Welcome to Talisman Energy’s ninth Corporate Responsibility Report titled “Integrate. Connect. Respect.” These words underscore the Company’s approach to corporate responsibility, which is to integrate corporate responsibility into our decision-making and day-to-day actions, connect early and often with our stakeholders and to respect our employees and the communities and environments in which we operate.
In many ways, 2008 was as dynamic a year as any in recent memory. It was also my first full year as Talisman’s President and Chief Executive Officer (CEO).
During the past year, we developed and started to implement a new strategy, which moved Talisman in a new direction. The Company had been successful for many years largely growing through acquisition. However, at our current size, we needed to create additional sources of growth for the future.
In charting our new strategic direction, we set three priorities: developing long-term growth opportunities, pursuing high-impact exploration, which will support the ongoing renewal of the Company and continuing to focus our portfolio. Since the introduction of the strategy last May, we have made significant progress.
Despite challenging economic conditions and commodity price volatility, Talisman has taken the necessary steps to navigate successfully through this period and continue to build a solid base for a profitable long-term future. The world requires energy to grow and, as confidence returns, so will demand and the need for oil and gas to fuel economic progress.
Portfolio and asset strategy are critical aspects of setting the Company up for the next stage of growth, but are not sufficient by themselves. We have also made significant changes to our organizational processes and capabilities throughout 2008 to underpin the delivery of our new portfolio strategy. We have upgraded and improved our health, safety and environment (HSE) and human resource capabilities and enhanced how we integrate and manage risk within our business.
HSE
Safe operations in all Company activities is a core value at Talisman. Integrated HSE performance is essential to corporate success and it begins with a clearly stated commitment from the top of the Company.
In 2008, Talisman’s Board of Directors constituted an HSE and Corporate Responsibility (HSECR) Committee, responsible for oversight of the Company’s HSE initiatives, policies and systems. This Committee is also responsible for reviewing this Report.
We also developed Talisman’s new global HSE Policy, which was released in January 2009. The new Policy provides a simple, global and clear statement of our intent and aspirations, which are to create a working environment such that we cause no harm to people and we minimize our impact on the environment. This new Policy will serve as the cornerstone of our HSE programs in the future.
At the operational level, we took significant steps to improve the consistency and effectiveness of our HSE processes and programs. Following the completion of a global process safety management review, we established new Company-wide safety standards, increased our focus on process safety and developed a global safety performance management system.
Tragically, we recorded three contractor fatalities in 2008. In June, a trucking assistant lost his life during a drilling rig move in northeastern British Columbia, Canada. In September, a worker in Indonesia fell through the roof of a building under construction, sustaining fatal injuries. In October, a contract scaffolder modifying a flowline on a Malaysian offshore platform suffered fatal head injuries while completing piping work on a pressurized line.
Following each one of these tragedies, ‘Safety Stand Downs’ were initiated, thorough investigations to determine contributing factors were completed, detailed findings were widely distributed and the learnings were incorporated into all Talisman work locations and practices.
These fatal accidents serve as a reminder that our work involves significant risks. Our priority must continue to be implementing safety systems and processes that reduce risk and lead to safer working conditions for everyone who works in Talisman operations.
people
In a particularly dynamic and changing time, our competitive advantage depends on the quality and motivation of our people. We have made significant improvements to our human resource processes over the last year, starting with the complete reorganization of our functional teams.
We completed a 360-degree feedback process with the executive team and we will continue throughout the organization in 2009. This is all part of a series of personal development tools to increase the effectiveness of our leaders. We also launched global networks for the different professional disciplines in 2008 focused on providing additional development opportunities. Finally, we are redesigning our Long-Term Incentive Program to support our strategic goals.
managing and integrating risk
Talisman’s international experience has helped us develop the expertise to manage above-ground risk successfully, a skill that will become even more important as Talisman continues to implement its global exploration strategy.
This expertise and experience allowed Talisman to enter into exploration agreements with the Kurdistan Regional Government (KRG) within Iraq in June 2008. As part of our agreement with the KRG, the capacity building payments which Talisman paid to the KRG were transparent, focused wholly on improvement projects for the people of the region and managed in line with the Extractive Industries Transparency Initiative.
Our ability to identify, integrate and manage above-ground risk is also evident through our work in South America. In Peru, Talisman recognizes and respects that there are stakeholders who do not support oil activity. Talisman has committed not to work in areas in Peru where we do not have an agreement with the community. We have continued to honour that commitment. Our operations continue to be successful and benefit from active and continuous engagement with local stakeholders.
In North America, our shift to unconventional gas development increases our need to connect with stakeholders such as indigenous communities, landowners and governments in Canada and the United States. Issues related to water and surface impacts are just a few of the challenges we are meeting head-on through consultation and engagement. Further, our new organizational structure places increased emphasis on stakeholder consultation in recognition of these risks.
An integrated approach to risk management has never been more critical to Talisman’s success.
On a daily basis, we are faced with risks arising from subsurface uncertainties, technical complexities, commodity price fluctuations, regulatory and fiscal regime changes, as well as political, legal, ethical, security and reputation risks.
In 2008, we improved the way we identify risks and our risk management strategies, utilizing a bottom-up approach to risk identification and mitigation, which was discussed progressively up the line and, ultimately, with the Board of Directors. Socio-political risks, many of which are discussed in this Report, are featured prominently in the final ranked list of risks.
looking ahead
Looking forward, we continue to build capability and capacity within the organization to execute our new strategy. Our continued integration of corporate responsibility is central to our success and the new members of our executive team are focused on this as part of capacity building throughout the organization. We will also continue to build on the solid foundations we have established in our HSE and people management systems.
Talisman’s Corporate Responsibility Report is a critical component of our stakeholder engagement. In 2008, we conducted an extensive consultation process with our stakeholders, seeking their feedback on ways to improve our reporting. We have endeavoured to incorporate many of their recommendations into this year’s Report, perhaps most notably by the inclusion of qualitative targets for the first time, many of which are summarized in the sidebar on this page. In this spirit, we invite you to read the Report and provide us with your feedback so that our reporting continues to improve over time.
Talisman’s 2008 Corporate Responsibility Report has been prepared in accordance with the Global Reporting Initiative’s G3 Sustainability Reporting Guidelines, Application Level A+. Talisman supports the United Nations Global Compact (UNGC) and has integrated the UNGC’s Principles into the Company’s strategy. Illustration of these indicators and principles are identified in the Global Reporting Initiative/United Nations Global Compact Index of this Report.
