*3.7. Composite Score (CS)*

Composite score (CS) is selected because it is a comprehensive evaluation indicator to evaluate the fiscal regimes of oil and gas projects. The linear weighting method is used to evaluate the indicators of GT and FLI. Thus, the linear weighting function of the composite score is built as CS = W1 × GT + W2 × FLI, where W1 and W2 reflect the attitude of the investor relating to the contribution of GT and FLI to the attractiveness of the fiscal regimes. This is determined by the decision-maker in accordance with their own experience. As the composite score is a comprehensive indicator that reflects the attractiveness of fiscal regimes, the interpretation for the CS is that the smaller the CS, the greater the attractiveness of the fiscal terms in the petroleum contract. The DCF and ROT could show the impact of fiscal terms and identify fiscal regimes of oil production countries.

Moreover, it is the most common method used by the IOC (Siew 2001). However, it does not consider the impact of different time sequences on the attractiveness of the fiscal terms. The model which combines DCF, NDCF, FLI, and CS by Luo and Yan (2010) overcame this weakness and reflected the combination level of the contract's fiscal terms more comprehensively. This is due to the consideration of time different impact. However, the attitudes of the decision-maker were assumed for the linear weighting method in the Luo and Yan (2010) study. Hence, it can limit the insight into the attractiveness level of fiscal terms. With the intention of filling the gap in the literature, this study develops a comprehensive model of DCF, NDCF, FLI, and CS. The model considers the attitudes of decision-makers in the Korean energy industry for the combined effects of fiscal terms to impact more realistically.

<sup>4</sup> For example, business tax, value-added tax, import tax levied on the investment.

<sup>5</sup> For example, royalty, profit split, host governmen<sup>t</sup> participation, bonus based on income and profit levels.

### **4. Quantitative Analysis for the Assessment of Upstream Petroleum Fiscal Regimes**
