President's Message

Welcome to Talisman Energy’s 11th Corporate Responsibility Report.

Immediately after this incident, I asked for an intensive worldwide review of all of our drilling operations, with an emphasis on operational integrity and process safety. The findings were reviewed by the Board of Directors and fully discussed throughout the company. While we were satisfied with the overall results of this evaluation, we were able to use our findings to improve upon many of our existing processes and put in place more extensive readiness reviews for our deepwater and higher-risk operations.

At Talisman, we are on a five-year journey to move to topquartile safety performance, and we have made significant gains in the past couple of years. In 2010, we lowered our losttime injury frequency rate by 18% over 2009, which itself had reduced 40% over 2008. Despite our continued progress, we did not meet our own internal aspiration and have refocused our efforts again as we enter 2011. An assessment of our 2010 incidents indicated that priority areas for our attention this year include our North American drilling and completion operations and our start-up exploration projects around the world. We have implemented special programs in these areas to ensure continued progress toward our safety goals.

Although we make concerted efforts to keep all workers safe at all times, tragically, we experienced a fatality in 2010 when contractor Evaristo Chimpa lost his life on the Pastaza River in northern Peru. All of us at Talisman extend our sincere condolences to Mr. Chimpa’s family and friends. We immediately ceased all river operations to undergo a detailed and comprehensive investigation. We have since used the findings to improve river operations in all areas where we rely on barges to supply our activities.

Wherever we operate, we try to minimize our impact on the environment, work with the support of local communities and share the economic benefits of our activities. We commissioned a report by Washington-based Foley Hoag, an internationally renowned legal and corporate social responsibility consultancy, on the issue of free, prior and informed consent for indigenous communities. We also received guidance from the World Resources Institute and several other expert organizations and individuals on this topic. Stemming from this report, we developed and issued a new community relations policy to help guide our interactions with local communities wherever we work.

As an example, in Peru we undertake a rigorous process to ensure local communities are made aware of our plans and are offered access to additional support to understand and evaluate the impacts on their communities. After this process, community members hold a vote, which requires a two-thirds majority before we can commence operations.

In North America, as we increase our shale activities, we see the tension between an affordable, abundant and clean energy source and public concerns, particularly with respect to water. Talisman is committed to environmentally responsible shale development, and we continue to look for ways to decrease our use of fresh water and to protect surface and ground water resources. Since mid-2010, we have achieved nearly 100% reuse of flowback water in Pennsylvania, our largest shale operation. In 2011, we will further increase environmental monitoring by developing and piloting a sector-specific water intensity performance indicator.

We have created a series of partnerships with agencies that provide support in the regions we operate, or that have a global focus on an important issue such as clean drinking water. In 2010, we partnered with the Centre for Affordable Water and Sanitation Technology. The Calgary-based, notfor- profit organization provides education, training and technical consulting in water and sanitation to organizations that serve the poor in developing countries. And, already in 2011, we accepted an invitation to participate in the United Nations Global Compact LEAD program, comprised of a group of companies committed to defining best practices for sustainability leadership. As well, we have recently announced a partnership with the World Resources Institute’s Aqueduct project focused on measuring and mapping water risk.

Of course, beyond local boundaries, hydrocarbons are also a major source of greenhouse gas emissions. Talisman continues to look for ways to leverage technology to improve energy efficiency and reduce our carbon footprint; you will see examples in this report.

Another challenge for the oil and gas industry is the aging demographic profile of our workforce. In a global, exciting and highly technical business, there is more we can do to attract and retain a new generation of engineers, geologists, accountants and other talented people. This is a great industry with great opportunities, in need of the best people. We are implementing a series of programs to build our capacity within the firm, and to develop our employees to their maximum potential.

To meet these challenges, we recognize that Talisman must produce energy safely, responsibly and with the support of communities impacted by our activities, in order to preserve our license to operate. As you will read in this report, we continue to build and enhance our activities to ensure Talisman remains a responsible corporate citizen. We are proud of our accomplishments to date, but we recognize that it must be a process of continuous improvement.

2010 was the first year we publicly shared some of our targets for improvement. This was to demonstrate our commitment to advancement and to set visible benchmarks for our stakeholders. The scorecard at the end of this report highlights some of our successes and areas for continued improvement. For 2011, we have added two new performance indicators relating to recordable injuries and overdue preventative maintenance.

Talisman’s purpose is safe, profitable growth. We believe that corporate responsibility programs must be fully integrated into all business activities. As the complexity of our business increases and the scale of our operations grows, we will continue to make substantial investments in the development of our people.

I would like to thank the Talisman Board for its important role in providing oversight to our corporate responsibility activities. Most of all, I would like to thank the more than 4,600 Talisman employees and contractors around the world who live our values and conduct their business every day in an ethical and responsible manner.

John A. Manzoni
President and Chief Executive Officer
Talisman Energy Inc.
February 28, 2011

OUR VALUES:
safety. passion. results. respect. excellence. teamwork. honest communication.