TRANSPARENCY

Fiscal Contributions to Host Governments

Talisman believes that the approach we take towards fiscal transparency is within the spirit of what is being asked of corporations by the Publish What You Pay Coalition5. While we believe we are on the right track, we continue to monitor developments and work with other companies, governments and NGOs in this evolving area. We monitor the developments of the reporting guidelines developed under the auspices of the UK Government-driven Extractive Industries Transparency Initiative6, which could act as a basis for how Company payments and government revenues should be published in the future and encourage additional dialogue on international reporting standards. We also support the Global Compact’s tenth and newest principle that businesses should work against all forms of corruption, including extortion and bribery.

Royalties and Current Taxes

In 2004, Talisman paid $1,726 million in royalties and current taxes. Not all of this expense represents cash payments to host governments. Under certain contractual terms, royalties and taxes represent the entitlement of the host government to a portion of Talisman’s share of production. Talisman does not distinguish between cash payments and ‘commodity-based payments’ in determining the Company’s total fiscal contribution to host governments. Talisman values these commodities at their respective market prices at the time of production. For more information, see table on next page.

Material Payments

With respect to other material payments of $1 million or greater paid to governments, Talisman paid $2.7 million to the government of Malaysia for research, training and development in accordance with the terms of various contracts.


Fiscal Contributions to Host Governments
Royalties Taxes Total
2004 2003 2002 2004 2003 2002 2004 2003 2002
Canada 562 562 372 28 18 (21) 590 580 351
US 37 25 1 15 3 1 52 28 2
North America 599 587 373 43 21 (20) 642 608 353
United Kingdom 37 8 96 348 167 220 385 175 316
Norway - - - 14 (6) - 14 (6) -
Netherlands - - - 18 7 - 18 7 -
North Sea 37 8 96 380 168 220 417 176 316
Indonesia 205 113 107 92 83 76 297 196 183
Malaysia 183 40 22 47 1 2 230 41 24
Vietnam 3 3 1 5 3 1 8 6 2
Southeast Asia 391 156 130 144 87 79 535 243 209
Algeria 97 46 - 33 - - 130 46 -
Sudan - 97 328 - 17 68 - 114 396
Trinidad - - - - - - - - -
Colombia - - - - - - - - -
Qatar - - - - - - - - -
Peru - - - - - - - - -
Other - - - 2 8 3 2 8 3
Rest of world - - - 2 8 3 2 8 3
Total company 1,124 894 927 602 301 350 1,726 1,195 1,277
Royalties represent cash payments, and in certain foreign operations, the entitlement of the respective governments to a portion of Talisman’s share of production. For more information see Notes 1g) and 20 to Talisman Energy Inc.’s Consolidated Financial Statements for the year ended December 31, 2004. Taxes represent current tax expense and current Production Revenue Taxes. For more information see Note 15 to Talisman Energy Inc.’s Consolidated Financial Statements for the year ended December 31, 2004. The majority of the 2004 Taxes in Other represents payment of Swedish taxes.

“It is important for extractive companies to disclose revenue payments in order to promote accountability of governments to citizens for the management of this income and a more stable operating environment for themselves.” Correspondence from Publish What You Pay
5 The Publish What You Pay Coalition calls for disclosure of payments to, and transactions with, governments by multinational natural resource companies, their subsidiaries and business partners. Additional information regarding the Publish What You Pay Coalition can be found online at www.publishwhatyoupay.org.

6 The Extractive Industries Transparency Initiative (EITI) is a global multi-stakeholder initiative that brings together developing country governments, donors, companies, investors, civil society organizations and international financial institutions to increase transparency in the extractives sector in developing countries. For more information on the EITI visit www.eitransparency.org.