Talisman's 2005 Corporate Responsibility Report - Responsibly Managing Impacts - reflects Talisman's approach to translating our commitment to corporate responsibility into action throughout our global interests, which ultimately contributes to the creation of long-term value for our shareholders.
Discussion with James W. Buckee, President and CEO
- WHAT DOES THE TITLE OF THIS YEAR'S CORPORATE RESPONSIBILITY REPORT MEAN TO YOU?
- As an international oil and gas company, our business interests take us around the world in search of exploration and development opportunities that provide energy for people. That is what we do. Managing the impacts of our activities, whether related to safety, environmental, economic or social performance, is how we do business. Talisman's 2005 Corporate Responsibility Report - Responsibly Managing Impacts - reflects Talisman's approach to translating our commitment to corporate responsibility into action throughout our global interests, which ultimately contributes to the creation of long-term value for our shareholders.
- WHY DOES TALISMAN REPORT ON ITS CORPORATE RESPONSIBILITY PERFORMANCE?
- I believe our approach to corporate responsibility and our reporting on corporate responsibility performance helps the Company manage risks (including our licence to operate, our employee recruitment and retention efforts and our need for access to capital) in a number of ways. First, over the years, I have observed that the process of reporting itself serves as a catalyst to sharpen our internal focus on programs across our organization. Second, reporting also ensures corporate accountability and helps to drive our performance. Third, the annual dissemination of the Report allows the Company to actively engage our numerous stakeholders on issues discussed in the Report, such as human rights, environmental performance and transparency. Ultimately, I feel the demonstration of our corporate responsibility programs through the publication of the Report creates investor confidence in our risk management systems.
- HOW DO YOU DEVELOP A CORPORATELY RESPONSIBLE CULTURE AT TALISMAN?
- I believe our employees have a deeply ingrained innate sense of corporate responsibility. My role, therefore, is to reinforce this sense of corporate responsibility through my behaviour and interest. I see corporate responsibility as an integral aspect of creating value throughout our operations, not an add-on to them. I am personally committed to high levels of performance in all areas of our operations and dedicated to ensuring they are conducted in a safe, healthy and environmentally responsible manner.
- WHAT IS THE MOST SIGNIFICANT CHALLENGE FACING TALISMAN?
- Upward pressure on oil prices, increased industry activity and the need for expert personnel have been building for a quarter-century. However, general industry recruitment has not kept pace with its needs. A shortfall in trades, engineers, geologists, geophysicists and many other professionals has had a deleterious effect on operational efficiency and execution. I believe this labour shortfall represents the single biggest challenge facing, not only Talisman, but, the international oil and gas industry as a whole. Compounding the challenge is the enhanced training and development required for new and less-experienced employees. The inflow of new and less-experienced employees into the oil and gas industry also puts pressure on companies to redouble their efforts in maintaining high safety standards. I expect this challenge will only intensify in the coming years.
- SO WHAT IS TALISMAN DOING TO ADDRESS THIS?
- To begin with, the Company must be able to retain the people that we already have, and we do a very good job at that. Turnover at Talisman is less than 4%, which is better than most of our peers. Providing greater employee mobility, enhanced training and development and improved coaching programs should allow us to maintain our strong retention levels. With respect to recruitment, while Talisman alone cannot address this industry-wide issue, I believe we have begun to take steps towards addressing our own recruitment challenges. In 2005, we initiated a global employee recruitment strategy to help define Talisman's unique employment identity. This, together with the exciting career opportunities that we offer and the mobility, training and coaching programs described above will also help address recruitment concerns. Talisman also employs undergraduate and graduate students in a variety of disciplines. We employ students in co-operative placements and often hire them once their training is completed. In 2005, Talisman made a decade-long commitment to students studying in the fields of energy and related studies by establishing scholarships for superior academic achievements at the Universities of Alberta and Calgary. It is truly a great time to be thinking about a career in the energy industry and we hope our relationship with the universities helps develop a pipeline of talent for the industry in general and Talisman in particular.
- IN YOUR OPINION, WHAT WERE TALISMAN'S MOST SIGNIFICANT CORPORATE RESPONSIBILITY ACHIEVEMENTS IN 2005?
- Talisman launched a Company-wide Online Ethics Awareness e-Learning Program for all employees and a significant number of contractors. We further embedded transparency within our Company by confirming Talisman's official commitment to the principles of the Extractive Industries Transparency Initiative (EITI), a global multistakeholder initiative seeking to increase transparency in the extractives sector in developing countries. Talisman also invested approximately $5.5 million in community development programs worldwide, including long-term commitments to universities, museums and tsunami relief efforts. We launched a proactive stakeholder consultation process in Alaska regarding our planned 2006 drilling program.
- HOW DOES TALISMAN ENSURE THE HIGHEST HEALTH AND SAFETY PERFORMANCE THROUGHOUT ITS GLOBAL OPERATIONS?
- Oil and gas operations, by their nature, are potentially risky and require daily vigilance at all levels of the organization to ensure the ongoing safety and security of employees, local communities and the environment. I believe my first responsibility is to the safety and well-being of our employees. Our Board and management fully support reaching a point where accidents don't happen and we strive to reach this goal through safe work procedures, rotating site visits, employee education and training, management tours, reporting and, most importantly, individual commitment. Despite these best efforts, sadly accidents sometimes occur. Talisman recorded no fatalities, life-threatening occupational injuries or major environmental incidents at Talisman-operated sites in 2005. However, I am saddened to report that three contractors to Talisman suffered fatal injuries in early 2006. In all cases, an ongoing investigation is underway, and any lessons learned will be incorporated into our workplace practices globally. Senior management have also conducted site visits to reinforce Talisman's safety standards and the need for safe working practices.
- WHAT IS HAPPENING WITH RESPECT TO TALISMAN, THE ALIEN TORT CLAIMS ACT LAWSUIT AND TALISMAN'S COMMUNITY DEVELOPMENT PROGRAMS IN SUDAN?
- Talisman continues to be subject to a lawsuit brought by the Presbyterian Church of Sudan and others commenced in November 2001 under the Alien Tort Claims Act in the United States District Court for the Southern District of New York. The lawsuit, which seeks class action status, alleges that the Company conspired with, or aided and abetted, the Government of Sudan to commit violations of international law in connection with the Company's now disposed, indirect interest in oil operations in Sudan. Talisman believes the lawsuit to be entirely without merit and is continuing to vigorously defend itself. For more information, see page 11. Despite this, Talisman provided approximately $400,000 to three core programs in Sudan: a model farm, an agriculture capacity building program and a distance learning program. Although the Company completed its threeyear funding commitment to these programs in 2005 following the sale of its indirect interest in Sudan, it will continue to fund these programs in 2006 while seeking new partners or sponsors going forward.
- INCREASINGLY, DISCUSSION OF ENERGY SUPPLY AND RISING COMMODITY PRICES HAS FOUND ITS WAY INTO REPORTS LIKE THESE. WHAT'S YOUR TAKE?
- Energy is a vital business and world demand for energy will continue to increase with economic and population growth. However, due to limited exploration budgets (that must compete internally against share buyback programs and dividend payments), lack of significant discoveries, restricted access to oil development in many countries and rising consumption, only a decreasing fraction of the oil consumed globally over the past 25 years has been replaced. Today world energy demand means relying on, increasingly mature oilfields in often politically unstable areas. The supply of cheap energy is reaching a crisis point and high oil prices will continue. In 2005, demand reached 83.3 million barrels of oil a day and is expected to continue to rise in 2006. Commodity prices reflect the tension between growing demand and a lack of spare production capacity. The price signal will ultimately lead to conservation, efficiency and alternative energy as important ways to reduce oil demand.
- WHAT IS TALISMAN'S POSITION ON THE ISSUE OF CLIMATE CHANGE?
-
On a personal level, I remain
skeptical of the science related to the
impact of CO2 on the climate. Nonetheless,
I acknowledge that many stakeholders hold
a different opinion on this issue, some very
strongly. I also understand that the issue of
CO2 emissions and climate change poses
particular risks to the energy industry, be it
reputation or regulatory risk. As Goldman
Sachs has recently stated in its US Portfolio
Strategy, "whether or not an individual investor
is convinced that anthropogenic, that is,
man-made GHGs are leading to changes
in the Earth's climate, this issue will have
implications for the financial markets and for
corporate performance". As with any business
risk, we have an obligation to strategically
manage the issue.
Our strategy includes:
- participation in the development of regulatory initiatives such as the EU Emissions Trading System and the Canadian "Large Final Emitter" regulations;
- study of the use of a Kyoto Clean Development Mechanism Project in Malaysia to generate "certified emission reductions" for use in Canada and the UK;
- improvement of our CO2, methane and other emissions reporting systems, including third party auditing of management systems;
- development of environmentally innovative projects such as the Beatrice Wind Farm and co-generation facilities in Western Canada; and
- investment in education initiatives in the areas of science and technology.
- WHAT IS HAPPENING WITH TALISMAN'S WIND FARM PROJECT?
- In 2005, work continued on the development of a $58 million wind farm demonstrator project off the coast of Scotland at Talisman (UK)'s Beatrice platform that could marry our expertise in offshore operations with leading edge wind power technology. Pending regulatory approvals, construction will begin in the third quarter of 2006. The full Beatrice Wind Farm Project, if implemented as currently envisaged, could generate as much as 1,000 megawatts from up to 200 turbine units deployed in the vicinity of our Beatrice platform. I am personally keen to look at the performance and operating characteristics of the demonstrator turbines to gauge the commercial viability of the project. For more information, please see page 32 of this Report.
- WHAT IS TALISMAN DOING TO IMPROVE ITS TRANSPARENCY?
-
I believe Talisman is a leader in
transparency. In 2005, Talisman became the
first Canadian company to join the Extractive
Industries Transparency Initiative (EITI) and
was named "overall leader" in transparency in
the oil and gas industry by Save the Children
(UK). Today, I believe that our disclosure of all
royalties, taxes and material payments to host
governments places us on the forefront of
fiscal transparency.
Talisman is also committed to the Global
Compact, and we are particularly pleased
with the Global Compact's inclusion of its
tenth and newest principle - that businesses
should work against all forms of corruption,
including extortion and bribery. We believe
that, if this principle is actively supported by
both governments and companies (whether
public or state-owned), real impact and
improvement can be achieved around
the world.
On a reporting basis, the Company chose the Global Reporting Initiative (GRI) as the foundation of this Report to improve transparency, reporting rigour and comparability. We've added GRI indicators to each sub-section for quick and easy reference and have addressed non-reported Key Performance Indicators (KPIs) where appropriate within the sub-section narrative. Talisman's 2005 Corporate Responsibility Report has been prepared in accordance with the 2002 Global Reporting Initiative's Guidelines. I believe it presents a balanced and reasonable presentation of the Company's social, economic, and environmental performance.
- WHAT CAN TALISMAN STAKEHOLDERS EXPECT FROM TALISMAN'S CORPORATE RESPONSIBILITY REPORTS IN THE FUTURE?
- Talisman will endeavour to continue to provide a balanced review in future Corporate Responsibility Reports. Further, we see continuous improvement in our reporting processes as a key management tool to improve our corporate performance. We will continue to review our performance and introduce new indicators that better reflect the nature of our operations. We will challenge our methodology by measuring non-traditional indicators. We will consult our stakeholders to ensure the content of our reports is relevant and will gauge our audience so that we might better understand what they want to know about our Company. And we will provide more real-time, web-based reporting to complement our annual Corporate Responsibility Report in 2006, as we strive to achieve best practices in Responsibly Managing Impacts.
Jim Buckee
President and Chief Executive Officer
Talisman Energy Inc.
March 13, 2006
"Most firms that make large changes begin from a low score but, one firm, Talisman Energy Inc., began from a strong base and made even more improvements, breaking into the top 15 companies for the first time… Among the many changes Talisman made was the elimination of director options and higher share ownership guidelines." Excerpt from Report on Business: Canadian Board Games, which appeared in an October 18, 2005 Globe and Mail article.