* Big deep water projects vulnerable to low price
* Shale oil adjusts swiftly to price volatility
* Saudi Arabia prepared for long haul on strategy
By Rania El Gamal
DUBAI, Sept 23 (Reuters) - After almost a year of painfullylow oil prices, OPEC members are beginning to believe they arewinning against upstart U.S. shale producers in a short-termmarket share contest.
Yet insiders and experts say OPEC is looking for alonger-lasting impact on other high-cost production oil fieldplans, many in deep oceans, with bigger time scales, even ifthat means a period of cheap oil prices lasting for years.
Privately, OPEC's core Gulf members say they have resignedthemselves to the idea that the U.S. shale industry's high-techflexibility means it will respond quickly when prices startrising again, making the United States the new swing producer inworld oil, the role held for so long by Saudi Arabia.
"The oil surplus is slowly being drawn from the market. U.S.oil production is expected to fall to less than 9 millionbarrels per day by the end of this year or early next year,"said an OPEC delegate from a Gulf oil producer.
"But there is one point that no one is looking at which isthe delay in the longer-term oil projects, these are 4-5 yearprojects. The postponement of these projects will impact theoverall supply in the market."
The short investment cycle of U.S. shale, where it takesabout few months before returns are seen, make it the mostsensitive to oil price fluctuation -- either way.
Thus the spike in oil prices in June where U.S. crude was trading above $60 a barrel drew out more shale output butthe price drop in August will reverse that, OPEC sources say.
And even if rising prices pushed supplies up again, in thelong run, higher production from shale is expected to be offsetby lower production from conventional high-cost offshore projects from countries such as Brazil and Mexico, the sourcessay.
"Shale will be a new swing producer of sorts," said YasserElguindi of economic consultants Medley Global Advisors."Because of its shorter investment cycle, when prices fall shaleproducers will be the ones to cut first, but likewise whenprices go up, they will also be the first to bring upproduction.
"This complicates life for those who are looking atinvestments that have a 2-5 year investment horizon. But again,the idea is to find the price level that slows down the rate ofgrowth considerably to something more sustainable -- and thattakes more than 2 to 3 quarters of lower oil prices."
BIG PROJECTS IN DEEP WATER
The drop in oil prices has forced companies to free upcapital to help balance their books at the expense of allocatingcash to expensive new projects. In some cases, investmentdecisions have been delayed to allow more time to reset coststructures on projects.
Companies such as BP, Total and Norway'sStatoil have postponed projects ranging from the Gulfof Mexico to the UK North Sea, Nigeria and Indonesia and dozensof other projects would be also likely delayed, according toNorwegian consultancy Rystad Energy.
Consultancy Wood Mackenzie estimated around 10.6 billionbarrels of oil equivalent potentially retrievable from deep andultra-deep offshore projects has been deferred, followed by 5.6billion barrels trapped in oil sands.
"We've slowed the pace in deep water." Ben Van Buerden,chief executive of Royal Dutch Shell's, said inJanuary.
Global deepwater production reached 8.8 million barrels perday in 2014, almost 10 percent of global demand.
Gulf oil sources believe that low oil prices have so farbeen successful in stimulating demand for crude and willgradually impact the oversupply which will start to be morevisible towards 2016 and beyond, a sign that Saudi Arabia's newmarket share strategy was working.
In its new medium-term forecast, OPEC sees oil prices risingby no more than $5 a barrel a year to reach $80 by 2020, withhigher demand for the group's oil and lower supplies from othernon-OPEC producers.
Though the demand for OPEC is higher than expected before,it is almost flat from current levels, suggesting that OPEC seesslow economic growth over the next couple of years and oilprices will remain depressed, OPEC sources say.
"Next year the oversupply will put pressure on prices, andthat's why no one is expecting $100 (a barrel) till 2040," saidone OPEC source.
Saudi Arabia is holding the line regardless of how low prices may fall and is in it for the long haul, oil sources andanalysts say.
"Remember what the Saudi oil minister said last year, evenif prices fell to $20, OPEC will not cut," said one Gulf oilsource. (Additional reporting by Karolin Schaps in London, editing byWilliam Hardy and Jonathan Leff)
