International Exploration

As part of its new strategy, Talisman is shifting the emphasis of its international exploration program. The Company will continue to explore in core areas, but will expand its search for high-impact prospects, which will support the ongoing renewal of the Company. The current emphasis is in South America, the Kurdistan region of northern Iraq and offshore Indonesia and Vietnam, with potential opportunities in Alaska and the Barents Sea.

Talisman plans to spend $660 million on international exploration in 2009.

southeast asia

The Company will mature recent discoveries in Vietnam and continue to build its inventory of exploration acreage. The recent entry into Blocks 133 and 134 supports the continued growth strategy for Vietnam.

In Indonesia, the Company has established a strong position in the high potential, under-explored Makassar Strait. Seismic interpretation and prospect generation is ongoing, with a view to drilling in 2010.

In Australia, the Kitan-1 exploration and followup appraisal wells were successful and a Field Development Plan will be submitted later this year. Talisman plans to participate in one offshore exploration well, subject to rig availability, in the Joint Petroleum Development Area 06-105.

In Papua New Guinea, Talisman received approval for a five-year extension of a petroleum retention licence in the Gulf of Papua.

north sea

Exploration activity in the UK will be focused on supporting a sustainable, flat production base. The Company expanded its acreage position in the Central Graben area of the UK North Sea with awards in the 25th Licence Round.

In Norway, Talisman drilled one successful exploration well in the Southern North Sea. The Company is increasing its activities in comparatively under-explored basins such as the Barents Sea, which have the potential to enrich Talisman’s portfolio and offer growth in the medium to long-term.

The Company plans to spend $310 million on exploration, drilling up to 10 exploration wells in the North Sea in 2009.

colombia

Colombia has large potential for heavy oil discoveries in the foreland and light oil in the foothills. The Company has interests ranging from 30 – 100% in 11 blocks, with total acreage in excess of five million net acres and, through a successful 2008 licence round program, Talisman is established as an in-country operator.

In 2009, the Company will complete drilling the Niscota exploration well, drill a well in the El Caucho area and continue the evaluation of the blocks awarded in the 2008 bid rounds.

peru

Talisman has built an extensive exploration acreage position in Peru, with 4.5 million net acres. The Company has interests ranging from 40 – 70% in four blocks. In 2009, Talisman will continue evaluating a previous oil discovery at Situche in Block 64.

kurdistan region of northern iraq

In 2008, Talisman entered into agreements with the Kurdistan Regional Government within northern Iraq for interests in Blocks K44 and K39. The Company holds a 40% non-operated interest in Block K44 and has a two-year seismic option agreement on Block K39. The Company will have the option to enter into a Production Sharing Contract as operator of the Block with a 60% working interest. The Sarqala-1 well on Block K44, the first of three commitment wells, was drilling over the year-end and a second well is planned for later in 2009. Talisman acquired seismic data across Block K39 to define drilling prospects.

alaska

Talisman holds interests ranging from 50 – 100% in land across the National Petroleum Reserve and Alaska Foothills. At year-end, the Company’s landholdings in Alaska totaled in excess of one million net acres.

on the ground, in peru ...

When Dr. Ervin M. San Román M.D. was a young boy in Lima, he was inspired to pursue a career in medicine by his family doctor, who was a frequent visitor to the busy San Román household. Dr. San Román remembers how every one felt better after the doctor left, their worries would disappear and they felt calm. It was then he knew that he wanted to be just like him.

In the 50 years that followed, Dr. San Román has blazed his own path as a medical doctor in some of the most remote areas of Peru. Working in the Amazon jungle since 1974, he has seen first-hand the evolution of the oil industry.

“When I arrived to my first muddy job in the jungle with my shoes shining and my pants well ironed, I realized I was in the wild, wild, west,� recalls San Román. “Alcohol, women, tobacco and drugs made the camps an eternal party. Fights, robberies and disappearances after pay-day were common occurrences. Incidents and accidents happened all the time. People worked in sneakers, T-shirts and shorts. No gloves, helmets or eyeglasses were used. Health and safety was a foreign concept that was not introduced until the 1990s.�

Now in the Talisman Sargento Puno base camp, San Román works in a clean, neatly organized office with two hospital beds, medicine, equipment and enough first aid supplies to deal with any emergency or acute sickness. He provides health and medical services to Talisman employees and contractors as well as residents of communities in the area. For many of his indigenous patients, it is their first visit to a medical doctor. The closest medical centre in the town of San Lorenzo is 12 hours away by river, the only means of transportation. Over 1,500 medical consultations were provided to community members in 2008.

Dr. San Román also plays a critical role in implementing Talisman’s occupational health and safety program for the workers and contractors employed by the Company. Health and safety education meetings, protective equipment checks, water testing, food storage and preparation and facility inspections are all conducted under his supervision. “Clearly, Talisman has a culture of safety; it is a big difference from when I first started working. Early in my career, I would treat as many as 300 – 400 workers hurt as a result of accidents in a given year. I can count on one hand the number of workers who had minor accidents on the job last year; the approach has completely changed.�

One of the critical components of Talisman’s health program is completion of pre-employment screening to ensure workers from outside the area have the necessary vaccines to protect themselves from contagious diseases found in the rain forest. It is also to protect the native population from diseases more common in North America.

Early last year, Dr. San Román conducted a routine pre-employment exam on a 22-year-old Achuar man from the community of Triunfo named Romel Flores. Romel was hired by Talisman as an Indigenous Workers Coordinator and reported to the medical office for his exam. “When I examined him, he presented symptoms of a heart problem, high blood pressure and unusual sounds in his heart. I suspected he had a heart defect and recommended he be sent to Lima for further testing.�

Romel was taken to Lima, using funds made available through the indigenous federation, FASAM, which represents seven communities located in the area of Talisman’s exploration program in Block 64. FASAM negotiated a land access compensation agreement and receives payments from Talisman for the use of its titled and traditional lands. The funds are used to provide services and infrastructure in FASAM communities and to support members like Romel.

Romel was diagnosed with coarctation of the aorta, which required surgery to repair. The surgery was successful and Romel is now back in his community and working on the project. Dr. San Román is certain Romel would not have been able to work without the treatment he received. “Definitely, we have saved many lives; it is not possible to know how many.�

Helping people like Romel is just one of the reasons that Dr. San Román enjoys his job. He takes great pride in being able to introduce health and safety concepts to workers, and believes “an educated population will take better care of their health. I feel like I have made a difference and played a role in the changes that have taken place in the industry over the last 35 years�.

Yes, Dr. San Román has seen a lot. He even remembers when doctors made house calls.