PwC Research



Energy, Utilities &  Mining

Anyone who operates in Kazakhstan and Central Asia knows the complexities of operating across currencies and in the highly volatile oil & gas markets. Selling oil in Dollars, managing an operating cost base in Tenge, and financing projects using a mix of Roubles, Pounds, Euros and Dollars means that every single oil and gas producer in Central Asia faces significant risks before they have even pumped a barrel of oil. This range of complexities makes for fascinating research area and PwC has funded some cutting edge research into the region. Recently, Professor Krezschmar published on Resource Capitalism in the region in “Energy Policy” Journal. For access to a copy of this publication click here.


Kazakhstan also has the largest proven reserve base in the Caspian Sea region, estimated to be 30 Billion barrels. The country therefore faces a unique and “positive” problem, of being a host country to oil & gas reserves but with technical challenges of extracting and developing these reserves. Kazakhstan accounts for more than half of Central and Eastern European (CEE) regional production (excluding Russia), with output in 2011 averaging an estimated 1.63 million b/d. Petroleum industry accounts for more than 30% of Kazakhstan’s GDP and generally commodities account for an excess of 70% of the Kazakh GDP.  As a result managing volatility and understanding oil & gas across the region is essential. For insights into the challenges facing international companies as they seek to obtain oil & gas reserves, see a publication by Gavin L. Kretzschmar and Liliya Sharifzyanova from Statoil in “Energy” Journal. Click here.


For insights into the effect of location of oil & gas reserves on corporate performance see publication by Professor Kretzschmar, Kirchner and Reusch who deal with risk and return in global oilfield asset holdings published in “Energy Economics” Journal. Click here.


Interestingly, the complexities of production sharing and concession ownership give rise to accounting anomalies. These accounting anomalies are covered by Professor Kretzschmar, Misund and Professor Hatherly who write in the “Energy Policy” Journal dealing with the effects of market risk on oilfield ownership. Click here.


Financial Services

At PwC we focus on giving our clients the competitive edge. Globally, regulatory reform has driven stringent capital requirements, robust risk management considerations and effectively put pressure on technologies. A low interest rate environment, and enhanced reporting requirements are also all challenges for growth in banking and capital markets. At PwC we work hard to provide sophisticated strategies and solutions for our financial services clients to gain competitive edge.

We have tasked Professor Kretzschmar with researching the issue of stress testing and the results were compelling. Effectively, using integrated risk frameworks which model market, interest rate and risk concentrations researched by Professor Kretzschmar and Professor McNeil discovered that many banks and financial institutions went into the financial crisis approximately 18% undercapitalized. For more on this research click here.


A lack of liquidity was sorely exposed in the financial crisis and as a result some work by Professor Kretzschmar in his research role with Professor McNeil has highlighted the importance of pricing liquidity in capital markets for the European CFO Forum White Paper in 2010. For work on liquidity estimation methods sand summary of these click here.

In addition, liquidity premium literature is reviewed and theoretical & empirical evidence behind the existence of the liquidity premium is assessed by the PwC Chair of Accounting. For insights into this research click here.


Consulting Strategy

In Advisory we are constantly seeking ways for our Clients to take an innovative approach to managing their assets. In particular, the emerging field of study known as real options is gaining traction in the world of corporate finance. To illustrate: if high oil prices would make a technically difficult field economically feasible, the incremental outlift which is often not included in a valuation calculation at lower oil prices could make an oilfield extremely viable, economic and profitable at higher oil  prices. Simplistically put,  the increase in value of an oilfield from a low oil price to a higher oil price, particularly when viewed alongside the introduction to new technologies is regarded in the new world of corporate finance as a real option. To understand and gain fascinating insights into this new field of corporate finance by Dr Kretzschmar in “Journal of Applied Corporate Finance” click here.