*3.5. Prompt and Intuitive Method*

The prompt and intuitive method is the easiest and fastest way for an investor to make a decision as soon as they know some fiscal regimes of the specific country (Luo and Yan 2010). As a matter of fact, forecasting the cash flow requires large amount of data, complex calculations, and multidisciplinary collaborations. In addition, cash flow calculation is difficult to complete in a short time. Therefore, a fast estimation method or the fast and intuitive method is recommended.

In the fast estimation method, the total income of the project is assumed as 100%, and the calculation is made in accordance with the order and proportion of the contractual system. Its strength is that the IOCs can evaluate the attractiveness of the fiscal terms of the resource country in a simple way. If IOCs are not aware of the detailed fiscal regimes of a specific country, it can also be used. However, the assumption of 100% total income for the entire project life cannot provide further insights.

According to Jiuliang and Fenglan (2001), there is no widely-accepted method for evaluating and comparing different types of petroleum fiscal regimes used in the upstream oil and gas contracts worldwide. Therefore, it is difficult to choose the indicators that can reflect the combined effects of different fiscal systems. This research develops the evaluation method applied by Luo and Yan (2010). Different indicators—namely, governmen<sup>t</sup> take (GT), front loading index (FLI), and composite score (CS)—are included in this evaluation method. Luo and Yan (2010) ascertained that these indicators are selected based on qualifications such as comprehensiveness, reflection of income allocation ratio between the IOC and resource-based country under the combined effects of fiscal regimes, considering

<sup>2</sup> Net Present Value.

<sup>3</sup> Internal Rate of Return.

the impact of the allocation order due to time value of money and time sequence of allocation obtained by different parties. Hence, the method using these indicators can affect the final benefit of the IOC.
