Your Guide to the Texas Oil & Gas Industry

oil pump jack against sunset

When it comes to oil and natural gas production in the U.S., Texas is the undisputed big dog. In 2023, the Lone Star State accounted for 43 percent of all domestic crude oil production, as well as 27 percent of the country’s natural gas, according to the U.S. Energy Information Administration. 

This industry is one of the most vital and far-reaching across the entire state. Hundreds of thousands of acres of Texas land are used for oil and gas production. Meanwhile, nearly half a million people are employed in the Texas oil and gas industry, accounting for almost a quarter of the American jobs in this sector.  

If you’re looking to get involved in oil and gas in Texas — either on land you currently own or on acres you plan to purchase — here’s what you need to know about permitting, financing, and the ins and outs of the industry. 

125 years of Texas oil and gas

Texas began securing its place in the U.S. oil and gas industry well over a century ago. There had been some oil refining throughout the 1800s. But in 1901, that potential fully erupted — literally. At the Spindletop oilfield near Beaumont, there was a “gusher” of oil that ushered in the first big oil boom in the state. 

Oil production jumped from less than 850,000 barrels in 1900 to more than 4.3 million in 1901 after that discovery. The industry has since become one of the most important in the state — and a critical supplier for the rest of the U.S.

Why is Texas so rich in oil? 

Texas has extremely unique geological characteristics that make it a treasure chest of natural resources.

These resources come from five major formations: 

• Permian Basin
• Eagle Ford
• Barnett Shale
• Haynesville Shale
• Granite Wash 

Of that group, the Permian Basin in West Texas (and extending into parts of New Mexico) is the biggest oil-producing region in the entire country. Close to half (45%) of all domestic crude oil production comes from this region, which includes more than 7,000 fields across more than 86,000 square miles. (It also accounts for 17 percent of gas production in the U.S.)

However, other parts of Texas have their fair share of oil and gas resources. South Texas is home to the Eagle Ford Shale, which hit a new production record in 2023. It processed more than a million barrels of oil a day, along with more than 6 billion cubic feet of natural gas production each day.

There’s also the East Texas oilfield: 140,000 acres where more than 5 billion barrels of crude oil have been drilled since the 1930s. 

In total, Texas has the capacity to produce more than 5 million barrels of crude oil every day. Out of the total U.S. refining capacity, Texas accounts for more than a quarter.

But Texas’s oil and gas industry isn’t just critical for domestic production. The state is also the leading energy exporter, by a long shot. In 2023, Texas exported about $200 billion of crude oil and gas. Louisiana, in a distant second place, exported $50 billion that year.

How does oil and gas leasing work? 

Some of the biggest oil companies in the world operate out of Texas — for example, ExxonMobil, ConocoPhillips, Marathon, and more. These companies run their own refining operations that produce millions and millions of barrels of oil (or cubic feet of natural gas). 

Oil companies can also establish lease agreements with private landowners in Texas. These agreements allow a company such as ExxonMobil to explore your land, develop facilities, and drill for oil and gas. 

Oil and gas leases can be extremely complicated, so if you want to pursue this kind of arrangement for your land, make sure to speak with an experienced attorney.

Can you drill for oil and gas on your land yourself?

If you own a tract of land in Texas that has oil or natural gas resources, you could potentially benefit financially. It will depend on which rights to the land you have. 

Texas law distinguishes between “surface rights” and “mineral rights” (or “estates”). Anyone who plans on drilling for natural resources must possess the mineral rights to that land. 

If you own these rights and plan to drill on your land, you’ll have to get a permit from the Railroad Commission of Texas. You’ll also have to follow any specific location restrictions: for example, how many feet away from houses or schools your drilling needs to be.

Data shows that plenty of Texas residents are taking advantage of their state’s natural resources. In 2024, there were more than 12 million oil and gas royalty owners throughout the U.S., according to the National Association of Royalty Owners. More than 4 million of those were in Texas.

Sometimes, these oil and gas rights are simply add-ons for Texas property owners. For example, many farm owners simply tack on oil and gas rights, in addition to the profits they gain from their regular farming operation. If you operate a farm on your land, own the land’s mineral rights, and want to expand to a new revenue stream, this could be a good option for you. 

How to know if your land contains oil or gas 

If you’re not sure whether your acres contain valuable natural resources, contact a professional to do an oil and gas assessment on your land. This usually means the assessor will drill a few test wells. 

Geologists and mineral experts are also valuable resources. They can evaluate what kinds of rocks are on your land (shale or limestone, for example), and whether those materials are likely to produce oil or gas.

Get financing help from the experts

Whether you’re looking to purchase new acres to break into the oil and gas industry, or you want to add more land into your existing portfolio, Texas Farm Credit offers land loans. Land refinancing is also available if you’re looking to increase your working capital.

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