Italian energy giant Eni SpA is facing a threat to its lucrative natural-gas business, long considered a ballast against volatile oil prices, as European Union trade regulators consider breaking up its network.
The company is due to testify before EU regulators on Nov. 27 to respond to allegations made by Brussels that it has restricted rivals from gaining access to its extensive natural-gas pipelines, according to a spokeswoman for EU antitrust Commissioner Neelie Kroes.
The hearing, requested by Eni, is the final step before the European Commission concludes a long-running inquiry into whether Eni has abused its dominant position in Europe's natural-gas market. Brussels is expected to rule on the issue next year.
Eni runs a sprawling pipeline network that delivers natural gas from the Continent's biggest suppliers -- Russia, Algeria, Norway -- into the heart of Europe, from Belgium to the tip of the Italian peninsula.
The business generates more than a third of Eni's revenues. Eni risks losing control of vital pipelines that have functioned as the main arteries of its gas business for decades.
Brussels alleges that Eni refused to sell capacity in its pipelines to rival companies seeking a route to deliver Russian and Dutch gas to European nations.
Brussels has also accused Eni of "strategic underinvestment" that restricted the amount of natural gas flowing through the pipelines.
Eni said it is cooperating with the inquiry but declined to comment on the charges or the coming hearing.
If Brussels rules against Eni, the company could face a fine in the billions of euros, or up to 10% of its total annual revenues, which were 108 billion euros ($159 billion) in 2008. Regulators could also force Eni to sell part of its pipeline network.
The inquiry cuts to the heart of long-running battles between Brussels and individual European governments for control of Europe's natural gas market. For decades, European governments have relied on national champions to jockey for access to major natural gas fields, securing the flow of gas to their national markets from far-flung sources.
In recent years, however, the EU has tried to convince governments to agree to new rules that would force companies to separate their production business from their transit and sales businesses. Such separation, Brussels says, would open national markets to competition by companies across the Continent and lower prices for consumers.
The EU inquiry is just one of the factors weighing on Eni's natural gas business. A slump in demand for gas in Europe has driven down prices, sapping plans for new pipelines.
Last week Russian gas monopoly OAO Gazprom's $11 billion Nord Stream pipeline project cleared its last major regulatory hurdles when it won approval from Finland and Sweden to carry gas across their borders to the rest of Europe, a move that could boost supply and keep gas prices down in the years to come.
Eni is currently on the hunt for another partner to join its own venture with Gazprom, to build the South Stream pipeline. The ambitious project calls for a new pipeline to carry gas under the Black Sea to central Europe and Italy, bypassing Ukraine, whose rocky relationship with Moscow has led to cutoffs in the flow of gas to Europe in recent years.
Meanwhile, Knight Vinke, an activist investment fund that holds 1% of Eni, wants Eni's gas utility business separated from the rest of the company, arguing that it no longer makes financial sense to keep Eni's upstream and downstream operations yoked together.
Unlike other oil majors, Eni owns some of Europe's biggest natural gas pipelines and controls a vast distribution and retailing network, allowing the company to not only pump fossil fuel from distant oil and gas fields but also distribute it across Europe and even deliver it directly to homes in Italy.
The hybrid business also has acted like an insurance policy against swings in the prices of oil and natural gas, because most of Eni's natural gas contracts are set for years in advance.
The unique structure has allowed the company to punch above its weight in an industry dominated by scale: Countries such as Russia are willing to look beyond Eni's smaller size because it offers potential deals in other parts of the market.
In recent years, for example, Eni has agreed to give up a slice of its Italian gas market to Gazprom in order to secure supply contracts to 2035 and in exchange for access to Russia's vast energy reserves.
Eni's natural gas business has high margins because it doesn't have to pay third parties to transport the gas it purchases in Russia and Algeria.
The EU case began in May 2006 with a series of dawn raids on Eni offices, and the company was formally placed under investigation the following year.
Since then, Eni Chief Executive Paolo Scaroni has repeatedly said that Eni aims to reach a compromise with Brussels and avoid a potential fine or the forced sale of assets. Mr. Scaroni declined to be interviewed for this article.
As the inquiry nears a ruling, however, Eni's window to negotiate a compromise and avoid a fine is narrowing, analysts said. "Given all the work done and the administrative resources deployed, [the Commission] might want to pursue the case to the end and adopt a negative decision," said Filippo Amato, a lawyer at Jones Day specializing in EU competition.