Skip to content

Permian Basin

The Permian Basin is one of the nation's oldest oil and gas producing regions. New technologies have transformed the region in the last decade, breathing new life into old wells and tapping new ones. Using the tabs below, learn more about the region's century-long history and explore how recent increases in production have affected labor markets and business activity.

The Region

Highlights

The Permian Basin covers 55 counties in West Texas and southeast New Mexico. The region has been producing for nearly a century and still contains large resources of oil and natural gas.

Location of permian basin counties Oil production regions in Permian Basin Gas production regions in the Permian Basin

Note

  1. For more information on the computation of county-level production, see Energy Data Explanatory Notes and Resources.

History

The Permian Basin’s long history is characterized by ups and downs. W.H. Abrams drilled the first well in 1920, but it produced only 10 barrels of oil per day. Although many experts considered the region a “petroleum graveyard,” Texon Energy tried again in August 1921. It spudded a well in Reagan County, near Big Lake, Texas. Its cable-driven drill descended less than 5 feet per day, so progress was slow. After several months without success, a particularly nervous investor sprinkled rose petals over the site and christened the well Santa Rita in honor of the Patron Saint of the Impossible. His commitment paid off after nearly two years of drilling when oil burst out of Santa Rita No. 1 in May 1923. The well produced for nearly 70 years before it was capped in 1990.

The Santa Rita discovery prompted many investors to explore the Permian Basin, which is noted for its size and diversity. It covers over 75,000 square miles in West Texas and southeast New Mexico, consisting of several layers of rock that contain vast reserves of oil and natural gas. In the three decades following Santa Rita, discoveries of these resources led to large and steady increases in oil and gas production. Oil production peaked at nearly 2 million barrels per day in the early 1970s and gas production soared to almost 10 billion cubic feet per day (Chart 1). During this boom, the Permian Basin accounted for over 20 percent of U.S. oil supply and 15 percent of U.S. natural gas supply (Chart 2).

Oil and Gas Production in the Permian Basin, 1945-2012 Share of U.S. Oil and Gas Produced in the Permian Basin, 1945-2012

A bust followed, lasting almost two decades. By the mid-2000s, oil production had declined more than 60 percent from its peak in the early 1970s. However, in recent years, operators have applied horizontal drilling and hydraulic fracturing techniques with great success. Since February 2011, the portion of rigs dedicated to horizontal drilling has more than doubled (Chart 3). As a result, production in the Permian Basin has picked up.

Share of rigs that are horizontal in Permian Basin

Sources

Oil Production

Highlights

After many years of decline, oil production in the Permian Basin began climbing at the start of 2010. Since then, production increases have averaged 16.1 percent per year.

The share of U.S. oil produced in the Permian Basin has also increased since 2010. In March 2018, the Permian Basin accounted for 29.1 percent of U.S. oil, up from 18.1 percent in 2013.

The Texas counties in the Permian Basin produce over 2.0 million barrels per day in second quarter 2017.

In New Mexico, the four counties in the Permian Basin dominate oil production, accounting for more than 95 percent of state supply.[1]

Oil Production
Third Quarter 2017
  Barrels per day
(thousands)
Year/year change
(percent)
Texas
Permian counties 2,068.5 24.6
Rest of Texas 1,408.1 –6.2
New Mexico
Permian counties 442.6 17.8
Rest of New Mexico 28.2 56.6
SOURCES: Energy Information Administration; Oil Conservation Division of New Mexico; calculations by Federal Reserve Bank of Dallas
Total Oil Production in the Permian Basin Share of U.S. Oil Produced in the Permian Basin Texas Oil Production in Permian Basin and Rest of State New Mexico Oil Production in Permian Basin and Rest of State

Note

  1. For more information on the computation of state-level production, see Energy Data Explantory Notes and Resources.

Natural Gas Production

Highlights

Natural gas production in the Permian Basin declined steadily for most of the last two decades. Since mid-2011, natural gas production in the region has increased, rising over 110 percent.

The share of U.S. natural gas produced in the Permian Basin has also ticked up since 2011. In March 2018, the region accounted for 10.0 percent of U.S. production, up from 5.4 percent in 2011.

The Texas counties in the Permian Basin produce the majority of the region's natural gas, and these counties have recorded strong natural production increases from 2012-2014. Production in third quarter 2017 was over 120 percent higher than production in first quarter 2011.[1]

Similar to the Texas Permian counties, the New Mexico counties in the Permian Basin have experienced growth in natural gas production. Production in second quarter 2017 was 70 percent higher than production in first quarter 2011.[1]

Natural Gas Production
Third Quarter 2017
  Cubic feet per day
(billions)
Year/year change
(percent)
Texas
Permian counties 6.8 21.2
Rest of Texas 15.0 –9.4
New Mexico
Permian counties 1.9 7.1
Rest of New Mexico 1.8 –2.0
SOURCES: Energy Information Administration; Oil Conservation Division of New Mexico; calculations by Federal Reserve Bank of Dallas
Natural Gas Production in the Permian Basin Share of U.S. Natural Gas Produced in the Permian Basin Texas Natural Gas Production in Permian Basin and Rest of State New Mexico Natural Gas Production in Permian and Rest of State

Note

  1. For more information on the computation of state-level production, see Energy Data Explantory Notes and Resources.

Drilling Activity

Highlights

The rig count in the Permian Basin increased steadily from mid-2009 to mid-2012. In May 2009, just 92 rigs operated in the Permian Basin; by June 2012, there were 525 active rigs in the region. The rig count declined in the second half of 2012, leveling off in 2013 at around 465 rigs. The Permian rig count increased steadily for most of 2014, reaching 565 in October 2014 before falling oil prices began to drive the rig count down.

The number of wells per rig in the Permian Basin peaked at 5.08 in fourth quarter 2013. It declined to 4.87 in fourth quarter 2014.

Rig Count
April 2018
  Number of rigs Year/year change
(percent)
Permian Basin 448 32.9
SOURCE: Baker Hughes.
Rig Count in Permian Basin Average Number of Wells Per Rig in the Permian Basin

Other Mining—Potash

Highlights

The New Mexico portion of the Permian Basin is the No. 1 producer of potash in the United States. Potash is a mineral rich in potassium, so it is most commonly used as an agricultural fertilizer. In New Mexico, this industry is concentrated in Eddy and Lea counties in southeastern New Mexico.

For most of the past three decades, potash prices hovered around $150 per ton, but prices spiked in the last few years, exceeding $750 per ton in 2009. These increases have brought new jobs and revenue to Eddy and Lea counties; employment dedicated to potash production increased 6.9 percent per year from 2006 to 2013.

Potash production increased steadily from 2006 to 2008, but declined sharply in 2009. By 2011, production still lagged behind the 2008 level, but because of steep price increases, the value of potash production increased steadily. In 2012, New Mexico potash production doubled, reaching 1.4 million tons, and then climbed again in 2013 to a record high of 2.4 million tons.

Potash Producing Counties in the Permian Basin Potash Prices, 1980 - 2015 New Mexico Annual Potash Production and Production Value

Labor Markets

Highlights

The Texas Permian counties enjoyed strong employment growth through the end of 2014. From 2010-2014, employment in these counties increased 18 percent compared with 14 percent for the rest of the state. In first quarter 2015, falling oil prices led employment in these counties to fall for the first time since 2009. Wages in the Texas Permian counties remain lower than in the rest of the state.

In New Mexico, the differences in employment growth between the Permian counties and the rest of the state are particularly stark. Employment in the Permian counties has fully recovered from the recession in 2008, while the rest of New Mexico has remained below prerecession levels. Average weekly wages in the New Mexico Permian counties have also grown strongly in the last decade, allowing wages in the region to surpass those in the rest of the state.

Employment
Third Quarter 2017
  Employment
(thousands)
Year/year change
(percent)
Texas
Permian counties 492.1 3.1
Rest of Texas 11,489.2 1.5
New Mexico
Permian counties 81.8 2.5
Rest of New Mexico 726.5 0.0
SOURCE: Bureau of Labor Statistics.
Texas Employment in Permian Basin and Rest of State Texas Wages in Permian Counties and Rest of State New Mexico Employment in Permian Basin and Rest of State
Wages
Third Quarter 2017
  Average weekly wage (dollars) Year/year change
(percent)
Texas
Permian counties $943 4.1
Rest of Texas $1,177 7.7
New Mexico
Permian counties $865 2.5
Rest of New Mexico $818 –1.2
SOURCE: Bureau of Labor Statistics.
New Mexico Wages in Permian Counties and Rest of State

Business Activity

Highlights

Taxable sales in the Texas Permian counties have grown much more quickly than in the rest of the state. From first quarter 2004 to fourth quarter 2015, this metric grew at an annualized rate of 7.3 percent in the Permian counties compared with 5.5 percent growth in the rest of the state.

The Permian counties in New Mexico have enjoyed similar success. Since 2004, taxable sales in the New Mexico Permian counties have grown 7.1 percent per year on average compared with 2.1 percent per year for the rest of the state.

Taxable Sales
Fourth quarter 2015
  Sales
($ billions)
Year/year change
(percent)
Texas
Permian counties 4.7 –26.8
Rest of Texas 91.9 –3.3
New Mexico
Permian counties 2.2 –32.9
Rest of New Mexico 10.8 –2.4
SOURCES: Texas Comptroller of Public Accounts; New Mexico Taxation and Revenue Department.
Texas Taxable Sales in Permian Counties and Rest of State New Mexico Taxable Sales in Permian Counties and Rest of State

Resources

Energy in the Eleventh District