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| Delaware                                                 |   | 75-2220418                         |
|----------------------------------------------------------|--------|------------------------------------|
| (State                or other jurisdiction              |   | (I.R.S.                Employer    |
| of                incorporation or organization)         |   | Identification                No.) |
|                                                     |   |                               |
| 6                Desta Drive, Suite 6500, Midland, Texas |   | 79705                              |
| (Address                of principal executive office)   |   | (Zip                Code)          |

| Indicate                by check mark whether registrant (1) has filed all reports required                to be                filed by Section 13 or 15(d) of the Securities Exchange Act of 1934                during                the preceding 12 months (or for such shorter period that the registrant                was required to file such reports), and (2) has been subject to such                filing requirements for the past 90 days: Yes x No ¨ |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer, or a non-accelerated filer. See definition of                “accelerated filer and large accelerated filer” in Rule 12b-2 of the                Exchange Act. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large                accelerated filer ¨                                                                                                                                                                                                                                                                             |   | Accelerated                filer ¨  |   | Non-accelerated                filer x |

| Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act). |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ¨                Yes                                                                                                                                     | x                No |

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|                    | **Table                of Contents**                                                                                      |     |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------|----------|
|                    |                                                                                                                      |     |
|                    |                                                                                                                      | **Page** |
|                    | Glossary                                                                                                                  | 3        |
|                    |                                                                                                                      |     |
|                    | **Part                I - FINANCIAL INFORMATION**                                                                         |     |
|                    |                                                                                                                      |     |
| Item                1.  | Financial                Statements                                                                                       | 5        |
|                    |                                                                                                                      |     |
|                    | Balance                Sheets as of March 31, 2007 and December 31,                2006                                   | 6        |
|                    |                                                                                                                      |     |
|                    | Statements                of Operations for the three months ended March 31,                2007 and 2006                 | 7        |
|                    |                                                                                                                      |     |
|                    | Statements                of Cash flows for the three months ended March                31, 2007 and 2006                 | 8        |
|                    |                                                                                                                      |     |
| Item                2.  | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations | 11       |
|                    |                                                                                                                      |     |
| Item                3.  | Quantitative                and Qualitative Disclosures About Market                Risk                                  | 15       |
|                    |                                                                                                                      |     |
| Item                4.  | Controls                and Procedures                                                                                    | 15       |
|                    |                                                                                                                      |     |
|                    | **Part                II - OTHER INFORMATION**                                                                            |     |
|                    |                                                                                                                      |     |
| Item                1.  | Legal                Proceedings                                                                                          | 16       |
|                    |                                                                                                                      |     |
| Item                1A. | Risk                Factors                                                                                               | 16       |
|                    |                                                                                                                      |     |
| Item                2.  | Unregistered                Sales of Equity Securities and Use of                Proceeds                                 | 16       |
|                    |                                                                                                                      |     |
| Item                3.  | Defaults                Upon Senior Securities                                                                            | 16       |
|                    |                                                                                                                      |     |
| Item                4.  | Submission                of Matter to a Vote of Security                Holders                                          | 16       |
|                    |                                                                                                                      |     |
| Item                5.  | Other                Information                                                                                          | 16       |
|                    |                                                                                                                      |     |
| Item                6.  | Exhibits                                                                                                                  | 16       |
|                    |                                                                                                                      |     |
|                    | Signatures                                                                                                                | 17       |

----

**Glossary      of Oil and Gas Terms**

*Bbl.      *

*BOE.      *

*Developmental      well. *

*Exploratory      well. *

*Farm-out      arrangement. *

*Field.      *

*Mcf.      *

*Net      Profits Interest. *

*Oil.      *

*Overriding      royalty interest*

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*Production      costs. *

*Proved      Area*

*Proved      developed oil and gas reserves. *

*Proved      properties*

*Proved      oil and gas reserves. *

*Proved      undeveloped reserves. *

*Reservoir.      *

*Royalty      interest. *

*Standardized      measure of discounted future net cash flows. *
* *

*Working      interest. *

*Workover.      *

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**PART      I. - FINANCIAL INFORMATION**

**Item      1.**
 
 

**Financial      Statements**

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**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**Balance      Sheets**

|                                                    |   | **March                31,** |      | **December                31,** |   |
|---------------------------------------------------------|--------|------------------------------|-----------|---------------------------------|--------|
|                                                    |   | **2007**                     |      | **2006**                        |   |
|                                                    |   | **(unaudited)**              |      |                            |   |
| **Assets**                                              |   |                         |      |                            |   |
|                                                    |   |                         |      |                            |   |
| Current                assets:                          |   |                         |      |                            |   |
| Cash                and cash equivalents                |   | $                            | 75,992    |                            | $      | 88,009 |   |
| Receivable                from Managing General Partner |   |                         | 195,103   |                            |   | 181,507 |   |
| New                Mexico income tax deposits           |   |                         | 1,442     |                            |   | 1,168 |   |
| Total                current assets                     |   |                         | 272,537   |                            |   | 270,684 |   |
|                                                    |   |                         |      |                            |   |   |   |
| Oil                and gas properties - using the full- |   |                         |      |                            |   |   |   |
| cost                method of accounting                |   |                         | 4,198,748 |                            |   | 4,198,748 |   |
| Less                accumulated depreciation,           |   |                         |      |                            |   |   |   |
| depletion                and amortization               |   |                         | 3,771,600 |                            |   | 3,767,334 |   |
| Net                oil and gas properties               |   |                         | 427,148   |                            |   | 431,414 |   |
|                                                    |   |                         |      |                            |   |   |   |
|                                                    |   | $                            | 699,685   |                            | $      | 702,098 |   |
|                                                    |   |                         |      |                            |   |   |   |
| **Liabilities                and Partners' Equity**     |   |                         |      |                            |   |   |   |
|                                                    |   |                         |      |                            |   |   |   |
| Asset                retirement obligations             |   | $                            | 329,837   |                            | $      | 322,606 |   |
|                                                    |   |                         |      |                            |   |   |   |
| Partners'                equity:                        |   |                         |      |                            |   |   |   |
| General                partner                          |   |                         | 2,493     |                            |   | 3,031 |   |
| Limited                partners                         |   |                         | 367,355   |                            |   | 376,461 |   |
| Total                partners' equity                   |   |                         | 369,848   |                            |   | 379,492 |   |
|                                                    |   |                         |      |                            |   |   |   |
|                                                    |   | $                            | 699,685   |                            | $      | 702,098 |   |

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**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**Statements      of Operations**

**(unaudited)**

|                                                     |   | **Three                Months Ended** |    |
|----------------------------------------------------------|--------|---------------------------------------|---------|
|                                                     |   | **March                31,**          |    |
|                                                     |   | **2007**                              |    | **2006** |   |
| **Revenues**                                             |   |                                  |    |   |   |
|                                                     |   |                                  |    |   |   |
| Income                from net profits interests         |   | $                                     | 317,279 |   | $ | 488,536 |   |
| Interest                                                 |   |                                  | 1,053   |   |   | 1,496 |   |
|                                                     |   |                                  | 318,332 |   |   | 490,032 |   |
| **Expenses**                                             |   |                                  |    |   |   |   |   |
|                                                     |   |                                  |    |   |   |   |   |
| Depreciation,                depletion and amortization  |   |                                  | 4,266   |   |   | 3,192 |   |
| Accretion                of asset retirement obligations |   |                                  | 7,231   |   |   | 4,110 |   |
| General                and administrative                |   |                                  | 16,479  |   |   | 23,351 |   |
|                                                     |   |                                  | 27,976  |   |   | 30,653 |   |
|                                                     |   |                                  |    |   |   |   |   |
| Net                income                                |   | $                                     | 290,356 |   | $ | 459,379 |   |
|                                                     |   |                                  |    |   |   |   |   |
| Net                income allocated to:                  |   |                                  |    |   |   |   |   |
|                                                     |   |                                  |    |   |   |   |   |
| Managing                General Partner                  |   | $                                     | 29,462  |   | $ | 46,257 |   |
|                                                     |   |                                  |    |   |   |   |   |
| Limited                partners                          |   | $                                     | 260,894 |   | $ | 413,122 |   |
|                                                     |   |                                  |    |   |   |   |   |
| Per                limited partner unit                  |   | $                                     | 25.71   |   | $ | 40.71 |   |

----

**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**Statements      of Cash Flows**

**(unaudited)**

|                                                                                                                              |   | **Three                Months Ended** |     |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|
|                                                                                                                              |   | **March                31,**          |     |
|                                                                                                                              |   | **2007**                              |     | **2006** |   |
| Cash                flows from operating activities:                                                                              |   |                                  |     |   |   |
|                                                                                                                              |   |                                  |     |   |   |
|                          Cash received from income from net profits                  interests |   | $                                     | 303,409  |   |   | 414,931 |   |
| Cash                paid to suppliers                                                                                             |   |                                  | (16,479  | ) |   | (23,351 | ) |
| Interest                received                                                                                                  |   |                                  | 1,053    |   |   | 1,496 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Net                cash provided by operating activities                                                                          |   |                                  | 287,983  |   |   | 393,076 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Cash                flows used in financing activities:                                                                           |   |                                  |     |   |   |   |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Distributions                to partners                                                                                          |   |                                  | (300,000 | ) |   | (400,000 | ) |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Net                decrease in cash and cash equivalents                                                                          |   |                                  | (12,017  | ) |   | (6,924 | ) |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Beginning                of period                                                                                                |   |                                  | 88,009   |   |   | 173,094 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| End                of period                                                                                                      |   | $                                     | 75,992   |   |   | 166,170 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Reconciliation                of net income to net cash                                                                           |   |                                  |     |   |   |   |   |
| provided                by operating activities:                                                                                  |   |                                  |     |   |   |   |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Net                income                                                                                                         |   | $                                     | 290,356  |   |   | 459,379 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Adjustments                to reconcile net income to net                                                                         |   |                                  |     |   |   |   |   |
| cash                provided by operating activities:                                                                             |   |                                  |     |   |   |   |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Depreciation,                depletion and amortization                                                                           |   |                                  | 4,266    |   |   | 3,192 |   |
| Accretion                of asset retirement obligations                                                                          |   |                                  | 7,231    |   |   | 4,110 |   |
| Increase                in receivables and deposits                                                                               |   |                                  | (13,870  | ) |   | (73,605 | ) |
|                                                                                                                              |   |                                  |     |   |   |   |   |
| Net                cash provided by operating activities                                                                          |   | $                                     | 287,983  |   |   | 393,076 |   |
|                                                                                                                              |   |                                  |     |   |   |   |   |

----

**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**(a      Delaware limited partnership)**

**Notes      to Financial Statements**

**1.    **
**Organization**

|                                                        | Limited  |   | General  |
|-------------------------------------------------------------|----------|--------|----------|
|                                                        | Partners |   | Partners |
| Interest                income on capital contributions     | 100%     |   | -        |
| Oil                and gas sales from net profits interests | 90%      |   | 10%      |
| All                other revenues                           | 90%      |   | 10%      |
| Organization                and offering costs (1)          | 100%     |   | -        |
| Amortization                of organization costs           | 100%     |   | -        |
| Property                acquisition costs                   | 100%     |   | -        |
| Gain/loss                on property dispositions           | 90%      |   | 10%      |
| Operating                and administrative costs (2)       | 90%      |   | 10%      |
| Depreciation,                depletion and amortization     |     |   |     |
| of                oil and gas properties                    | 100%     |   | -        |
| All                other costs                              | 90%      |   | 10%      |

|   | (1) | All                organization costs in excess of 3% of initial capital contributions                will                be paid by the Managing General Partner and will be treated as a                capital                contribution. The Partnership paid the Managing General Partner an                amount                equal to 3% of initial capital contributions for such organization                costs. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Administrative                costs in any year which exceed 2% of capital contributions shall                be paid                by the Managing Partner and will be treated as a capital                contribution. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**2.    **
**Summary      of Significant Accounting Policies**

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**Southwest      Royalties Institutional Income Fund VIII-B, L.P.**

**(a      Delaware limited partnership)**

**Notes      to Financial Statements**

**3.    **
**Abandonment      Obligations**

|                             |   | 2007   |    | 2006   |   |
|----------------------------------|--------|--------|---------|--------|--------|
| Beginning                of year |   | $      | 322,606 |   |   | 204,577 |   |
| Accretion                expense |   |   | 7,231   |   |   | 4,110 |   |
| End                of year       |   | $      | 329,837 |   |   | 208,687 |   |

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**Item          2.      **
**Management's          Discussion and Analysis of Financial Condition and Results of          Operations**

*General*

*Oil      and Gas Properties*

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*Critical      Accounting Policies*

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**Supplemental      Information**

|                                                     |   | **Three                Months Ended** |    |
|----------------------------------------------------------|--------|---------------------------------------|---------|
|                                                     |   | **March                31,**          |    |
|                                                     |   | **2007**                              |    | **2006** |   |
| Oil                production in barrels                 |   |                                  | 7,226   |   |   | 9,050 |   |
| Gas                production in mcf                     |   |                                  | 7,811   |   |   | 8,111 |   |
| Total                (BOE)                               |   |                                  | 8,528   |   |   | 10,402 |   |
| Average                price per barrel of oil           |   | $                                     | 55.08   |   |   | 59.46 |   |
| Average                price per mcf of gas              |   | $                                     | 7.50    |   |   | 7.91 |   |
| Partnership                distributions                 |   | $                                     | 300,000 |   |   | 400,000 |   |
| Limited                partner distributions             |   | $                                     | 270,000 |   |   | 360,000 |   |
| Per                unit distribution to limited partners |   | $                                     | 26.61   |   |   | 35.48 |   |
| Number                of limited partner units           |   |                                  | 10,147  |   |   | 10,147 |   |

**Operating      Results**

**Income      from net profits**

**Expenses**

**Texas      Margin Taxes**

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**Liquidity      and Capital Resources**

**Recent      Accounting Pronouncements**

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**Item3.**
**Quantitative      and Qualitative Disclosures About Market Risk**

**Item      4.**
 
**Controls      and Procedures**

**Internal      Control Over Financial Reporting**

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**PART      II. - OTHER INFORMATION**

**Item      1.**
**Legal      Proceedings**

**Item      1A.**
**Risk      Factors**

**Item      2.**
 
**Unregistered      Sales of Equity Securities and Use of Proceeds**

**Item      3.**
 
 

**Defaults      Upon Senior Securities**

**Item4.**
**Submission      of Matter to a Vote of Security Holders**

**Item      5.**
**Other      Information**

**Item      6.**
**Exhibits**

| 31.1 | Rule                13a-14(a)/15d-14(a) Certification                                                                                                                                                                                     |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Rule                13a-14(a)/15d-14(a) Certification                                                                                                                                                                                     |
| 32.1 | Certification                of Chief Executive Officer and Chief Financial Officer Pursuant to                18                U.S.C. Section 1350, as adopted Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002 |

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**SIGNATURES**

|   | Southwest                Royalties Institutional Income Fund |
|--------|--------------------------------------------------------------|
|   | VIII-B,                L.P., a Delaware limited partnership  |
|   |                                                         |
| By:    | Southwest                Royalties, Inc., Managing           |
|   | General                Partner                               |
|   |                                                         |
|   |                                                         |
| By:    | /s/                L. Paul Latham                            |
|   | L.                Paul Latham                                |
|   | President                and Chief Executive Officer         |
|   |                                                         |
| Date:  | May                14, 2007                                  |

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