Corridor Gas Plant in Indonesia

Talisman has more than doubled its production in Southeast Asia over the past two years and expects to continue production growth from existing projects to the end of the decade. Southeast Asia was Talisman’s lowest operating cost area in 2004.

In Indonesia, Talisman continues to develop its large natural gas reserves in the Corridor Block. A major new gas sales contract was signed during the year. In Malaysia and Vietnam, the PM-3 CAA project performed above expectations producing 42,000 boe/d (net Talisman) during its first full year of operations. Development of the South Angsi field is continuing according to plan.

2004 in Review

• Natural gas production averaged 260 mmcf/d, an increase of 122%. Liquids production averaged 35,644 bbls/d, an increase of 46%.
• Exploration and development spending totaled $255 million.
• Talisman drilled 30 exploration and development wells.
• Talisman added 134 mmboe of proved reserves and had 453 mmboe of proved reserves at year end.
• In Indonesia, an agreement was signed for the sale of 2.3 tcf of natural gas from the Corridor PSC to PT Perusahaan Gas Negara (Persero), Tbk. (“PGN”), the Indonesian national gas transmission and distribution company. Talisman’s share is 36%. This gas sales agreement will result in PGN building a major pipeline linking the island of Sumatra to major gas markets in West Java.
• The PGN gas sales agreement underpins further development of the Suban field and the expansion of the gas production and processing facilities, which commenced in August.
• Talisman signed a PSC for Block PM-314 offshore Malaysia in the highly prospective Malay Basin and the initial seismic program has been completed.
• The Tanjung enhanced oil recovery contract expired in November and the Jambi enhanced oil recovery contract expired in early 2005. Talisman’s non-operated interest in the Madura PSC was sold in December.

2005 Outlook

• Production targets are 255-285 mmcf/d of natural gas and 33,000-37,000 bbls/d of oil and liquids.
• Exploration and development spending is expected to be $310 million.
• In Indonesia, the Suban Phase 2 gas expansion project in the Corridor PSC will continue, including the installation of two new gas trains, additional pipelines and infrastructure.
• The Company continues to look for additional markets for its large remaining uncontracted Corridor gas reserves.
• In Malaysia, the South Angsi field is expected to come onstream in mid-2005 with an estimated 6,500 bbls/d of production in 2005 and 12,000 bbls/d in 2006.
• In Malaysia/Vietnam, the Company expects to start development of the northern fields in PM-3 CAA.
• Talisman is planning to drill up to 26 exploration and development wells in Southeast Asia.

A fast track, low cost development strategy for South Angsi

Development of the South Angsi field in Block PM-305 is a good illustration of Talisman’s fast track, shallow water, oil exploration and development strategy in Southeast Asia. The initial discovery was made in April 2003, the jacket was installed in October 2004 and first production is expected in mid-2005.