(Repeats item issued earlier, with no change to text)
* After fight, the two sides talk, but still compete
* OPEC wants to see Texan fields, U.S. bankers visit Vienna
* OPEC needs higher prices, but wary of new U.S. oil boom
By Ernest Scheyder
VIENNA, May 26 First, they ignored each other.
Then, they went into a bruising fight. Finally, they are
talking, albeit with opposing agendas.
The history of the relationship between OPEC and the U.S.
shale oil industry has evolved a great deal since the cartel
discovered it had a surprise rival emerging in a core market for
its oil around five years ago.
U.S. shale bankers came to Vienna this week and OPEC is
readying a trip for its top officials to Texas in a bid to
understand whether the two industries can co-exist or are poised
to embark on another major fight in the near future.
"We have to coexist," said Khalid al-Falih, Saudi Arabia's
energy minister, who pushed through OPEC production cuts in
December, reversing Riyadh's previous strategy to pump as much
as possible and try to kill off U.S. shale with low oil prices.
OPEC and non-OPEC countries led by Russia agreed on Thursday
to extend oil output curbs by nine months to March 2018, keeping
roughly 2 percent of global production off the market in an
attempt to boost prices.
But OPEC now realises supply cuts and higher prices only
make it easier for the shale industry to deliver higher profit
after it found ways of slashing costs when Saudi Arabia turned
up the taps three years ago.
In the Permian Basin - the largest U.S. oilfield - Parsley
Energy Inc, Diamondback Energy Inc and others
are pumping at the fastest rate in years, taking advantage of
new technology, low costs and steady oil prices to
reap profits at OPEC's expense.
OPEC's latest calculus acknowledges the global clout of
shale but seeks to hinder its growth by keeping just enough
supply on the market to hold prices below $60 per barrel.
"All shale companies in the U.S. are small companies," said
Noureddine Boutarfa, who represented Algeria at the meeting.
"The reality is that at $50 to $60 a barrel, (the U.S. oil
industry) can't break beyond 10 million barrels per day."
That is the level many analysts estimate U.S. oil production
will reach next year, in what would be a 1 million bpd rise, a
staggering jump for an industry marked during 2015 and 2016 by
scores of bankruptcies and thousands of layoffs after a two-year
price war with OPEC.
Still, that extra volume may not be enough to meet rising
global demand or offset natural declines in traditional
oilfields, which OPEC is banking on.
"For all OPEC members, $55 (per barrel) and a maximum of $60
is the goal at this stage," said Bijan Zanganeh, Iran's oil
minister. "So is that price level not high enough to encourage
too much shale? It seems it is good for both."
Some OPEC members seem keen to show they have shed any prior
naivete about shale, making it a key topic during Thursday's
meeting after barely mentioning it before. Shale's limitations,
including rising service costs, also were
"We had a discussion on (shale) and how much that has an
impact," said Ecuador Oil Minister Carlos Pérez. "But we have no
control over what the U.S. does and it's up to them to decide to
continue or not."
Mark Papa, chief executive of Permian oil producer
Centennial Resource Development Inc, was asked by OPEC
delegates to give a presentation on shale's potential last week.
He appeared to have played his cards close to his chest.
"In terms of the threat, we still don't know how much (U.S.
shale) will be producing in the near future," Nelson Martinez,
Venezuela's oil minister said after the talk.
WARNING FOR SHALE
By the same token, some U.S. shale leaders may also want a
better insight into OPEC thinking and help OPEC understand that
shale is not a flash in the pan.
"OPEC looks at shale and it scoffs," said Dave Purcell of
Tudor, Pickering, Holt & Co, a U.S. shale investment bank that
attended the OPEC meeting for the first time. "There's a
rational skepticism globally, but it misses the mark."
For example, the UAE Energy Minister Suhail bin Mohammed
al-Mazroui said he did not believe U.S. oil production would
rise by 1 million bpd next year.
Some of OPEC's customers are happy to see an alternative.
India, the world's third-largest oil consumer, said this week it
is looking to the United States for greater supply.
"The new normal has to be accepted," Dharmendra Pradhan,
India's energy minister said this week ahead of the OPEC
OPEC meets again in November to reconsider output policy.
While most in the group now appear to believe that shale has to
be accommodated, there are still those in OPEC who think another
fight is around the corner.
"If we get to a point where we feel frustrated by a
deliberate action of shale producers to just sabotage the
market, OPEC will sit down again and look at what process it is
we need to do," said Nigerian Oil Minister Emmanuel Kachikwu.
(Additional reporting by Rania El Gamal, Ahmad Ghaddar, Dmitry
Zhannikov, Alex Lawler, Shadia Nasralla; editing by Dale Hudson
and Philippa Fletcher)