Commitment

We support sensible, economic measures that will improve our energy efficiency and reduce emissions on a unit of production basis.

Production Carbon Intensity (PCI) and Production Energy Intensity (PEI) are useful aggregate indicators of greenhouse gas emissions and energy efficiency. PCI is a measure of the amount of CO₂, N₂O and CH₄ (expressed as CO₂ equivalents) emitted per unit of production. PEI is a measure of the amount of energy consumed per unit of production. Both of these metrics normalize for production growth and facilitate direct comparisons of performance over time.

Achieving consistent improvement in PEI and PCI is a significant challenge as declining reservoir pressures and increased formation water handling contribute significantly to incremental energy demand.

In 2003, Talisman’s Board of Directors approved the construction of a gas-fired cogeneration facility at the Edson, Alberta gas plant pictured above.

Improvements continue to be made to ensure that our greenhouse emissions data are accurate and verifiable. Safeguards have been implemented in the data upload process and in the energy data management system itself to ensure greater data integrity. These include a system of examining trends and discrepancies and a comparison of fuel consumption volumes to the theoretical data associated with the equipment. In 2001, we modified our methodology for calculating PCI and PEI to better reflect current industry practice.

In Canada, the Company’s Production Carbon Intensity improved by 5% in 2002 over 2001 levels, due to gas conservation projects, reductions in flaring and venting and changes in our production activities.

Talisman (UK) has carried out reviews of energy use and carbon emissions data and related calculation and aggregation techniques in the course of preparing for new regulatory requirements including Integrated Pollution Prevention and Control (IPPC) and the forthcoming EU Emissions Trading Scheme. These reviews have significantly improved the accuracy of the methods used and resulted in revisions to some of the data for energy use and carbon emissions, which underlie the PCI and PEI Indices. Talisman (UK) is therefore restating PCI and PEI figures for 2000 and 2001, and aims to continue to improve data measurement and reporting techniques to meet increasing external requirements. Substantial increases in diesel consumption and flaring contributed to increased PEI and PCI in the United Kingdom in 2002.

Energy Conservation Initiatives

In Alberta, Talisman’s gas conservation ratio increased from 95.1 to 95.4% in 2002 as a result of flare and vent gas conservation initiatives. The provincial industry average was 94.7%.

In 2003, Talisman’s Board of Directors approved the construction of a gas-fired cogeneration facility at the Edson gas plant in Alberta. This facility will produce utility steam for the gas plant and electrical power very efficiently, contributing to further improvements in aggregate PEI when the facility comes on stream in 2005.

Talisman is co-sponsoring engineering and environmental studies in support of the potential Beatrice Windfarm Project in the Moray Firth, off the coast of Scotland. Consistent with the UK Government’s stated commitment to renewable generation capacity, the Beatrice Windfarm Project (as presently envisaged) could generate as much as 1,000 megawatts from up to 200 turbine units deployed in the vicinity of Talisman’s Beatrice oil field. Current studies are focused on assessing the feasibility of the project and on the preliminary design of two demonstrator turbine installations. For more, Economic Performance section.

Voluntary Reporting Programs

Talisman has participated in the Voluntary Challenge and Registry (VCR) since 1994, and achieved Gold Champion-Level Reporter status for our most recent submission (2002) after two years at the Silver Level. To qualify for Gold status, one requirement of reporting companies is to reduce current emissions or emissions intensity to levels below their base year (1994 in Talisman’s case). Additional information regarding our Canadian energy efficiency and emission reduction initiatives can be found in our annual reports to the VCR available online at www.vcr-mvr.ca.

Kyoto Protocol

In Canada, the federal government continues with policy development and implementation planning consistent with its 2002 “Climate Change Plan for Canada”. Framework enabling legislation could be introduced as early as the fall of 2004. The principle negotiating forum for the upstream oil and gas sector is the CAPP Climate Change Working Group (CCWG). Priority matters currently before the CCWG include critical review of the government’s business-as-usual emission intensity projections, design and allocation of Large Final Emitter emission targets, ensuring flexibility with respect to compliance options and harmonization of federal and provincial reporting and verification requirements.

With respect to the UK, the European Union (EU) Directive establishing the EU Emission Trading Scheme (ETS) was adopted in October 2003. The UK Government issued a draft National Allocation Plan (NAP) in January 2004, for broad consultation. The ETS is a cap-and-trade system. The draft NAP proposes an overall CO₂E emissions cap for specified industrial sectors in the UK and provides an early indication of the number of permits to be allocated to individual installations. The first phase of the EU ETS is to commence in 2005. Talisman continues to participate in industry-government consultations on the ETS through the UK Offshore Operators Association.

We remain concerned that there will be significant incremental challenges and costs associated with meeting commitments under the Kyoto Protocol, with no clear assurance of commensurate environmental benefits globally.

Environmental Monitoring

Process and ambient monitoring is undertaken at larger, more complex facilities consistent with regulatory obligations and terms of the relevant operating permits and licences. Monitoring data is scrutinized to confirm our continued compliance with process limits and ambient environmental standards. Recent modifications at our Edson gas plant, for example, should result in significantly improved sulphur recovery. From this point forward, we expect to reduce sulphur dioxide emissions by approximately 24%.

Talisman also directly funds cooperative regional air quality monitoring programs in the West Central Regional Airshed, the Peace Regional Airshed and the Parkland Regional Airshed, in Canada.

Production Carbon Intensity (PCI) and Production Energy Intensity (PEI), Canada
	2000	2001	2002
PCI (tons CO2E/boe)	0.030	0.027	0.026
PEI (mmBtu/boe)	0.251	0.243	0.237
Production Carbon Intensity (PCI) and Production Energy Intensity (PEI), UK
	2000	2001	2002
PCI (tons CO2E/boe)	0.022	0.025	0.031
PEI (mmBtu/boe)	0.328	0.372	0.458

4 This report includes information on our 2002 greenhouse gas emissions performance as 2003 data was not available at time of publication.