Category Archives: Offshore

A file photo shows the company logo at the headquarters of Norwegian energy firm Statoil outside Oslo. BERIT ROALD / AFP/Getty Images

A week after Statoil sold off all its assets in Albertas oilsands, it looked eastward, to Newfoundlands offshore.

There, the Norwegian energy giant saw opportunity in the North Atlantic, announcing this week plans to drill two offshore exploratory wells this summer in the Flemish Pass Basin, roughly 500 kilometres east of St. Johns, N.L.

It is a gamble pulling out of one area with vast pools of proven oil reserves, while simultaneously launching a drilling program in the open ocean, where discovering commercially viable reservoirs is not certain.

But analysts say there is logic behind Statoils decision. While companies shifting their investments to offshore exploration are taking on more risk, there is upside.

The crude found beneath the ocean floor is generally lighter and more valuable than oilsands bitumen. Offshore oil can also be shipped anywhere in the world by tanker, whereas Albertas landlocked oil requires pipelines to access markets abroad pipelines that still need to be built.

You fill up a tanker from your platform and you send it to whoever is willing to pay the best price for it, said Kevin Birn, senior director for IHS Markit.

Whereas in Western Canada, the history has been you put it in a pipeline and it goes south. Those prices are subject to transportation costs down to the Gulf Coast and you have a lower price as a result.

Statoil Canada president Paul Fulton said the decision to invest in the offshore is in line with the parent companys strategy of funding safe, high-volume projects (with) low-carbon emissions.

He said Statoils exit from the oilsands was a commercial decision that had nothing to do with criticism from environmentalists in Norway, as has been suggested by some.

The upstream emissions from potential projects out there (on the East Coast) are very good, so we see that as a good fit and it fits into the competitive portfolio of Statoil globally, Fulton said in an interview.

Analysts, however, say criticism in Norway had to have been a factor in the sale of oilsands assets.

Statoil in particular was facing some political pushback from Norway as a state-owned company operating in the oilsands, said Nathan Nemeth, an upstream research associate at Wood Mackenzie.

Nemeth said oilsands and offshore projects both face long planning phases, high upfront costs and complicated construction issues, but the payback of capital for offshore comes much more quickly because of flush production from freshly drilled wells. Oilsands production, on the other hand, is steady and predictable for decades.

Statoils offshore investment comes as Calgary-based Husky Energy confirmed earlier this week it had shipped its first oil to an unnamed customer in China from the White Rose project, about 350 km east of Newfoundland.

The pieces of the puzzle fell together for the sale, company spokesman Mel Duvall said in an email. Favourable freight rates made it economically attractive.

Statoil is a major player in Newfoundlands offshore oil sector with a nine per cent stake in the Hebron project, a five per cent share in Hibernia and a 15 per cent stake in Terra Nova.

In 2015, the company bought six exploration licences in the Flemish Pass Basin and its first two licences for offshore Nova Scotia.

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After selling off all oilsands assets, Statoil looks to Newfoundland offshore - Calgary Herald

The north-west shelf project in Western Australia which the Tax Justice Network says pays high royalties. Photograph: Graeme Robertson for the Guardian

The Turnbull government must introduce a 10% royalty on all offshore oil and gas projects in Australia to ensure taxpayers start getting a fair return on their natural resources, the Tax Justice Network says.

The group has called for the petroleum resource rent tax (PRRT) to be overhauled, saying there were too many opportunities under its regime for offshore oil and gas companies to exploit transfer pricing, with direct impacts on PRRT credits and profits.

In a submission to the PRRT review, the Tax Justice Network said a 10% royalty ought to be applied to offshore oil and gas projects in commonwealth waters that were only subject to the PRRT.

It said a 10% royalty needed to be charged because the PRRT which was designed in the 1980s for crude oil projects, but which had failed to keep up with developments in the industry was failing to collect adequate revenue.

The treasurer, Scott Morrison, admitted last year that revenues from the PRRT had halved since 2012-13, and crude oil excise collections had fallen by more than half.

He announced a formal review of the PRRT regime in November after a rapid decline in revenues from the tax.

Jason Ward, from the network, said a 10% royalty would raise between $4bn and $6bn over the next four years.

He said the royalty system should be similar to existing state and Commonwealth royalties that already apply to all other oil and gas projects in Australia.

It should be deductible from PRRT, and the PRRT should remain as a backstop to collect additional revenue if and when prices increased substantially and when existing PRRT credits were exhausted.

With Australia poised to be the worlds largest exporter of LNG but projected to generate little direct government revenue for decades, there is a major problem that needs to be addressed, he said.

At the moment projects in commonwealth waters are getting millions of tonnes of LNG effectively for free.

No other industry, including coal, iron ore and onshore gas, get given the total cost of their investment (plus uplift) in free resources before they begin paying for that resource.

This policy will level the playing field across the oil and gas industry. At the moment projects in commonwealth waters are getting a competitive advantage over onshore projects and the north-west shelf who pay much higher royalties.

All of the major companies, Shell, Chevron, BHP, Woodside and BP, already pay under our proposed model through their ownership of the north-west shelf project. They have been happy to pay under this model for years without complaint. The north-west shelf shows they still make huge profits under this type of royalty regime.

Ward said mature oil projects, such as BHP in the Bass Strait who already pay PRRT, would not be affected given the royalty would be fully deductible from the PRRT.

This proposal we believe ensures a fair return to the Australian people while still encouraging investment by maintaining our royalty regime as one of the most generous in the world, he said.

We call on the industry to support this proposal to the commonwealth government.

The problems raised by the Tax Justice Network are similar to those raised by tax expert Dr Diane Kraal, from Monash University.

Her submission warned flaws in the PRRT regime meant Chevrons giant Gorgon gas project off WA would not pay the tax until at least 2030, despite decades of operation.

Kraal said her modelling showed $5bn in revenue would be raised from Gorgon alone by 2030 if royalties were reintroduced.

She said her research indicated other natural gas projects in commonwealth waters should also be subject to commonwealth royalties, including Chevrons Wheatstone, Woodsides Pluto LNG project, and Inpexs Ichthys project.

Woodside Petroleum used its submission to argue against any changes to the PRRT.

It said the PRRT had been operating as intended, despite declining revenues from the tax recently.

It said the regime had delivered $200bn worth of projects over the past decade, and Woodside had paid $2bn in PRRT since 2001.

As a profits-based tax, it is not unusual to have declining PRRT at a time of declining oil and gas prices and prior to these projects recouping their costs, its submission said.

Woodside pays billions of dollars of taxes in Australia. The PRRT is just one part of our tax contribution but increasing it could put other tax revenues at risk by making future projects unviable.

Woodside has an ownership stake in three of Australias major undeveloped gas resources. As the leading Australian gas producer, we want to develop these resources and deliver significant benefits to the Australian people.

We urge the PRRT review team to consider carefully the substantial impact of any changes to the current fiscal settings that could jeopardise existing and future investments.

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Coalition urged to charge 10% royalty on offshore oil and gas projects - The Guardian

The Offshore World Championship 2018, a World Sailing sanctioned event, will take place in the Hague, specifically from the port of Scheveningen, in July 2018. An innovative solution will be used for the first time to unite the two largest offshore racing fleets.

Racing using a handicap or rating system is a way for yachts of different size, shape, age and performance profiles to compete together equitably on the same race course at the same time. There are many handicap and rating systems in use around the world but the two most successful in terms of numbers of subscribers are ORC and IRC. Together the two have rated over 15,000 boats in over 50 countries worldwide in 2016.

There have been World Championships run since 1999 for yachts handicapped under the Offshore Racing Congress' IMS and ORCi rating systems, while for the first time since being sanctioned as an International Rating system by World Sailing in 2003, IRC scoring will be used in a World Championship.

A pragmatic and innovative solution now opens the door to allow an offshore fleet derived from ORCi and IRC-rated boats to assemble and compete for their discipline's ultimate title, 'World Champion'. By using a combined scoring system, this combined fleet will, in 2018, be able to compete on the water against each other for the first time using both systems.

The compromise reached at the sport's international federation (World Sailing) conference in Barcelona last November calls for each boat entering the world championship to have a measurement certificate from each of the two systems, ORCi and IRC. ORC had previously approved the proposal bid from organizers from The Hague to be hosts for the World Championship based on the ORC's standard week-long championship format, however the details of format and scoring will be re-examined by a Working Party formed from IRC and ORC to examine the options.

Stan Honey, chairman of World Sailing's Oceanic and Offshore Committee said, "It was really important to come up with a solution to find a way for the two most important fleets of offshore yachts to compete for a world title. By using both systems conjointly for the event's scoring neither group is compromised and both groups benefit from the dual system solution that we agreed upon in Barcelona last month. I'm looking forward to the return on experience from this event in 2018. I'm sure it will be a popular and successful event."

Based on the experience from this exciting new cooperation between these two systems, further evolutions and convergence are envisaged in the future.

Marcel Schuttelaar, Chairman of The Hague Offshore Sailing World Championship 2018, "We are extremely pleased that the two major rating systems of the world are agreeing to make our event a pioneer in future cooperation for the World Championship. Our venue location is ideally suited to attract a strong turnout from both cultures, so we look forward to working closely with ORC and IRC on building the framework for a successful championship event."

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ORC and IRC unite offshore racing fleets for 2018 World ... - International Sailing Federation

What happened?

If you look at some of the news from offshore rig companies, it would look as though things are starting to look up for the business. The one exception is looking at Seadrill (NYSE:SDRL) as of late. Shares of Seadrill declined an incredible 45.2% in January. Compare that to Ensco (NYSE:ESV) and Noble Corporation (NYSE:NE), which both saw double-digit gains. The big reason Seadrill's stock declined sharply while others made some modest gains is that the company announced it is struggling with refinancing with some of its creditors.

Image source: Getty Images.

Let's start with the good news in the offshore rig industry: Producers are starting to show an interest in hiring offshore rigs again. Noble announced on its most recent fleet status report that two of its jack-up rigs had their contracts extended until 2022. Granted, Noble took a slightly lower day rate in the negotiation, but the two will add to the company's backlog of contracted work. Also, Ensco picked up a contract for one of its jack-ups in the North Sea that will mobilize in the spring, although no price has yet been given for the contract. Overall, considering how many rigs have gone off contract as of late, this is a pretty welcoming sign for offshore rigs.

Seadrill, on the other hand, wasn't so fortunate. The company did announce in late December that it had received a three-year contract extension for one of its jack-up rigs, but that news has been overshadowed. The real big event in January was when Seadrill announced that it was in discussions with its creditors to restructure its debt. Accord to CEO Per Wullf, those negotiations have taken longer than expected. The company has been making as many capital preservation moves as possible lately, such as delaying delivery of new rigs under construction, but the rapid decline in contract work for its fleet is leaving it with little cash flow to spend on preserving its fleet or paying down debt.

It's ultimately going to come down to a large issuance of equity. Management has already warned investors that it thinks it needs to raise about $1 billion in debt, and that it may result in "significant shareholder dilution."

One important lesson investors should have learned during this market downturn is that balance sheets matter. Seadrill's balance sheet was in rough shape during this most recent downturn, while Noble and Ensco's financial statements looked much more respectable. So, as cash flows have dried up, Seadrill has perpetually been trying to pare down its expenses and its debt load to survive. With a need for $1 billion to keep things going, that's likely going to mean investors are going to get hurt, here, one way or another.

For investors looking at offshore rig stocks other than Seadrill, now may be an intriguing time to put them on your radar. Both Noble and Ensco are trading well below their tangible book values. It will likely be a long payback period, but there looks to be a lot of value in these shares for investors who have the patience.

For Seadrill, though, there is a little more uncertainty. Until the company announces the final results of its debt restructuring and how it impacts the equity in the company, it's probably best to stay away.

Tyler Crowe owns shares of Seadrill. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Shares of Seadrill Went in the Exact Opposite Direction of Other Offshore Drillers in January - Motley Fool

Tullow finds 'live oil' offshore Ja

Steven Jackson

Senior Business Reporter

Oil and gas company Tullow Oil disclosed this week that it found 'live oil' off the coast of Jamaica in its latest search.

The company has since extending its 2D seismic mapping by hundreds of kilometres to determine the full scope of the find.

"In Jamaica, following the completion of a drop core and seep study in the Walton Morant blocks that identified a live oil seep, Tullow will acquire a further 680 kilometres of 2D seismic data before considering the acquisition of a 3D seismic," said Tullow in its annual report released on Wednesday.

A Jamaican engineer who worked on oil rigs off the coast of Gabon told the Financial Gleaner that live oil seeps are evidence of oil flowing to the surface, which provide the first indication of petroleum systems in the basins surveyed. Requests for comment from Petroleum Corporation of Jamaica (PCJ) and Tullow Oil were unanswered up to press time.

Tullow, which is based in the United Kingdom, posted a US$600 million net loss on US$1.3 billion in revenue for its December 2016 year end, due to write-offs and impairments. The company, which operates in 18 countries, holds net debt of US$4.8 billion and free cash flow of $1 billion.

In November 2014, the PCJ signed a production-sharing agreement with Tullow for oil and gas exploration in Jamaica's offshore areas. It includes 10 full blocks and one part block in shallow water to the south of the island.

Last year, Tullow completed a bathymetry survey over the 32,056 square km Walton Morant Blocks. Also, it completed a 2D seismic survey in the first quarter of 2016 to delineate potential plays in shallow water.

Tullow previously reported that there have been oil or gas shows in 10 of the 11 onshore and offshore wells drilled in Jamaica.

The offshore area to the

south of the island has been identified as having good frontier exploration potential, encompassing three geological provinces: the Pedro Bank carbonate platform and the Walton and 'Southern' sub-basins, which offer tertiary-aged clastic and carbonate reservoir targets in both structural and stratigraphic settings. Multiple leads have been identified on existing seismic data which lie in 25m to 2,000m depths.

Canadian company Sagres Energy, which previously held the rights in 2010, exited Jamaica in 2012 as it was unable to find a drilling partner. Sagres, instead, chose to focus on opportunities in Colombia.

steven.jackson@gleanerjm.com

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Tullow finds 'live' oil offshore Jamaica - Jamaica Gleaner

Democrats on the House Ways and Means Committee are urging their colleagues to oppose a resolution that would repeal Obama administration rules aimed at curbing offshore tax deals.

"These regulations are intended to combat aggressive corporate tax planning techniques that, rather than serving an economic purpose, are used by some corporations to avoid taxes," the Democratic tax-writers wrote in a letter Wednesday to their colleagues.

The letter comes after Rep. Todd Rokita (R-Ind.) introduced a resolution last week to use the Congressional Review Act to disapprove of the rules, which the Treasury Department finalized in October. A vote on Rokita's resolution has not yet been announced, but in recent weeks, the House has approved several resolutions to undo recent Obama-era regulations.

When Treasury initially proposed the rules in the spring, both Republican and Democratic lawmakers had concerns that they would hurt business transactions that had nothing to do with inversions. But the Democratic lawmakers said that "Treasury made extensive revisions to its original draft in order to address these concerns."

If the rules are repealed, "Republicans in Congress will open the door to more companies renouncing their U.S. citizenship for tax purposes, while still reaping the benefits of doing business in America a tax practice President Trump railed against on the campaign trail," the Democrats said.

Rokita said in a statement Wednesday that his resolution "will reduce the tax burden on Indiana firms and all American companies so they can grow our economy and create jobs."

The National Association of Manufacturers supports Rokita's resolution. The group said that Treasury's rules, even with revisions, would impose documentation, compliance and cost burdens on many manufacturers.

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Dems: Don't repeal offshore tax rules | TheHill - The Hill

Wind farm developers installed more power than any other form of energy last year in Europe, helping turbines to overtake coal in terms of capacity, industry figures show.

European wind power grew 8 percent, to 153.7 gigawatts, comprising 16.7 percent of installed capacity and overtaking coal as the continents second-biggest potential source of energy, according to figures published Thursday by the WindEurope trade group. Gas-fired generation retained the largest share of installed capacity.

With countries seeking to curb greenhouse gas emissions that causes climate change by replacing fossil fuel plants with new forms of renewable energy, investment in wind grew to a record 27.5 billion euros ($29.3 billion) in 2016, WindEuropes annual European Statistics report showed.

Wind and coal are on two ends of the spectrum,said Oliver Joy, a spokesman for WindEurope, in an e-mail. Wind is steadily adding new capacity while coal is decommissioning far more than any technology in Europe.

The group underscored that wind, which only produces power intermittently, hasnt yet overtaken coal share in total power generation.

European wind investment increased 5 percent in 2016 from a year earlier driven by the offshore segment that attracted 18.2 billion euros, the report said. That offset a 29 percent investment decline in the onshore market.

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Wind Overtakes Coal Power in Europe as Turbines Head Offshore - Bloomberg

President Donald Trumps plan to use corporate profits returned from overseas to help finance nationwide improvements to roads, bridges, airports and other public works picked up an important supporter in the U.S. House: Representative Bill Shuster.

The dollars are out there, so we get a piece of that, Shuster, a Pennsylvania Republican who chairs the House Transportation and Infrastructure Committee, said in an interview. The process of returning corporate profit to the U.S., known as repatriation, can be one of the sources that helps generate funding for repairs and new construction, he said.

Photographer: Andrew Harrer/Bloomberg

Trump has proposed spending $1 trillion during the next decade on U.S. infrastructure and wants to leverage more private-sector dollars. Gary Cohn, Trumps chief economic adviser, said on Fox Business on Feb. 3 that the president wants to use proceeds from repatriation to help fund the improvements.

U.S. companies have an estimated $2.6 trillion in profits that theyve earned overseas and are keeping there. Under federal tax law, offshore earnings arent taxable in the U.S. until companies decide to return the income to America. Trump and House Republicans have called for establishing a lower tax rate on those profits, easing their return to the U.S.

But theres been less agreement about how to use the resulting tax revenue. Shuster said he expects a lot of it would be used to offset broader tax-rate cuts, as House Republican leaders have proposed. What exactly is the funding, thats what were going to try to figure out and debate and move, Shuster said. Everythings going to be on the table.

Democrats have said theyre willing to work with Trump on infrastructure, including in the Senate, where lawmakers have proposed spending $1 trillion during the next 10 years. Republican congressional leaders, however, are pushing for private investment to play a bigger role. Republican House Speaker Paul Ryan has said he would like to see $40 in private spending for every additional federal dollar.

Asked whether Ryan supports using repatriation for infrastructure, spokeswoman AshLee Strong said only that congressional leaders will work with the Trump administration to craft a fiscally responsible infrastructure plan.

Witnesses at the first hearing of the House Transportation and Infrastructure Committee last week, including FedEx Corp. Chairman and Chief Executive Officer Frederick Smith, said they dont think additional private-sector funding will be enough to meet the nationwide need. They said additional federal spending, from a gas tax that hasnt been increased since 1993 or other sources, must be included.

Shuster said a combination of additional federal spending and increased private investment will be needed but said he couldnt provide the precise mix. Asked whether hed support increasing the gas tax, Shuster didnt rule it out as part of negotiations to get a final package.

That is certainly a difficult thing to do, he said. Its something we should look at and consider.

One thing he cant support: creating a federal infrastructure bank to provide funding for projects, Shuster said. Senate Democrats and Steve Mnuchin, Trumps choice to be Treasury secretary, have floated that concept, but Shuster said he feared it would become a boondoggle in Washington.

Its also important that whatever infrastructure package emerges be done in cooperation with U.S. states, Shuster said.

You have to have the states buy-in to this infrastructure bill and what they want to do, he said.

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Its also likely that infrastructure could help get Democrats to accept changes they may not want on taxes and health care, Shuster said.

As we go through Obamacare and tax reform, for the Democrats, theres some bitter pills that they may have to swallow, Shuster said. And the sweet chaser is infrastructure dollars.

Originally posted here:

Trump's Plan to Tap Offshore Profit for Infrastructure Gains an Ally ... - Bloomberg

You have to give Diamond Offshore (NYSE:DO) credit. Despite an absolutely brutal market for offshore rigs, the company was able to not only soundly beat estimates for the quarter, but it was able to actually increase earnings. That's something that almost no other rig owner has been able to say for the past several years.

Here's a look at how Diamond was able to pull off this rather remarkable feat, and how management thinks the position it is in today will help to make it an even more competitive company in the coming years.

Image source: Getty Images.

*in millions, except per-share data. Source: Diamond Offshore earnings release.

Based on the dynamics of the oil and gas industry today, the last group of companies you might expect to see an uptick in earnings is with offshore rig companies. Yet that is exactly what happened with Diamond this past quarter. That net income gain is a little larger because of an early termination fee that added $0.28 per share to the bottom line, but even after we pull out that gain it was still an impressive gain over the two comparable quarters.

There are some gains that are sustainable, and some that aren't. One of the most notable gains was in its Mid-water floater segment. However, this is the segmenet where it netted that one time contract termination gain. The one that is truly impressive, though, is the gains for its ultra deepwater fleet. Two rigs -- the Ocean GreatWhite and Ocean BlackLion -- both started 3 year contract terms.

The Ocean GreatWhite is in a unique position because the job it was hired to do was drill in Austrailia's Bight Basin for BP (NYSE:BP). BP has since suspended operations there, however, so the two have worked out a hybrid standby contract that will remain in place until BP can find a place to put this ship to work.

Source: Diamond Offshore earnings release. Author's chart.

The increase in revenues and the declines in operating costs have also freed up cash flow for the company, which is enabling it to pay down some debt. This past quarter alone Diamond was able to pay back $188 million in short term borrowings. With little in terms of capital spending in the coming quarters, the company should be able to throw off quite a bit of cash for either paying down debt or even returning that cash to shareholders. Considering the depressed share price, it wouldn't be shocking to see Diamond buy back some stock.

For the most part, CEO Marc Edwards' comments were on all of the action items that have happened as of late, notably the contracting of several rigs. While that does give the company a decent boost to the income statement now, Edwards also explained how there are some other advantages to being in this position for the future.

Although the next few years will be challenging for offshore drillers, we have uniquely positioned Diamond Offshore to take best advantage of a recovery either in '19 or 2020.

For example, our sixth-generation fleet is contracted through 2019. Our clients have a strong preference for rigs that have recently completed other work. In other words, rigs that are hot. They do not want to take the financial or time risk of qualifying a rig which has been stacked for a lengthy period. We are already seeing some tenders illustrate a strong preference for rigs that are hot. As the market recovers, our rigs will be finishing up their contracts and will therefore be the most attractive to our clients.

Diamond Offshore has done a great job of transforming itself over the past several years. It has gone from a company with an old fleet of rigs with little to differentiate itself from the pack to a young, capable fleet that is working on some innovative ideas like its partnership with General Electric for its pay for performance blow out preventors and its new generation design for ultra deepwater rigs.

With a decent chunk of its fleet contracted out over the next several years, it looks as though Diamond will be in a much better position than its peers to handle the ups and downs of the market. With shares trading at very cheap prices today, it may be a long term investment worth putting on your radar.

Tyler Crowe and The Motley Fool own shares of General Electric. The Motley Fool has a disclosure policy.

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Diamond Offshore Surprises Everyone With a Fourth Quarter ... - Motley Fool

8064 3

by Brad Setser February 6, 2017

One important result of my theory about the sources of dark matter in the U.S. balance of payments is a concern that border adjustment might not generate the expected revenues. American multinationals would have a strong incentive to shift their offshore income on intellectual property rights that are now located in subsidiaries offshore back to the U.S..

A lot depends on the details of any proposed tax reform, but I think a firm with U.S. expenses and export revenues would generate a tax loss on its exports (export revenues are excluded from calculation of revenues for the purpose of the tax, and domestic expenses can be deducted). If that tax loss is refundable, exporters essentially get a check back from the government for a sum equal to their domestic labor costs (see Chad Bown on the subsidy component of a border tax adjustment).* Profits that now show up in subsidiaries in Ireland, Puerto Rico, Singapore, and the like** based on intellectual property that is held in the Caribbean, thanks to the low price headquarters charges for the global rights on their intellectual property, might show up back in the U.S.and I suspect the royalties their offshore subsidiaries pay headquarters for research and design and engineering (e.g. exports) would soar.

I havent started to figure out how European companies that now report very little income on their direct investment in the U.S. might try to game the system. I suspect that they have an incentive to try to lower their reported intra-firm importse.g. reduce the transfer prices they charge their U.S. subsidiaries to lower their border adjustment. Auerbach, Devereux, Keen and Vella have emphasized that introducing a destination based cash flow tax in one country would have quite different effects than introducing a destination based cash flow tax in all countries.

But I also wanted to draw out the implications of the rapid growth in the offshore profits of American companies for the broader debate on globalization.

Consider the following chart: normalized versus GDP, the reinvested (tax-deferred, or less politely, largely untaxed as of now) profits of U.S. multinationals have more than doubled over the past twenty years, while U.S. exports of capital goods, consumer goods, and autos (my measure for core manufacturing exports) have stayed constant as a share of GDP. Imports of that set of goods have increased by roughly 25 percent on this measure.

Obviously, setting the initial level at 100 exaggerates a bit to make a pointnamely, that U.S. export and income growth from globalization shows up offshore, not in onshore export jobs.

As a share of GDP, reinvested earnings (a proxy for tax-deferred offshore earnings) have gone from 0.5 percent of GDP to around 1.6 percent of GDP over the past twenty years (they reached a peak of 2 percent of GDP when the dollar was weak).***

Core manufactured goods (autos, capital goods, and consumer goodsI am leaving out manufactured industrial supplies such as chemicalslargely for simplicity) exports have stayed constant at about 5 percent of GDP.

They were a bit higher for a while, but, well, something happened in the last couple of years. I tend to think that something was mostly the impact of the dollars rise but the global fall in demand for oil and mining equipment also played a role.

With rising productivity, a constant (and low) level of exports to GDP meant the export sector was shedding jobs.

And with imports rising relative to GDPcore imports have gone from about 6.5 percent of GDP in 1995 to about 8.5 percent of GDP in 2015 (they will fall a bit in 2016)of course import-competing sectors were shedding jobs.

I suspect the politics around trade would be a bit different in the U.S. if the goods-exporting sector had grown in parallel with imports.

That is one key difference between the U.S. and Germany. Manufacturing jobs fell during reunificationand Germany went through a difficult adjustment in the early 2000s. But over the last ten years the number of jobs in Germanys export sector grew, keeping the number of people employed in manufacturing roughly constant over the last ten years even with rising productivity. Part of the trade adjustment was a shift from import-competing to exporting sectors, not just a shift out of the goods producing tradables sector. Of course, not everyone can run a German sized surplus in manufacturesbut it seems likely the low U.S. share of manufacturing employment (relative to Germany and Japan) is in part a function of the size and persistence of the U.S. trade deficit in manufactures. (It is also in part a function of the fact that the U.S. no longer needs to trade manufactures for imported energy on any significant scale; the U.S. has more jobs in oil and gas production, for example, than Germany or Japan).

Of course, the sectors that have seen their offshore income grow rapidly are growing, and they do employ more peoplethough successful tech companies employ comparatively few people relative to their profits.

But the shift from an economy that pays for its imports by exporting goods to one that increasingly relies on the income its multinationals generate in offshore tax centers likely has had some significant distributional consequences.

And as I have argued before, I suspect that one of the problems the U.S. faces is that a significant share of the gains from globalization arent actually taxed, and thus arent directly available to fund the kind of programs that my colleague Ted Alden has suggested are needed to allow the workforce to adopt to various shocks more effectively. And I am not convinced a border adjustmentwhich I think solves the transfer price problem by exempting export revenue from any calculation of taxsolves this particular problem. I suspect effectively untaxed (permanently tax-deferred) profits offshore become untaxed export profits onshore.

* If the border adjustment leads to an adjustment in the exchange rate, such a rebate is needed to offset the exchange rate drag. ** Puerto Rico is outside the United States for corporate tax purposes, thanks to its unique status. For details on Microsofts tax structure, see the Senate Investigative Committee report. *** Foreign multinationals do not have big cash hoards in the U.S., so their reinvested U.S. profits have stayed roughly constant as a share of GDP, pushing the U.S. surplus on reinvested earnings up.

CFR seeks to foster civil and informed discussion of foreign policy issues. Opinions expressed on CFR blogs are solely those of the author or commenter, not of CFR, which takes no institutional positions. All comments must abide by CFR's guidelines and will be moderated prior to posting.

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Williams argues that the status quo for peace operations in untenable and that greater U.S. involvement is necessary to enhance the quality and success of peacekeeping missions.

The authors argue that the United States has responded inadequately to the rise of Chinese power and recommend placing less strategic emphasis on the goal of integrating China into the international system and more on balancing China's rise.

Campbell evaluates the implications of the Boko Haram insurgency and recommends that the United States support Nigerian efforts to address the drivers of Boko Haram, such as poverty and corruption, and to foster stronger ties with Nigerian civil society.

Complete list of Council Special Reports

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Offshore Profits and US Exports - Council on Foreign Relations (blog)