Scope of Report Message From the Chairman Our Company 2006 Highlights 2006 At A Glance 2006 Performance Data How We Operate Review of Operations Safety Performance Environmental Performance Global Workforce Community & Social Performance Global Compact Index GRI & IPIECA/API Index Verification Statement

ENVIRONMENTAL PERFORMANCE

We are committed to meeting the highest standards of corporate citizenship by safeguarding the environment.

GLOBAL CLIMATE CHANGE

Climate change is a global environmental concern with potentially significant consequences for society and the energy industry. Implementation of the Kyoto protocol has effectively placed a monetary value on greenhouse gas (GHG) emissions. Carbon markets are quickly evolving and the cost or value of GHG emissions is likely to have a significant impact upon oil and gas project economics.

The company has two major sources of GHG emissions; combustion of hydrocarbon fuels for power generation and flaring of associated gas . Additional processes, such as acid gas removal can also be a significant source.

The company is committed to the responsible management of GHG emissions from our existing operated and nonoperated assets and future developments. We will also use the emerging carbon market to review our global carbon portfolio and identify capital project opportunities. The company has undertaken a program to assess, monitor and mitigate GHG emissions, including carbon dioxide and methane. The challenges associated with this program are significant, not only from the standpoint of technical feasibility, but also from the perspective of adequately measuring our entire GHG inventory. We made further progress in developing our standardized reporting methodology in 2006. We undertook a validation of our 2005 emission estimates by comparing calculations made using our original methodologies with those made in accordance with our GHG protocol and an American Petroleum Institute sponsored tool (SANGEA) designed specifically for the oil and gas industry. In late 2006 we engaged Det Norske Veritas (DNV), a leading global independent verification organization, to conduct an independent review of our protocol and our 2005 greenhouse gas inventory. The verifiers visited several of our sites; including our Port Reading Refinery in New Jersey, our Gassi El Agreb operations in Algeria, the Seminole Gas Plant in Texas and our U.K. North Sea operations, in order to determine the accuracy and completeness of our inventory.

The DNV review concluded that our GHG Protocol provides sound guidance for estimating direct GHG emissions from the major emissions sources found at typical reporting sites. DNV did not identify any significant emissions sources missing from our inventory. In addition, the review teams reported sincere commitment to these programs, and excellent internal capabilities that can be utilized to make the necessary improvements.

DNV did identify the following areas requiring improvement:

• The GHG Protocol did not provide a source materiality definition or a list of potential emission sources
• Documented implementation of a tiered system, uncertainty analysis and internal audit had not been undertaken
• Greater use of site specific data was recommended, where such data are available
• There is a need to strengthen the links between the GHG Protocol and the SANGEA monitoring system.

We are addressing these issues through revisions to our Protocol, as well as instructional, definitional and networking improvements in 2007.

Our total GHG emissions decreased by 4%, from 5.58 million tonnes in 2005 to 5.36 million tonnes in 2006 . However, our normalized emissions increased by 4%. Increases in normalized emissions are largely attributable to increased energy use in our maturing North Sea and U.S. assets, where more energy is required for injection and compression. We were also forced to switch from gas to temporary fuels such as diesel in our U.S. Gulf Coast operations during the refurbishment of our hurricane damaged facilities. Redevelopment of our Algerian operations has resulted in a 34% decrease in normalized GHG emissions since 2002. Further reductions are anticipated once Phase 2 of our Gas Compression and Reinjection project comes on stream in 2007.

As we continue to expand our operations, our total atmospheric emissions may increase. We will continue to look for opportunities to sustain or reduce our overall carbon footprint. For example, our North Dakota operations are participating in the Plains CO2 Reduction Partnership, assessing the technical and economic feasibility of capturing and storing CO2 emissions from stationary sources in the northern Great Plains and adjacent areas. We are also developing an inventory focusing on all of our equity interests to help us better understand our carbon emissions.