ENERGY EFFICIENCY AND EMISSIONS

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

In 2004, Talisman emitted 2,788,302 tons of CO₂E from our Canadian operations and 1,582,641 tons from our UK operations. We have identified certain issues regarding the controls relating to the measurement, processing and reporting of CO₂E emissions data for our UK operations, which we are committed to addressing in 2005.

Emission Reporting

Talisman reported emissions of criteria air contaminants from 170 individual facilities in Canada consistent with requirements of the National Pollutant Release Inventory program. We also reported 2003 CO₂E emissions for select facilities to the Alberta Government under a new mandatory reporting scheme introduced through provincial legislation enacted in 2004. We continue to contribute to the cooperative regional air quality monitoring programs in the West Central, Peace and Parkland Regional Airsheds in Alberta, Canada.

Energy Conservation Initiatives

In 2004, Talisman’s direct energy use was 20,697,019 mmBTU at our Canadian operations and 23,762,384 mmBTU at our UK operations.

Talisman constructed a new cogeneration facility at the Edson, Alberta, natural gas processing plant in 2004. The cogeneration facility will substantially reduce fuel gas consumption at the Edson plant, reducing direct emissions by approximately 22,000 tons of CO₂E annually.

We also increased natural gas conservation in Alberta from 95.4% to 95.6% in 2003 (totals are reported one year late), as a result of continued flare and vent gas conservation initiatives. In addition, we installed methane emissions controllers at a number of facilities in Western Canada.

Renewable Energy

Engineering, design, operations and maintenance studies were completed in 2004 in advance of committing to the construction of the Beatrice Wind Farm Demonstrator Project. This is currently the largest wind energy research and development program in the European Union. Key activities in 2005 will include comprehensive environmental studies, submission of a formal environmental impact statement and award of contracts for turbine manufacture and installation, fabrication and tie-in. See page 27 for more information.

Kyoto Protocol

Talisman actively participates in the CAPP Climate Change Working Group (CCWG). This is the Canadian upstream oil and gas sector’s primary vehicle for discussion with the Federal Government regarding implementation of Canada’s commitments under the Kyoto Protocol. CCWG efforts in 2004 focused on the design of Large Final Emitter emission reduction targets, flexible compliance options including contributions to qualifying research, harmonization of federal, provincial and territorial reporting and verification requirements and federal policy beyond the first compliance period.

In the UK, Talisman continued to prepare for participation in the EU Emission Trading Scheme, completing comprehensive external verification of historic combustion related CO₂E emissions from Talisman (UK)’s platforms and terminals.

Related to this, Talisman (UK) conducted a major study of all operated sites in 2004 to determine the required changes to comply with the EU Emissions Trading Scheme, the Offshore Combustion Installations (Prevention and Control of Pollution) Regulations and the Department of Trade and Industry’s Flare Mass Reporting requirements. This involved site visits as well as a desk-based review to evaluate the current situation and to produce a detailed Statement of Requirements (SOR) for each installation to meet compliance. The SORs specify exactly what has to be done in terms of fuel and flare metering, emissions sampling, data recording, reporting and verification to meet legislative requirements.