatriation Number of Saipem employees repatriated due to diseases

in respect to the previous year 70%

Safety

Fatalities Zero

Lost Time Injuries (LTI) Frequency Rate 15% less than 2005

Total Recordable Injuries (TRI) Frequency Rate 10% less than 2005

EnvironmentSignificant Environmental incidents Zero significant incidents

Zero fines and prosecutions

ISO 14001 certification for Groups companies Development of ISO14001 compliant Environmental Management

System for Saipem Nigeria

Sustainability

Accounting system & corporate standard Develop a Saipem group sustainability accounting system

Emission of a corporate standard for Social Impact Assessment

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HSE Management System

For the last few years, Saipem Corporates main issue has

been to reach a high level of implementation and

integration of Health, Safety and Environment

Management System (HSE MS) across the Group.

The international approach which characterizes Saipems

activities and the ever increasing complexity and risksinvolved in modern projects is at the basis of our

continuous motivation for developing an effective

management system aimed to continuous improvement.

Due to the complex and varied nature of Saipems activities,

the Corporate HSE Department rely on the Operating

Companies and the Project Managers to achieve the

established objectives, with the full support of the local /

project HSE Managers. The relationships between

Operating Companies / Projects Managers and the

Corporate is based on a clear and mutual understanding of

Missions, Policies and Objectives.

The HSE MS is mainly organized at three levels, to assure a

consistent performance level throughout its operations:

Corporate Level: defining policy, guidelines and standards

for all Saipem Operating Companies

Operating Company Level: defining policy, objective,

organization, procedures and work instructions to be

adopted in each Operating Company

Project Level: defining specific plans and procedures for

each specific project

The documents which form the HSE MS at the various

levels, and their interaction, are shown on the flow chart

below. The diagram illustrates the hierarchy of HSE

documentation which exists to provide clear

understanding of precedence and priorities of the

documents which comprise the HSE Management System.

This structure enables alignment of Operating Companies

to the Corporate management system and allows

Companies HSE Management Systems to integrate with

those of customers at local/project level as well as the

flexibility to accommodate any variation in local legislation.

Saipem is committed to achieving the highest standards of

Health, Safety and Environment within all its business

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activities. The HSE Mission and commitment can be

summarised as follows:

Developing a culture that achieves excellence in HSE

performance through the active participation and support of

all management, employees, customers and suppliers.

Promoting a culture which believes in all accidents being

avoidable, unnecessary and morally unacceptable.

Providing our employees with the training and tools to

ensure that they have the knowledge and skills needed toimplement the Company HSE Policies and perform their

work competently.

Providing advice and support to the Project Management

Teams to ensure compliance with Company standards and

all applicable legal, regulatory and contractual requirements.

The Saipem HSE Policy which sets the HSE values and

direction for the entire group is supported by the

following primary objectives:

Identification of all hazards and management of allrelevant risks

Systematic and accurate management of all methods

and activities for safeguarding health, safety at work and

protecting the environment

Performance of operating projects in line with current

laws, best available technologies and practices

Continual reduction of the number of undesirable events

with the ultimate aim of achieving zero accidents and

occupational diseases by adapting suitable measures for

preventing or reducing professional risk exposures

Limiting impact on the natural environment where

projects take place

The above objectives are achieved by pursuing a

continuous pro-active approach to the HSE issues aimed at

influencing attitudes and promoting safe and healthy

behavior. Pro-active involvement of both management and

workforce is reinforced and praised through the

implementation of rewarding schemes and awards at both

corporate and project levels. Specific awareness campaigns

and training programs are also conducted with the intent

to help people acquire the skills, knowledge and attitudes

to make them competent in the HSE aspects of their work.An open and effective communication system is

maintained and continuously promoted. The sharing of

safety experience, lessons learnt and best practice is in fact

recognized to be an effective way of achieving

improvements on safety performance. Saipem Corporate

HSE MS is formed around the following 15 HSE

Management Principles which define the basic

requirements of the HSE management systems in all

Saipem Operating Companies.

1. MANAGEMENT COMMITMENTSenior Management will provide visible, strong and pro-

active leadership and commitment to develop, implement,

audit and maintain the HSE Management System and the

relevant culture.

2. RISK MANAGEMENT

All hazardous operations and conditions will be identified,

the risks assessed and the relevant actions implemented

throughout the activities in order to prevent all accidents.

3. HUMAN RESOURCES

All personnel will have adequate physical fitness,

competency, training and attitude to carry out their duties

in safe manner.

Hierarchy of HSE Documentation

CORPORATE COMPANY PROJECT/SITE

POLICY

HSE POLICY

HSE GUIDELINES

PROJECT HSEPLANS,

PROCEDURES

HSE STANDARDS

OBJECTIVES

ORGANISATION

PROCEDURES

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4. COMMUNICATION

An effective and open communication system on HSE

matters shall be established and maintained for internal

and external interested parties.

5. ENVIRONMENTAL PROTECTION

All potential environmental impacts will be assessed,

evaluated and actions shall be taken to avoid any damage

to the environment and to restore original conditions.

6. COMMERCIAL

Basic processes shall be adopted in order to guarantee that

all cost factors and other commitments are assessed to

carry out the activities in accordance with Company HSE

Management System.

7. ENGINEERING

All facilities, plants and equipment will be engineered in

compliance with the best international HSE requirements

and statutory legislation.

8. PURCHASING

Suppliers will be selected, inspected and assessed in order

to guarantee the compliance with HSE requirements and

so that only safe material and equipment are purchased and

used within all Saipem activities.

9. OPERATIONS MANAGEMENT

Safe systems of work will be implemented by carrying out

all operations in compliance with Company HSE

Procedures, client requirements and statutory legislation.

10. SUBCONTRACTORS & SERVICES

Sub-contractor and Services Companies will be selected in

full compliance with Saipem HSE requirements. Their

activities shall be audited and evaluated in order to ensure

that safe conditions are maintained at the working sites.

11. ASSETS MANAGEMENT

All assets will be maintained, examined and inspected in

compliance with the statutory requirements,company and

international safety standards.

HSE Responsabilities Lines

HSE FUNCTION HSE ORGANISATIONLINE MANAGEMENT RESPONSABILITY

CORPORATE

OPERATINGCOMPANY

PROJECTS/SITES

VESSEL

Supporting, Advising, Coordinating, FacilitatingTraining, Auditing, Reviewing, Recommending

QHSE SENIOR VICE PRESIDENT

OPERATING COMPANYHSE MANAGER

PROJECT HSE MANAGER

HSE ENGINEERS/MEDICS

HSE ENGINEERS/OFFICER

OPERATING COMPANY MANAGING DIRECTOR

BU/DEP MANAGER

PROJECTS/SITE MANAGER

SUPERINTENDENT

CONST./DRILLING ORGANISATION

EMPLOYESS

VESSEL MASTER

MARINE/TECH. ORGANISATION

EMPLOYESS

SUPERVISORS TEAM LEADERS

EMPLOYESS

SUPERVISORS TEAM LEADERS

ASSET MANAGER EMPLOYESS

CHAIRMAN and CEO

MANAG. DIRECTOR

CHIEF OP OFFICIERBU SENIOR VP

HEALTH, SAFETY & ENV MANAGERS

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12. EMERGENCY PLANS AND PREPAREDNESS

Emergency plans, consistent with identified hazardous

conditions, shall be prepared and maintained and

periodical emergency drills shall be performed.

13. INCIDENT & ACCIDENT MANAGEMENT

All incidents and accidents will be duly investigated to

identify the causes and to prevent re-occurrences. A

reporting system shall be settled and implemented.

14. AUDIT

An independent audits system shall be implemented to

determine whether activities and related results conform

to planned arrangements and are suitable to achieve the

HSE Policy and objectives.

15. HSE MANAGEMENT SYSTEM REVIEW

The HSE Management System shall be reviewed yearly by

the Senior Management to guarantee a continuous

improvement as well as to meet new requirements and to

update the system with more experienced operations.

The above HSE Principles and their embedded

requirements are implemented and integrated into all

Group processes.

The HSE MS is continuously subject to monitoring and

review of the Corporate HSE Department, and the results

and analysis of this process are periodically shared with theCompanys Senior Management.

A key element of the HSE MS which deserves particular

focus is Management Commitment and Leadership in Safety.

Management at all levels in the Group are responsible for

leading and engaging the workforce in safety.

Managers need to demonstrate visible commitment to the

safety initiative and to provide the necessary resources to

ensure that an active HSE MS is implemented.

The further enhancement of Senior and Line Managementawareness on safety responsibilities and pro-active

leadership towards HSE is currently a key supporting

objective of the Saipem Corporate two-year Safety Plan

(2006/2007).

All employees are also individually responsible and

accountable for all HSE issues relating to themselves and

those with whom they associate.

A HSE function network is in place at all levels to support

the HSE role and responsibilities of Corporate / Operating

Company / Project / Site Management

This principle and organization can be represented in the

following flow chart:

The diagram above illustrates HSE as a Line Management

Responsibility. The HSE Organization provides for an

unbroken delegation of duties through the line

management to the workforce who operate where the

hazards arise. The diagram also shows the HSE function

network from the support role at the project/site level with

a functional reporting line to the operating company HSE

Manager, which is in turn supported by the Corporate HSE

function, to deliver the appropriate level of HSE

competence and resources according to the businessneeds. On the vessel, the HSE Engineer / Officers support

both the Master or Superintendent and ensures a direct link

between the vessel and the Corporate HSE Department /

Project Management Team.

In accordance with both international

and Company safety management

principles, all Group entities have

programs and procedures in place for

auditing the HSE Management System.

Audits are periodically conducted to

determine whether activities and

related results conform to planned

arrangements and are suitable for

achieving HSE Policy and objectives.

Results of the audits are presented to

local and corporate management so

that continued relevance of the HSE

Management System and overall HSE

performance can be evaluated.

In other words, as part of this auditing

process Saipem verifies that it is doing

what it said it was going to do.

Operating Companies and Project

Teams have the freedom to schedule

and organize HSE Management System

audits. Moreover, Saipem Corporate

performs worldwide audits in

accordance with a schedule issued on

a yearly basis.

An exercise to collect all QHSE Group

auditing activities in 2005 was

conducted at the beginning of the year

and resulted in the following data.

Saipem Group companies / sites /

projects were subject to 781 audits,

of which 586 were Internal Audits

and 195 by Third Parties such as

Clients and Certifiers

As a result, 2,418 Corrective Action

Requests were raised, 49% of which

were satisfactorily addressed and

closed-out at the end of 2005

140 external audits to Subcontractor

activities were performed

Saipem counts 111 qualified QHSE

auditors within its organization

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HSE Training year 2005 for Saipem

Today, there will not be any project, vessel, rig or site in the

Saipem Group conducting their activity without an

adequate training program for all Saipem project

personnel, regardless of nationality and job position. HSE

training is not only a legal or a client requirement set forth

in the most important regulation worldwide, butrepresents also an effective instrument for transferring and

sharing HSE know-how and awareness throughout the

personnel within the Company. It is also an irreplaceable

and invaluable tool for keeping Supervisors and Operators

up-to-date with current HSE technology and best practices.

The massive increase in hours dedicated to training, so-

called In-house training (that means a job related

formation), bears witness to the importance of these

statements: Saipem passed from 273.146 training hours for

the year 2004 to 523.354 training hours for the year 2005.

Saipem has increased by about 90% the time dedicated to

personnel training. The relative table also shows that

Saipem has increased by more than 100% the in-house

training rate (calculated for an employee for 1000 hours

worked) passing from 1.86 to 3.73 hours. This rate means

that each employee for every 1000 hours worked

underwent almost 4 hours of in-house training, whereas in

2004 the hours of in-house training were only 2. The

relative chart shows that the overall Saipem Group average

training rate is 4.18, with both offshore business units wellover of the average rate. Instead, the Onshore Construction

and Leased FPSO Business Units are well below the average

rate, even if the worked man hours for onshore

construction are more important and, therefore, the

resulting training rate is more significant. Consideration

must be given to the Offshore Construction Business Unit,

which has improved by more than 200% its training

performance. Only Leased FPSO has worsened its in-house

training performance, but that could be due to the reduced

activity of 2005.

In 2005 Saipem developed a Corporate Standard to set out

minimum requirements for the implementation of HSE

training activities for all personnel. This Standard refers to

training on HSE-related matters, and for each one a course

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has been developed which is performed by means of in-

house schedules suited to specific company needs. The

courses are divided into two categories: Type "A" (Approved

Professional HSE Courses) and Type "B" (Standard HSE

Courses). Courses belonging to the type A will be

delivered through an accredited third-party organization.

At the end of the course an approved professional

certification will be issued to the participants. A final

assessment or scheduled refreshment may be required,

depending on course provider and accredited training

program. Courses belonging to the type B foresee a non-accredited certification; they are delivered either by

Company internal resources or third-party training

organizations. The standard, of course, does not consist of

Statutory Training on HSE and Emergency - related matters

provided in compliance with applicable Regulations and

International Standards (i.e. STCW, OPITO, OLF etc.) and

administered by authorised providers. For this type of

training we refer to another Corporate Standard.

As said before, the development and implementation

activity of this "In-house" training has been partially carried

out utilising an external internationally recognised training

provider. In the year 2005 an extensive campaign was

conducted with emphasis on offshore construction

operations. This campaign alone provided almost 23.000

training hours.

The typology of certifications (A and B) issued for the

courses provided is assessed at around the 50% mark.

The following figure shows all in house training courses

grouped together in six main categories and expressed in

percentages. From this figure it is clear that the training has

focused mainly on the lifting issue, more than 35% of the

total amount. This datum reflects what is in reality the

Companys most important activity, and care has been paid

to the issue. Also encouraging is the percent of RiskAssessment and Permit to Work courses delivered to

middle-upper management training.

Saipem Training hours

Business unit In - house External Statutory Total Hours Total training rate (*)

Training Provider training Worked

Offshore construction 272.614 14.021 35.813 308.427 41.080.893 7,51

Onshore construction 55.679 940 0 55.679 36.916.034 1,51

Driling 73.750 6.944 13.441 87.191 12.628.314 6,90

Leased FPSO 580 0 719 1.299 1.417.927 0,92

LFM 39.219 0 0 39.219 20.917.194 1,87

MMO 26.545 0 0 26.545 9.499.065 2,79

Integrated projects 27.685 0 0 27.685 6.196.024 4,47

Others 27.283 1.056 15.224 42.507 12.132.140 3,50

TOTAL 523.354 22.961 65.197 588.551 140.787.590 4,18

In-house training hours and comparison with year 2004

Training Hours In-house training rate (%)

Business unit 2005 2004 difference (%) 2005 2004 difference (%)

Drilling Operations 73.750 57.254 28,8 5,84 5,02 16,30

Offshore Constructions 272.614 84.421 222,9 6,64 2,17 206,08

Leased FPSOs 580 720 -19,4 2,12 3,97 -46,72

LNG, Maritime Works & Floaters 39.219 34.494 13,7 1,87 1,02 83,96

Onshore Constructions 55.679 44.747 24,4 1,51 1,08 39,61

Maintenace Modification Operations 26.545 26.221 1,2 2,79 3,26 -14,24

Integrated Projects 27.685 4,47

Other (Logistic Bases & Head Offices) 27.283 25.289 7,9 2,25 2,07 8,67

TOTAL SAIPEM GROUP 523.354 273.146 91,6 3,73 1,86 100,62

(*) Training rate is: Training Hours/Million Worked Hours

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Total Training hours per 1000 Worked Hours

8

7

6

5

4

3

2

1

Offshoreconstruction

Onshoreconstruction

Driling Leased FPSO LFM MMO Integrated projects Other

Training Hours / Million Worked Hours

Main In-house Training Courses

40 %

35

30

25

20

15

10

5

Hazardous Substances

Management

Lifting Equipment

Management

Lifting Operations

Management

General Safety

Awareness

Working at Height

Management

Risk Assessment

& Permit to Work

Trainings have been a part of Saipem med

responsibility with particular emphasis on health

related risk on each project location. With influenza

worldwide, massive information campaigns on

influenza were performed in all Saipem entities.

Other trainings such as Malaria and STD including

MEDICAL TRAINING HIV/AIDS information campaigns were continuously

done. A total of 3900 trainings were performed by

health department in 2005. This constitute a dramatic

rise of 70.6% compared to last year partially due to

more accurate recording of this activity. Drilling BU

performed was a training champion with a total of

1742 trainings, followed by Offshore with 1045

trainings done.

40

45 %

35

30

25

20

15

10

5

Offshore Onshore Drilling FPSO LFM MMO Integratedprojects

Logisticbases

Headoffices

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Sustainable development is an integral part of Saipem

culture and core business. Urged by a relative lack of

resources when compared to with the Oil&Gas Companies,

and high levels of exposure to risk owing to the nature of its

operations, Saipem has always endeavoured to make a key

to success what is called Local Content and, more recently,Sustainability.

The sustainable management covers the whole range of a

company's interaction with society at large, from health,

safety and environmental protection to conditions of

employment, local economy and labour standards, social

development and human rights. From this definition, the

sustainabilitybecomes for us a strategy for gaining

long-term competitive advantage and a vehicle that helps

our business to achieve planned targets.

In order to achieve long-term positive results, we believe

that crucial factors for consideration are both the

importance of financial issues for shareholders and values

such as health, safety, environmental care and social

responsibility for our employees, the environment and the

communities with which we interact.

The Saipem Sustainability Team, in cooperation with

representatives from all the other Company functions, has

been working since 2002 to develop a strong culture of

sustainability at all levels and functions within the

Company, through specific training programs, informativeand awareness campaigns, local Case Studies, focused on

key countries, distribution of principles, policies and

management tools that foster and reinforce the internal

network.

An essential aspect of this approach is Company

commitment to the development of the communities in

which Saipem works and makes its business. We depend on

and must contribute to the socioeconomic development

and the conservation of natural resources around the world.

In its international operations, in fact, Saipem places

particular emphasis on acting with the proper respect for

local customs, traditions, culture and being sensitive to any

potentially disruptive effects that its presence might cause.

Moreover, aware of the effects of its operations, Saipem has

Our Commitment for Sustainability

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