By Mark Jaffe, EUCI energy writer
New Mexico is seeing the country’s most rapid increase in oil and gas production – with an output of 2 million barrels a day in 2024 – more than double the 2019 amount, according to a Federal Reserve Bank of Dallas study.
New Mexico shares the Permian Basin, the richest oil and gas reserve in the county, with Texas, which is the country’s number one oil producer. New Mexico has, however, quickly moved into the number two spot.
“Production growth in New Mexico—on both percentage and volume bases—has greatly exceeded its bigger neighbor,” the bank study said.
While Texas is still the top producer as its production has climbed to 5.7 million barrels a day in 2024 – a 12% increase over 2019 – New Mexico’s production rose to 2 million barrels a day from 900,000 barrels a day during the same period.
Wells are also being brought online more quickly in New Mexico, with the state’s share of new Permian Basin wells rising to 28% from 20% in 2019. In 2023, a record number of new wells came online fueling New Mexico’s production growth.
That growth is largely coming on federal lands in the southeast corner of the state. “The once-quiet, southeast corner of New Mexico is now dotted with rigs tapping into the Delaware Basin—a subsection of the Permian Basin,” the study said.
Oil-producing states such as North Dakota, Oklahoma, and California have been stagnant or in decline since 2019, but thanks to the output from Texas, New Mexico, and a few other regions, total U.S. oil production has increased.
In 2024, the U.S. average production was 13.2 million barrels a day, making it the world’s top producer of crude oil, according to the federal Energy Information Administration.
Production in the entire Permian Basin continued to grow in 2024, surpassing 6 million barrels a day.
“Industry participants say the region has a larger number of drilling locations relative to other basins and a multi-stacked play, which allows the simultaneous targeting of several oil-bearing zones,” the study said.
Permian production also benefits from a generally favorable regulatory environment, access to pipelines, and proximity to Gulf Coast refining and chemical plants.
Another spur to New Mexico production is the lower royalty rates on federal land. About two-thirds of the state’s production is on federal land. Federal acreage makes up about one-third of the total state’s land.
The royalty rate paid to the federal government by operators for production on federal land was 12.5% through 2021. It rose to between 16.67% and 18.75% in 2022.
Royalties on state lands can be as high as 20% and are also generally higher on private lands, the federal reserve bank report said.
The surge in oil and gas production has helped bolster the state’s economy. The 2024 economic output of 6.8% outpaced the national rate of 2.9%, the federal reserve bank said. “Much of this growth was attributable to the burgeoning energy industry.”
“After a decade of stagnation, New Mexico has experienced strong economic growth, mostly due to energy production, government research, and international trade,” the report said. “Now, growing revenues are giving the state an opportunity to invest in long-run growth by tackling persistent poverty, an undereducated labor force, and a lack of economic diversification.”
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