2006 was another strong year for PGS health, safety and environment performance, with further advances in both management commitment as well as in management of risk at all operational levels of the company; building on a strong HSE culture in the pursuit of continual improvement.

Our objective remains to be in the top tier when it comes to health, safety, environment and quality.
Specific areas of improvement during 2006 were:

• Further development of competence at management and operational levels
• Alignment and simplification of our Management Systems
• Improvement in the way we identify, manage and mitigate risk
• Quality improvement in audit programs and non-conformance management
• Behavioral programs

From Lagging to Leading Focus
We have continued and further developed the philosophy that real improvements in Health, Safety and Environmental performance for the future, and more importantly handling latent risk threats, are achieved by promoting and measuring active efforts to improve the safe working environment and safe working practices, rather than measuring lagging errors which only tell us about the past. The 2006 HSEQ improvement plans at all levels and in all product lines were constructed with a range of initiatives and targets with an emphasis on leading indicators such as:

• Improved auditing routines and handling of non-conformances
• Formal and standardized approach to management visits, audits and inspections of field operations.
• Specific improvements in the management of subcontractors
• Development of project risk analysis tools to quantify HSEQ, commercial, technical, political and security risks at the pre-contract phase.
• Development of the ‘Intervention’ concept for field crews as part of a behavioral focus
• New routines to use quantified potential risk values to determine preventative action

In a move to address underlying operational risk, the main lagging indicator focus will shift to the metric HiPoF (High Potential incident Frequency), calculated as the number of high potential incidents per million man-hours.

This shift from lagging to leading indicators is an invaluable tool in developing management commitment. During 2006, the number of managers directly involved in the execution of HSEQ improvement plans approximately doubled compared to 2005.

Lost Time Incidents Frequency (LTIF)

Total Recordable Case Frequency (TRCF)

PGS further implemented the TopSet® incident investigation methodology during 2006 with the training of a number of in-house tutors, qualified to hold recognized investigator courses with crew and management staff. The TopSet® method applies simple and standardized logic to the performance of investigations at the scene of an incident in addition to using methodical root cause analysis.

Incident handling has also been systematically linked to potential risk ratings to define the level of management involvement in a post-incident investigation. This link ensures that trivial events which could have had potentially serious consequences are identified and that preventative action is taken to make sure sufficient barriers are in place.

We believe that successful operations depend heavily upon the cooperation and trust of the indigenous population – which is best attained through demonstrated social responsibility.

By applying the PGS Core Values of Leadership in HSE, People Focus and Integrity, Initiative and Innovation, Delivery and Reliability in all of our projects and major business decisions, we ensure that all of our stakeholders are protected and included.

Particularly in our Onshore business, issues and needs vary from community to community, and from project to project, so our program is adaptable and locally driven. We take responsibility for establishing good relationships with local communities.

“We like to develop seismic work in the pre-job stages by involving the community so they can get collective benefit out of having the seismic done,” says Norberto Soto, General Manager of Latin America at PGS Onshore.

“Establishing good relationships and opening communications paths at the start of a job before we get in the field is one of the most important things to do.”

It is about more than simply providing local employment, it involves determining what the community itself believes it needs and then working to provide lasting help with those needs.

PGS Social Responsibility programs over 2006 consistently have the following elements:

• Staffed crew social action team
• Provision or support of health services to communities
• Participation by Community leaders in PGS Crew decision-making
• Informing of and consultation of communities regarding our activities and provision of local employment
• Sponsorship of educational needs, e.g. refurbishing schools, funding libraries/books etc.
• Repairing, or even rebuilding, of selected local infrastructure

The local population must experience that they benefit from our presence. We believe that maintaining positive community relations plays a key role in ensuring the security of our personnel and operations.

In addition to field operations efforts, PGS has also encouraged community activities at its office locations:

• Volunteer work, food and clothing contributions to Houston Food Bank and other local relief agencies
• PGS matching funds raised by individual employees to support Charitable Organizations
• PGS Charities Day for selected charity organizations to present options to PGS employees

Marine
HSEQ performance in Marine remained strong during 2006 with lagging indicators showing a flat trend with no significant changes in total recordable case frequency (TRCF) or lost time incident frequency (LTIF). More
significant was the completion of the first Level 3 HSEQ improvement plan on all of PGS’ seismic vessels. Key points in the Level 3 Plan included systematic process audits of the management system, focus on non-conformances and the correct handling of these in addition to a formalized approach to risk ratings for incidents.

In contrast to 2005, the improvement plans at all levels were owned and executed by the management, and not HSEQ professionals: further strengthening Leadership in HSEQ – a PGS Core Value.

During 2006, PGS Marine achieved the significant milestone of taking maritime management control of four streamer vessels and two support vessels. This development required development and implementation of a Safety Management System in compliance with ISM regulations and a license to operate granted only following close scrutiny from independent class auditors. Looking ahead, the maritime Safety Management System will be integrated into the PGS Management System to provide a seamless framework for all vessels and operations.

A major milestone reached during 2006 was the certification of both Perth and Rio Data Processing centers to ISO9001:2000. This achievement represents the completion of the initial phase of the quality improvement project with all major Data Processing centers now accredited.

2006 also presented a number of challenges regarding security and logistics for vessel operations worldwide, particularly in locations where civil unrest or criminal activities were an issue. Again, by applying the PGS core values, the vessels have been able to continue while reducing risk to levels regarded as ALARP (as low as reasonably practicable) while performing our commitments to customers.

Onshore
HSEQ performance at Onshore also remained strong during 2006. There was no significant change in TRCF. LTIF decreased by 33% while total exposure hours increased by approximately 51% to 13.6 million man-hours.
PGS Onshore’s key improvements during 2006 included:

• Completion of the Level 1 & Level 2 HSEQ Improvement plans
• Identification of HSE Management Support Team
• Formalized Management Visit Auditing
• Verification of alignment of ERP, Environmental
• Management Plans and Safety Management
• Systems with ISO and OSHAS standards
• Increased technical training and placement of additional HSE Staff

Despite well-organized and implemented security plans, there were two serious kidnap events in our Nigeria Operations during 2006, both of which were successfully handled through coordination with our local area and business unit and group management teams. These events highlighted the need to remain vigilant with our security arrangements and continue with improvement projects on emergency preparedness and crisis management.
PGS Onshore has extensive ongoing programs related to several HSE courses, technical courses and other training courses for its employees.

Onshore expect to continue in 2007 to develop and implement its Behavioral Safety and HSE Culture Program through a multi-faceted approach including a PGS Core Values Program, Team Building and leadership Courses, PGS Onshore HSE Culture presentations to crews in addition to various other PGS group initiatives. We believe that ensuring the safe and incident free behavior of individuals is a function of our Culture, and this is the key for us to take our HSEQ programs to the next level and ensuring that they stay there.

HSEQ objectives 2007
The following overall HSEQ objectives have been defined for 2007:

• Integration of Duty of Care into PGS Management System
• State-of-the art and company-wide emergency response capability
• Formalize and standardization of High Potential event management
• Increased focus on Security and HSE in the office environment