*3.1. Upstream Petroleum Fiscal Regimes*

The upstream petroleum fiscal regimes in oil and gas E&P industry are royalties, various kinds of tax including profit-based tax and non-profit-based tax, bonus payments, cost recovery limits, profit split, host governmen<sup>t</sup> participation, domestic market obligations, investment credit, etc. (Johnston 1994). However, different countries have different petroleum fiscal systems which typically include royalty and tax systems. Petroleum fiscal regimes of international contracts adjust the profit of the IOC and the host government. This determines the income allocation of all parties, which contract fiscal terms with a distinctive petroleum feature and the core of the contract (Cameron 2006; Cottarelli 2012).

Petroleum fiscal regimes depend on resource facts the IOC has to consider if they would like to enter a country. Its attractiveness has a major impact on the feasibility of the project and the project of the IOC. Hence, they are significant when judging a country's oil and gas resource investment climate. Moreover, evaluation and comparison of fiscal terms are crucial and will provide basis for the IOC's overseas investment decision, and contribute to the most active implementation of upstream oil and gas E&P business (Boykett et al. 2012). Due to the importance of upstream fiscal terms in investment, there are several studies regarding the upstream fiscal regimes for oil-producing countries, in OECD countries (Zhao and Dahl 2014); Indonesia (Abidin 2015); Malaysia (Manaf et al. 2014); Pakistan and Thailand (Zahidi 2010); Nigeria, Ghana, and Cameroon (Ghebremusse 2015); and Australia (Hunter 2008). However, there has still been a scarcity of studies for some developing countries including Myanmar

### *3.2. Quantitative Method for Petroleum Fiscal Regimes Assessment*

There are different types of petroleum co-operation in different regions, depending on national petroleum legislation, international relations and the stage of oil and gas development. However, the major difference is only resource ownership transfer (Johnston et al. 2008). From the petroleum fiscal point of view, there are four steps: firstly, investment for oil and gas production; secondly, allocation of royalties or similar expenses attributable to the host government; thirdly, cost recovery, tax deduction and other compensation for IOC; and finally, profit split (Mabadi 2008; Serova 2015).

In the previous studies of Mommer (2001), Baunsgaard (2001), and Mommer (2002), the upstream fiscal regimes are analyzed based on the concept of economic rent through tax instruments such as royalties, bonuses, fixed fees, etc. Baunsgaard (2001) ascertained the equivalent fiscal regimes in different fiscal designs. For instance, the cost recovery concept in PSC is similar to the royalty of concessionary, and profit split in PSC is also similar to the initial tax rate in concessionary. It supports the concept that "fiscal regimes differences between contract types can be ignored when evaluating the attractiveness of the fiscal terms" (Luo and Yan 2010). As the number of types of fiscal contract designs is more than the number of countries (Johnston 1994), such findings for equivalent regimes has the advantage for comparative analysis of different fiscal contract types in different countries. This study agrees with those findings since the concessionary system uses only royalty and tax while PSC fiscal design uses various fiscal components.
