Following his election victory in early November, US President-elect Donald Trump has filled key positions in his upcoming administration with figures that he hopes will propel a policy of “energy dominance” for the country. If confirmed by the Senate, the second iteration of the Trump administration will include Chris Wright, the chief executive officer of frac services company Liberty Energy, as Secretary of Energy. In addition, Doug Burgum, the Governor of oil-rich North Dakota, will assume the role of Secretary of the Interior and Chairman of a newly formed National Energy Council. Trump has made it a priority to boost oil and gas drilling in the US, with a key focus on speeding up permitting and leasing processes on federal lands and waters. In the medium term, speeding the approval of federal permits could modestly increase output on prolific federal acreage in the New Mexico portion of the Permian Delaware, but this would come in the form of a reallocation of capital from other parts of operators’ portfolios. This is because exploration and production (E&P) investors are unlikely to accept reduced near-term returns alongside a declining capital efficiency, as would occur if operators accelerated capital expenditure and production growth.

While the incoming administration’s policy priorities may have a more noticeable impact on offshore activity and non-free trade agreement (FTA) export licenses for proposed liquefied natural gas (LNG) export projects, its levers to increase the production of oil in the US onshore are far more limited. The US is unique in that most activity and production takes place on land in which the mineral rights are owned by privately, rather than by federal or state governments.

As a result, this gives the President far less sway over oil and gas development than is typical in other countries. While more permits can be issued and more land could be opened to permitting, the maturity of the shale industry means that budgeting is largely set in advance, and operators have little appetite for more high-risk exploration in today’s oil price environment. This leaves the federal government with few levers to boost output. That said, the federal government does own the mineral rights to swathes of land in New Mexico, via the Bureau of Land Management (BLM), which is home to some of the most commercial drilling in the Delaware sub-basin of the Permian and the country writ large. The incoming Trump administration has announced plans to expedite the approval of permits on federal land as one of the means to increase output.

Another question remains over how much increased permitting would translate to activity and output against the current pace. While prospective federal land exists outside of New Mexico, including significant portions in Wyoming and Utah, BLM New Mexico wells are most competitive for capital and therefore could be the most influenced by policy. Figure 1 shows the oil type curves for Permian wells on federal land in New Mexico, compared to non-federal wells in New Mexico, Texas Delaware wells and Midland wells. The grouping uses the median well in each category started in 2023 or 2024 with at least three months on production. Wells on federal land significantly outperform all other types, both in terms of initial productivity and two-year cumulative output, proving the importance of this segment to the producers that operate there. Please note that Figure 1 considers mineral rights rather than surface land ownership. In most cases, especially in the New Mexico Delaware, the two are highly correlated.

Stay tuned for Rystad Energy's take on capital efficiency declines.