Wherever we operate, we endeavour to understand local environmental sensitivities and plan our activities accordingly. This demands careful attention to environmental issues and impacts in order to minimize the Company’s environmental footprint.

An Update on Talisman’s Activities Onshore Trinidad In July 2003, Talisman (Trinidad) Petroleum Ltd. and our coventurer led members of Trinidad’s Environmental Management Authority (EMA) and the Ministry of Energy and Forestry on a trip through the Eastern Block in Trinidad to assess our work in the area. During that visit, participants witnessed our efforts to minimize our environmental footprint and assessed previously cut seismic lines, vegetation regrowth and observed two seismic charge detonations. Talisman also provided the environmental representatives with a video of our seismic activity in the area and progress made in the Eastern Block. On October 31, 2003, Talisman received a Certificate of Environmental Clearance from the EMA to expand our low-impact seismic survey into the western edge of the 15,400-acre Nariva Swamp3, a coastal wetland partially encompassed by Talisman’s Eastern Block onshore Trinidad. Though only a small part of Talisman’s seismic operations were planned for in the Nariva Swamp, Talisman engaged in extensive stakeholder consultation including informing landowners, farmers and residents of our activities and a comprehensive environmental and social impact assessment. 3 The area was nominated as a “Wetland of International Importance” in 1993 under the Ramsar Convention of Wetlands (Ramsar, Iran, 1971). For more information, visit www.ramsar.org

Surveys, Assessments and Studies

Surveys of rare plants and other site assessment activities were completed in support of drilling access planning at Callum Creek in the North Porcupine Hills of Alberta.

Caribou protection plans were developed in support of winter exploration and development activity within defined Caribou Management Areas in Alberta. These plans specify environmental protection measures such as limits on the extent and configuration of clearing, schedules for activities, access control and coordination. By following these plans closely, we limit our impact on local caribou populations.

A preliminary environmental study of Block 10 offshore Qatar was completed in support of future operational planning. The study concluded that there are no unique or otherwise sensitive environmental features within the block.

In the UK, 18 project-related environmental assessments were completed: 14 in support of proposed offshore drilling operations, two in support of offshore pipeline operations and two for workover activities.

In 2003, a two-year independent, retrospective environmental impact assessment was completed on our gas operations on Lake Erie. The study looked at waste management (including drilling mud and cuttings) and related biological effects, well abandonment and pipeline decommissioning, well and pipeline integrity, spill history, and spill response capability. Results demonstrate that Talisman’s offshore gas exploration and production activities have had no significant, measurable impact on the Lake Erie ecosystem.

We also engage in collaborative planning practices in an effort to reduce the environmental impact of oil and gas activities. For example, in the environmentally sensitive eastern slopes of the Rocky Mountains, Talisman currently represents the Canadian Association of Petroleum Producers (CAPP) on environmental policy and planning initiatives relating to regional natural gas development. These include the development of coordination and control mechanisms for future access development (by the oil, gas and forestry industries) and the development of cumulative environmental effects modeling as a tool in regional land use planning. We also participate on the Alberta Government’s Grizzly Bear and Caribou Recovery Teams, providing science-based, strategic advice to the provincial Endangered Species Conservation Committee.

Construction projects are carefully planned and we employ several routine practices to reduce environmental impact. Onshore, these include minimizing the size of areas to be cleared or otherwise disturbed, salvaging topsoil for eventual use in site reclamation and properly controlling runoff and erosion. Efforts are made to avoid sensitive environmental features through routing and schedule adjustments and the use of directional drilling techniques. In some cases, wells can be drilled from common pads to minimize the environmental footprint in a given area and most pipeline stream crossings are drilled or bored. To assist in our monitoring efforts, environmental inspectors are hired to guide work in sensitive locations.

Talisman hosted or actively participated in 18 open houses in Canada in support of specific projects or community appreciation events, which were attended by approximately 3,500 people.

Talisman continued to develop oil reserves within the Ribstone-Edgerton Heritage Rangeland in 2003. Regulatory consultation and environmental planning of our activities in the area included a baseline sensitivities analysis and mapping, rare plant surveys and archeological investigations, access planning and pipeline routing to avoid sensitive features and drilling multiple wells from a common surface location to minimize the amount of ground disturbance.

Marine mammal protection measures were implemented in support of well abandonment programs in the North Sea in 2003, as this operation required the detonation of explosives at depth. Dedicated marine mammal observers logged over 400 hours of survey time during these operations, ensuring there were no whales, dolphins, or porpoises in the vicinity during the controlled detonations.

Environmental Remediation in Colombia

Talisman (Colombia) Oil and Gas Ltd. has been named as a defendant in a legal action along with our operating coventurer in the District of Acevedo, Colombia. The legal action seeks remediation for environmental impacts associated with lease and access road construction. Talisman has provided technical advice to the operator to effectively remediate the issues and, through the operator, is working closely with neighboring communities and local regulatory authorities to resolve this issue.

In September 2003, Talisman (UK) supported a Scottish Native Woods demonstration day at Braemar, Scotland to highlight work being done to protect the native juniper tree and reverse a decline in its numbers. Other participants included local landowners, farmers and community and statutory organizations. .

In Canada, Talisman indirectly supports a wide range of environmental research and development programs funded by industry levy and administered through the British Columbia Science and Community Environmental Knowledge Fund and the Canadian Association of Petroleum Producer’s Environmental Research Advisory Committee.

Talisman funded coldwater fisheries inventory work by the Alberta Conservation Association (ACA) in the Blackstone River drainage (Rocky Mountain Foothills), ACA’s Foothills Model Forest Grizzly Bear Research Program, the Alberta Government’s West Central and Boreal Caribou Research Programs and the Alberta Research Council’s work on the use of native grass species for land surface reclamation.

Talisman is also an ongoing supporter of the Alberta Ecotrust Foundation, which provides financial support for grassroots environmental projects by communities and organizations across Alberta.

Talisman continued its partnership with the University of Aberdeen in 2003 when we provided support for the development of research and teaching facilities at the Lighthouse Field Station in Cromarty. Talisman Adds Extra Shine to Lighthouse Project In 2003, the development of a key ecological project in the north of Scotland supported by Talisman (UK) was given a formal stamp of approval when Charles Kennedy, the local Member of Parliament and Leader of the Liberal Democrats, officially opened a recent expansion of the University of Aberdeen’s Lighthouse Field Station in Cromarty. The field station, which is best known for its internationally-acclaimed studies of the Moray Firth’s bottlenose dolphin population, also conducts long-term ecological studies of harbour seals and seabirds. International recognition of these studies now brings visiting researchers from many overseas countries. The Company helped refurbish an adjacent building, which now accommodates new marine research facilities. “As active operators in the Moray Firth, we remain extremely sensitive to the ecological importance of the area and recognize the hugely important work undertaken through the project,” said Talisman (UK)’s Environment Manager, Jan Rusin.

Spill Response

Our regional operations maintain spill contingency plans and have access (either directly or through contractual arrangements) to spill containment and cleanup equipment, trained personnel and other key resources.

In 2003, spill-response guidance for the Company’s operations in Ontario was completed and integrated within the new provincial emergency response-planning framework.

In the UK, oil spill contingency plans for offshore sites were updated and improved and key offshore personnel completed oil spill response training using a computer-based package called “On-Scene Responder”.

Talisman (UK) continues to actively support the Hydrocarbon Leak Reduction Initiative, an industry-wide campaign to achieve substantial reductions in major and significant leaks offshore to water and atmosphere. Talisman achieved a significant reduction in reportable leaks in 2003 with only four reportable releases in 2003, compared to nine reportable releases in 2002.

The majority of spills reported by Talisman (UK) operations in 2003 were attributable to produced water exceedances (oil concentrations greater than 100 mg/kg must be reported as spills in the UK). This contributed to the relatively low average spill size in the UK. The average spill volume for Talisman (UK)’s operations was 5.7 barrels, with the largest spill estimated to be 260 barrels in volume. Talisman worked with local stakeholders and governments to quickly and effectively mitigate the onshore impacts of this spill. Efforts to improve oil-water separation and ongoing spill prevention initiatives at the UK sites should result in reduced spill frequency.

Talisman Malaysia completed the development and implementation of a new oil spill contingency plan in 2003. This plan covers offshore production operations as well as ongoing exploration and development drilling operations. Training was also completed in oil spill response, as part of an overall program in support of a new emergency response framework for the PM-3 project.

Two large drilling mud spills contributed to a relatively large average spill size in Malaysia in 2003.

Talisman (UK) continues to actively support the Hydrocarbon Leak Reduction Initiative, an industry-wide campaign to substantially reduce offshore hydrocarbon releases to water and atmosphere.

Average Oil Content of Produced Water Discharged to the Sea (ppm)1
	2001	2002	2003
United Kingdom	26.12	25.12	20.4
Malaysia	—	8.9	20.8
1 Statutory limit is 40 ppm. 2 Following review, figures for average oil content of produced water in the UK for 2001 and 2002 have been revised as above. This revision did not affect the accuracy of UK statutory reporting.

Spill Frequency (number/mmboe)	2001	2002	2003
Canada (Reportable Spills)1	0.37	1.00	1.18
UK (Reportable Spills to Sea)	0.55	0.89	1.21
Malaysia (Reportable Spills to Sea)			0.36
Average Spill Size (barrels)	2001	2002	2003
Canada	72.8	97.3	53.7
UK	0.7	0.9	5.7
Malaysia			200.3
1 Includes oil, emulsion, produced water and other reportable spills as defined by local jurisdictions.