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This result is related to a significant increase in the number of new field- based contractors. Santos is taking action to address this specific issue.

Notwithstanding this, an encouraging trend has been the reduction of the severity of injuries to employees and contractors. Santos achieved a 15% reduction in injury severity in 2006 which contributed to a total reduction of 60% since 2004.

Areas of particular focus during 2006 were keeping hands safe (a significant challenge in a manual labour environment), driving and working in hot climates.

Santos has developed new health and safety lead indicators which will help fine-tune programs to drive further improvement in health and safety performance. An example is proactive reporting ratios which encourage the reporting and management of hazards and extraction of lessons learnt from near misses.

BUILDING AN ACHIEVEMENT- ORIENTATED CULTURE

Santos has continued to implement the strategy developed in 2004 to create an organisational culture defined by shared goals, values and principles founded on people systems, leadership and behaviour.

Employee survey results in 2006 confirmed that the practice of leaders directly discussing Company vision, strategy and values has been instrumental in improving employee understanding of and alignment with Company direction.

Significant foundation work has been undertaken over the past three years to develop people

systems that are progressive and support business direction. Central to this has been the development of performance management and remuneration systems.

The Company’s performance management system has been revised to clarify individuals’ performance objectives and now provides a clear line of sight with Santos’ strategic objectives. The link between performance and rewards has also been strengthened through changes to the short-term incentive program.

DEVELOPING CAPABILITY TO ENSURE SUCCESS

At Santos, capabilities are defined as the set of organisational behaviours that are required for success at work. The Santos Capability Framework has been developed based on extensive independent global research on leadership development and success, employee potential, and oil and gas industry experience.

Implementation of the framework will commence during 2007 through leadership assessments, tailored development for individuals and teams, and the embedding of the framework in all recruitment, selection and employee development activities.

Another way Santos invests in the future capability of the Company is through its Graduate Program. This is a structured three-year program that provides graduate employees with exposure to a range of work assignments on a rotational basis.

In 2006, 55 geoscience and engineering graduates participated in this program which provides

LOCATION OF EMPLOYEES 2006 %

South Australia 71.8% Queensland 15.4% Northern Territory 2.0% Western Australia 0.8% Victoria 0.1% Indonesia 7.4% United States 2.4% Papua New Guinea 0.1%

The majority of Santos’ employees are located in South Australia due to the significant Cooper Basin operations and the Adelaide-based corporate and business services that support Santos’ assets in Australia and overseas. At 31 December 2006, Santos had 1,679 employees, a 10% increase on the previous year due to the ramp-up of the Cooper Basin Oil Project and Fairview operations. Some 387 people are employed under award-based agreements and in 2006 there was no time lost due to industrial stoppage.

EMPLOYEE GENDER BY FUNCTION 2006 %

Geoscience and New Ventures Gas Marketing and Commercialisation

76 24 68 32

Office of General Counsel 38 62

Corporate and People

57 43

Office of Managing Director

56 44

Indonesia Business

58 42

Development Projects and Technical Services

78 22

Operations

Strategic Projects

76 24

United States Business Total

Male

Female

Finance

68 32

61 39

80 20

93 7

Santos’ gender profile reflects the predominantly male workforce in trades, engineering and science. The Company is involved in programs to improve gender balance; for example, the Geoscience Pathways project which encourages school students to consider careers in this discipline.

Santos Annual Report 2006 27

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