BUSINESS ABROAD: State v. Private Capital

The boss of Italy's powerful Ente Nazionale Idrocarburi, the Italian state oil and gas authority, is a slim, eagle-beaked man of 48 named Enrico Mattei. To some Italians he is the greatest man in all Italy. To others, and particularly to U.S. businessmen trying to do business in Italy, Enrico Mattei is the biggest and clearest symbol of what is wrong with Italy's economy. Last week, in the Italian press, both sides were shouting bitter arguments at each other.

As head of E.N.I., Oilman Mattei is an implacable foe of any foreign-capital oil investment in his homeland. His enemies say that Mattei, more than anyone else, is responsible for scaring away the very type of enlightened foreign capital that Italy must have to complete its economic recovery. Italy, which has always had to import most of its coal and oil at high cost, has promising oil and gas formations, notably in the Po Valley. The big question is: Who will be allowed to develop the oil and who can do it best?

Horn of Plenty. Mattel's thesis is that a state monopoly can do more for Italy than foreign capital, thus does his best to ban outside investors and increase E.N.I.'s power. Starting with capital of $50 million last year, E.N.I, has rapidly expanded until now it controls most of Italy's production and refining, operates a tanker fleet, makes soap and sells 20% of all Italy's gasoline.

Mattei, a carabiniere's son and a wartime partisan, got into the oil business in 1945 when he was made Northern Commissioner of E.N.I.'s predecessor, the state-owned A.G.I.P. (Azienda Generale Italiana Petroli), with the job of selling off its assets. Mattei defied the orders, kept his equipment and put prospectors to work in Italy's big Po Valley. Soon, Mattei was boss of all A.G.I.P. His geologists found a big methane gas deposit with an initial production (1.5 billion cu. ft.) greater than all the rest of Italy's fields. By 1953, Mattei's wells were producing 71 billion cu. ft. of gas annually, saving Italy more than $32 million in coal and oil imports. This year production will hit 90 billion cu. ft., increase in 1956 to 130 billion cu. ft., the equivalent of 66% of Italy's fuel imports.

Trickles & Troubles. No one questions Mattei's success in natural gas, but his attempts to give Italy an oil industry have failed. In the promising Po Valley, E.N.I, has produced only a trickle of oil, some 83,000 tons (636,000 bbls.) in 1953. Critics claim that E.N.I, has neither the capital nor the equipment to explore the Po Valley properly. By monopolizing all explorations, Mattei has spent badly needed Italian cash, including some dollar aid from the U.S., when he could have had U.S. firms spend their own money to explore the area. Even in E.N.I.'s successful gas operation, there has been trouble. In the rush to draw off natural gas from the Po Valley fields, E.N.I, failed to seal a well properly. As a result, methane has leaked through large areas of porous upper strata, ruining crops and wasting gas.