1
                                 FORM 10-Q


                    SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D. C.  20549

(Mark One)

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

                                    OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _________________ to _______________

Commission file number 0-16494

        Southwest Royalties Institutional Income Fund VIII-B, L.P.
                  (Exact name of registrant as specified
                   in its limited partnership agreement)

Delaware                                          75-2220418
(State or other jurisdiction of                                  (I.R.S.
Employer
incorporation or organization)
          Identification No.)

                         6 Desta Drive, Suite 6500
                           Midland, Texas 79705
                 (Address of principal executive offices)

                               432-682-6324
                      (Registrant's telephone number,
                           including area 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 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. (Check one):
      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__ No  X

The  registrant's  outstanding  securities  consist  of  Units  of  limited
partnership  interests for which there exists no established public  market
from which to base a calculation of aggregate market value.

         The total number of pages contained in this report is 20.

<PAGE>

Glossary of Oil and Gas Terms
The  following are abbreviations and definitions of terms commonly used  in
the oil and gas industry that are used in this filing.

     Bbl. One stock tank barrel, or 42 United States gallons liquid volume.

     BOE.   Equivalent  barrels of oil, with natural gas converted  to  oil
equivalents based on a ratio of six Mcf of natural gas to one Bbl of oil.

     Developmental well. A well drilled within the proved area of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known  to  be
productive.

     Exploratory  well. A well drilled to find and produce oil  or  natural
gas  reserves  in  an  unproved area, to find a new reservoir  in  a  field
previously  found  to  be  productive of oil  or  natural  gas  in  another
reservoir, or to extend a known reservoir.

     Farm-out arrangement. An agreement whereby the owner of a leasehold or
working  interest agrees to assign his interest in certain specific acreage
to  an  assignee,  retaining some interest, such as an  overriding  royalty
interest,  subject  to  the drilling of one (1)  or  more  wells  or  other
specified performance by the assignee.

     Field. An area consisting of a single reservoir or multiple reservoirs
all  grouped  on  or  related to the same individual geological  structural
feature and/or stratigraphic condition.

     Mcf. One thousand cubic feet.

     Net  Profits  Interest.  An agreement whereby  the  owner  receives  a
specified  percentage of the defined net profits from a producing  property
in  exchange for consideration paid.  The net profits interest  owner  will
not otherwise participate in additional costs and expenses of the property.

     Oil. Crude oil, condensate and natural gas liquids.

     Overriding  royalty  interest. Interests that  are  carved  out  of  a
working  interest, and their duration is limited by the term of  the  lease
under which they are created.

<PAGE>

     Standardized  measure  of discounted future net  cash  flows.  Present
value  of  proved reserves, as adjusted to give effect to estimated  future
abandonment costs, net of the estimated salvage value of related equipment.

     Production  costs.  Costs incurred to operate and maintain  wells  and
related  equipment  and facilities, including depreciation  and  applicable
operating  costs  of support equipment and facilities and  other  costs  of
operating and maintaining those wells and related equipment and facilities.

     Proved Area. The part of a property to which proved reserves have been
specifically attributed.

     Proved  developed  oil and gas reserves. Proved oil and  gas  reserves
that  can  be  expected to be recovered from existing wells  with  existing
equipment and operating methods.

     Proved properties. Properties with proved reserves.

     Proved  oil  and gas reserves. The estimated quantities of crude  oil,
natural  gas, and natural gas liquids with geological and engineering  data
that  demonstrate  with  reasonable certainty to be recoverable  in  future
years   from  known  reservoirs  under  existing  economic  and   operating
conditions, i.e., prices and costs as of the date the estimate is made.

     Proved  undeveloped  reserves. Proved oil and gas  reserves  that  are
expected  to  be  recovered from new wells on undrilled  acreage,  or  from
existing  wells  where  a  relatively major  expenditure  is  required  for
recompletion.

     Reservoir.  A porous and permeable underground formation containing  a
natural  accumulation  of  producible  oil  or  gas  that  is  confined  by
impermeable  rock  or water barriers and is individual  and  separate  from
other reservoirs.

     Royalty  interest.  An  interest in an oil and  natural  gas  property
entitling  the  owner to a share of oil or natural gas production  free  of
costs of production.

     Working  interest.  The operating interest that gives  the  owner  the
right  to  drill, produce and conduct operating activities on the  property
and a share of production.

     Workover.  Operations  on  a producing well  to  restore  or  increase
production.





<PAGE>


                      PART I. - FINANCIAL INFORMATION

Item 1.  Financial Statements

The  unaudited  condensed financial statements included  herein  have  been
prepared  by  the Registrant (herein also referred to as the "Partnership")
in  accordance  with generally accepted accounting principles  for  interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X.  Accordingly, they do not include all of the information
and  footnotes  required  by generally accepted accounting  principles  for
complete   financial  statements.   In  the  opinion  of  management,   all
adjustments necessary for a fair presentation have been included and are of
a  normal  recurring nature.  The financial statements should  be  read  in
conjunction with the audited financial statements and the notes thereto for
the  year ended December 31, 2005, which are found in the Registrant's Form
10-K  Report  for  2005 filed with the Securities and Exchange  Commission.
The December 31, 2005 balance sheet included herein has been taken from the
Registrant's  2005 Form 10-K Report.  Operating results for the  three  and
nine-month  periods ended September 30, 2006 are not necessarily indicative
of the results that may be expected for the full year.

<PAGE>


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

                                 Septembe  December
                                  r 30,      31,
                                   2006      2005
                                  ------    ------
                                 (unaudit
                                   ed)
Assets
----------

Current assets:
 Cash and cash equivalents    $  137,204   173,094
  Receivable  from  Managing     265,788   198,811
General Partner
 Other                           490       359
                                 --------  --------
                                 ----      ----
   Total current assets          403,482   372,264
                                 --------  --------
                                 ----      ----
Oil  and  gas  properties  -
using the full-
 cost method of accounting       4,094,07  4,094,07
                                 7         7
       Less      accumulated
depreciation,
         depletion       and     3,762,01  3,752,39
amortization                     5         1
                                 --------  --------
                                 ----      ----
      Net   oil   and    gas     332,062   341,686
properties
                                 --------  --------
                                 ----      ----
                              $  735,544   713,950
                                 =======   =======
Liabilities  and   Partners'
Equity
----------------------------
------------

Current     liability      -  $  -         683
distributions payable
                                 --------  --------
                                 ----      ----

Asset retirement obligation      213,400   204,577
                                 --------  --------
                                 ----      ----
Partners' equity:
 General partner                 16,764    14,529
 Limited partners                505,380   494,161
                                 --------  --------
                                 ----      ----
   Total partners' equity        522,144   508,690
                                 --------  --------
                                 ----      ----
                              $  735,544   713,950
                                 =======   =======













                  The accompanying notes are an integral
                    part of these financial statements.
<PAGE>

        Southwest Royalties Institutional Income Fund VIII-B, L.P.
                         Statements of Operations
                                (unaudited)

                                 Three Months Ended   Nine Months Ended
                                    September 30,       September 30,
                                   2006      2005      2006      2005
                                   -----     -----     -----     -----
Revenues
-------------
Income from net profits        $ 444,054   477,937   1,381,13  1,130,41
interests                                            6         9
Interest                         1,666     1,039     4,997     2,349
                                 --------  --------  --------  --------
                                 --        --        ----      ----
                                 445,720   478,976   1,386,13  1,132,76
                                                     3         8
                                 --------  --------  --------  --------
                                 --        --        ----      ----
Expenses
------------
Depreciation, depletion and      3,158     3,728     9,624     10,947
amortization
Accretion of asset retirement    4,419     2,693     12,949    8,080
obligation
General and administrative       22,954    19,369    74,473    64,071
                                 --------  --------  --------  --------
                                 --        --        ----      ----
                                 30,531    25,790    97,046    83,098
                                 --------  --------  --------  --------
                                 --        --        ----      ----
Net income                     $ 415,189   453,186   1,289,08  1,049,67
                                                     7         0
                                 ======    ======    =======   =======
Net income allocated to:
 Managing General Partner      $ 41,835    45,691    129,871   106,062
                                 ======    ======    =======   =======
 Limited Partners              $ 373,354   407,495   1,159,21  943,608
                                                     6
                                 ======    ======    =======   =======
  Per limited partner unit     $  36.79     40.16    114.24     92.99
                                 ======    ======    =======   =======
























                  The accompanying notes are an integral
                    part of these financial statements.
<PAGE>
         Southwest Royalties Institutional Income Fund VIII-B, L.P.
                         Statements of Cash Flows
                                (unaudited)

                                    Nine Month Ended
                                     September 30,
                                     2006      2005
                                    -----     -----
Cash flows from operating
activities
 Cash received from income from
net
  profits interests              $ 1,309,9   1,103,6
                                   02        44
 Cash paid to suppliers            (74,473   (64,071
                                   )         )
 Interest received                 4,997     2,349
                                   -------   -------
                                   -----     -----
  Net cash provided by operating   1,240,4   1,041,9
activities                         26        22
                                   -------   -------
                                   -----     -----
Cash flows from financing
activities
 Distributions to partners         (1,275,   (1,025,
                                   633)      000)
 (Decrease) increase in            (683)     257
distributions payable
                                   -------   -------
                                   -----     -----
  Net cash used in financing       (1,276,   (1,024,
activities                         316)      743)
                                   -------   -------
                                   -----     -----

  Net (decrease) increase in       (35,890   17,179
cash and cash equivalents          )

 Beginning of period               173,094   155,361
                                   -------   -------
                                   -----     -----
 End of period                   $ 137,204   172,540
                                   =======   =======
Reconciliation of net income to
net cash
 provided by operating
activities

Net income                       $ 1,289,0   1,049,6
                                   87        70

Adjustments to reconcile net
income to net
 cash provided by operating
activities

 Depreciation, depletion and       9,624     10,947
amortization
 Settlement of asset retirement
obligations
  for plugged and abandoned        (4,126)   -
wells
 Accretion of asset retirement     12,949    8,080
obligation
 Increase in receivables           (67,108   (26,775
                                   )         )
                                   -------   -------
                                   -----     -----
Net cash provided by operating   $ 1,240,4   1,041,9
activities                         26        22
                                   =======   =======












                  The accompanying notes are an integral
                    part of these financial statements.
<PAGE>
        Southwest Royalties Institutional Income Fund VIII-B, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

1.   Organization
     Southwest  Royalties  Institutional  Income  Fund  VIII-B,  L.P.   was
     organized  under  the laws of the state of Delaware  on  November  30,
     1987,  for  the purpose of acquiring producing oil and gas  properties
     and to produce and market crude oil and natural gas produced from such
     properties  for a term of 50 years, unless terminated  at  an  earlier
     date  as  provided for in the Partnership Agreement.  The offering  of
     limited   partner   units  began  March  31,  1988,  minimum   capital
     requirements  were met July 11, 1988, with the offering  concluded  on
     March 31, 1989.  The Partnership sells its oil and gas production to a
     variety of purchasers with the prices it receives being dependent upon
     the  oil  and  gas economy.  Southwest Royalties, Inc. a wholly  owned
     subsidiary  of Clayton Williams Energy, Inc., serves as  the  Managing
     General  Partner.   Revenues,  costs and  expenses  are  allocated  as
     follows:
                              Limited   General
                              Partners  Partners
                              --------  --------
Interest  income on  capital  100%      -
contributions
Oil  and gas sales from  net  90%       10%
profits interests
All other revenues            90%       10%
Organization  and   offering  100%      -
costs (1)
Amortization of organization  100%      -
costs
Property acquisition costs    100%      -
Gain/loss    on     property  90%        10%
dispositions
Operating and administrative  90%       10%
costs (2)
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
     The  interim financial information as of September 30, 2006,  and  for
     the  three  and  nine months ended September 30, 2006,  is  unaudited.
     Certain  information  and footnote disclosures  normally  included  in
     financial  statements prepared in accordance with  generally  accepted
     accounting principles have been condensed or omitted in this Form 10-Q
     pursuant  to the rules and regulations of the Securities and  Exchange
     Commission.  However,  in  the opinion of  management,  these  interim
     financial  statements include all the necessary adjustments to  fairly
     present  the  results of the interim periods and all such  adjustments
     are  of a normal recurring nature.  The interim consolidated financial
     statements should be read in conjunction with the Partnership's Annual
     Report on Form 10-K for the year ended December 31, 2005.

     In September 2004, the Securities and Exchange Commission issued Staff
     Accounting  Bulletin No. 106 ("SAB 106"). SAB 106  expresses  the  SEC
     staff's views regarding SFAS No. 143 and its impact on both the  full-
     cost  ceiling  test  and  the calculation of  depletion  expense.   In
     accordance  with  SAB  106, beginning in the first  quarter  of  2005,
     undiscounted abandonment costs for wells to be drilled in  the  future
     to develop proved reserves are included in the unamortized cost of oil
     and  gas  properties, net of related salvage value,  for  purposes  of
     computing  depreciation,  depletion  and  amortization  ("DD&A").  The
     implementation  of  SAB  106 did not have a  material  impact  on  our
     financial statements.


<PAGE>
        Southwest Royalties Institutional Income Fund VIII-B, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

3.   Asset Retirement Obligations

     Changes in abandonment obligations for the nine months ended September
     30, 2006 and 2005 are as follows:

                                        2006     2005
                                       -------  -------
Beginning of year                   $  204,577  169,640
Settlement   of  obligations   for     (4,126)  -
plugged and abandoned wells
Accretion expense                      12,949   8,080
                                       -------  -------
                                       -------  -----
End of year                         $  213,400  177,720
                                       =======  =======
                                       =


<PAGE>
Item 2.   Management's  Discussion and Analysis of Financial Condition  and
          Results of Operations

General
Southwest Royalties Institutional Income Fund VIII-B, L.P. was organized as
a  Delaware limited partnership on November 30, 1987. The offering of  such
limited  partnership  interests  began  March  31,  1988,  minimum  capital
requirements were met July 11, 1988, and concluded on March 31,  1989  with
total limited partner contributions of $5,073,500.

The Partnership was formed to acquire royalty and net profits interests  in
producing  oil  and  gas properties, to produce and market  crude  oil  and
natural  gas  produced  from such properties, and  to  distribute  the  net
proceeds from operations to the limited and general partners.  Net revenues
from  producing  oil  and gas properties will not be  reinvested  in  other
revenue  producing  assets except to the extent that production  facilities
and wells are improved or reworked or where methods are employed to improve
or  enable  more efficient recovery of oil and gas reserves.  The  economic
life  of  the  Partnership  thus  depends on  the  period  over  which  the
Partnership's oil and gas reserves are economically recoverable.

Increases   or   decreases   in  Partnership   revenues   and,   therefore,
distributions  to partners will depend primarily on changes in  the  prices
received  for  production,  changes in volumes of  production  sold,  lease
operating  expenses, enhanced recovery projects, offset drilling activities
pursuant to farmout arrangements, sales of properties, and the depletion of
wells.  Since wells deplete over time, production can generally be expected
to decline from year to year.

Well  operating costs and general and administrative costs usually decrease
with   production   declines;  however,  these  costs  may   not   decrease
proportionately.  Net income available for distribution to the partners  is
therefore expected to fluctuate in later years based on these factors.

Oil and Gas Properties

Oil  and  gas  properties  are accounted for at cost  under  the  full-cost
method.  Under this method, all productive and nonproductive costs incurred
in  connection with the acquisition, exploration and development of oil and
gas  reserves  are capitalized.  Gain or loss on the sale of  oil  and  gas
properties  is not recognized unless significant oil and gas  reserves  are
sold.

Should the net capitalized costs exceed the estimated present value of  oil
and gas reserves, discounted at 10%, such excess costs would be charged  to
current  expense.  As of September 30, 2006, the net capitalized costs  did
not exceed the estimated present value of oil and gas reserves.

<PAGE>

The  Partnership's  interest  in oil and gas  properties  consists  of  net
profits  interests  in  proved properties located  within  the  continental
United  States.   A net profits interest is created when  the  owner  of  a
working  interest in a property enters into an arrangement  providing  that
the  net profits interest owner will receive a stated percentage of the net
profit  from  the  property.   The  net profits  interest  owner  will  not
otherwise participate in additional costs and expenses of the property.

The  Partnership recognizes income from its net profits interest in oil and
gas property on an accrual basis, while the quarterly cash distributions of
the net profits interest are based on a calculation of actual cash received
from  oil  and  gas sales, net of expenses incurred during  that  quarterly
period.   If  the  net  profits interest calculation  results  in  expenses
incurred  exceeding the oil and gas income received during  a  quarter,  no
cash  distribution is due to the Partnership's net profits  interest  until
the  deficit is recovered from future net profits.  The Partnership accrues
a quarterly loss on its net profits interest provided there is a cumulative
net  amount  due for accrued revenue as of the balance sheet date.   As  of
September 30, 2006, there were no timing differences, which resulted  in  a
deficit net profit interest.

Critical Accounting Policies

The  Partnership follows the full cost method of accounting for its oil and
gas  properties.   The  full cost method subjects  companies  to  quarterly
calculations of a "ceiling", or limitation on the amount of properties that
can  be capitalized on the balance sheet.  If the Partnership's capitalized
costs  are in excess of the calculated ceiling, the excess must be  written
off as an expense.

The  Partnership's discounted present value of its proved oil  and  natural
gas  reserves  is  a  major  component  of  the  ceiling  calculation,  and
represents  the  component  that requires the  most  subjective  judgments.
Estimates  of  reserves are forecasts based on engineering data,  projected
future  rates  of  production and the timing of future  expenditures.   The
process  of  estimating oil and natural gas reserves  requires  substantial
judgment,  resulting  in  imprecise determinations,  particularly  for  new
discoveries.   Different reserve engineers may make different estimates  of
reserve quantities based on the same data.

The  passage  of  time  provides  more  qualitative  information  regarding
estimates of reserves, and revisions are made to prior estimates to reflect
updated  information.   However,  there  can  be  no  assurance  that  more
significant  revisions  will not be necessary in  the  future.   If  future
significant  revisions  are  necessary  that  reduce  previously  estimated
reserve quantities, it could result in a full cost property writedown.   In
addition to the impact of these estimates of proved reserves on calculation
of  the  ceiling,  estimates  of proved reserves  are  also  a  significant
component  of  the calculation of depletion, depreciation, and amortization
("DD&A").

While  the quantities of proved reserves require substantial judgment,  the
associated prices of oil and natural gas reserves that are included in  the
discounted  present  value of the reserves do not  require  judgment.   The
ceiling calculation dictates that prices and costs in effect as of the last
day  of  the  period are generally held constant indefinitely. Because  the
ceiling  calculation dictates that prices in effect as of the last  day  of
the  applicable quarter are held constant indefinitely, the resulting value
is  not indicative of the true fair value of the reserves.  Oil and natural
gas  prices have historically been cyclical and, on any particular  day  at
the  end of a quarter, can be either substantially higher or lower than the
Partnership's  long-term price forecast that is a barometer for  true  fair
value.



<PAGE>
Supplemental Information
The following unaudited information is intended to supplement the financial
statements  included  in  this Form 10-Q with  data  that  is  not  readily
available from those statements.

                             Three Months Ended
                               September 30,
                               2006      2005
                              ------    ------
Oil production in            8,732     10,074
barrels
Gas production in mcf        8,438     8,238
Total (BOE)                  10,138    11,447
Average price per barrel  $    66.07
of oil                                 59.09
Average price per mcf of  $     8.03
gas                                    7.94
Partnership               $  450,000   375,000
distributions
Limited partner           $  405,000   337,500
distributions
Per unit distribution to  $    39.91
limited partners                       33.26
Number of limited            10,147    10,147
partner units

Operating Results
The  following  discussion  compares our results  for  the  quarters  ended
September  30,  2006 and 2005.  Unless otherwise indicated,  references  to
2006 and 2005 within this section refer to the respective quarterly period.

Income from net profits
Oil  and  gas  prices continued to climb to record levels compared  to  the
previous  two  years.  Comparing 2006 to 2005, oil and gas sales  decreased
$16,000,  of  which  price variances accounted for a $61,700  increase  and
production variances accounted for a $77,700 decrease.

Production  in  2006  (on  a  BOE basis) was  11%  lower  than  2005.   Oil
production decreased 13% due primarily to a producing property shut in when
the salt water disposal well was down.  We increased our gas production  by
2%.

In  2006,  our  realized  oil price was 12% higher  than  2005,  while  our
realized  gas price was 1% higher.  Historically, the markets for  oil  and
gas have been volatile, and they are likely to continue to be volatile.  We
have  very little control over the prices we receive for our production  at
the  wellhead since most of our physical marketing arrangements are market-
sensitive.

Oil  and gas production costs on a BOE basis increased from $15.96 per  BOE
in  2005 to $19.78 per BOE in 2006.  The increase in oil and gas production
costs was due primarily to well repairs on an oil well.

Expenses
Depletion  on  a BOE basis decreased 4% in 2006.  Comparing 2006  to  2005,
depletion expense decreased $570, of which rate variances accounted  for  a
$144 decrease and production variances accounted for a $426 decrease.

Accretion  expense  increased 64% in 2006 due primarily to  fourth  quarter
2005  revisions in previous estimates related to increased  costs  to  plug
wells.

General  and administrative ("G&A") expenses were 19% higher than  2006  as
compared to 2005.  The increase in G&A expense was primarily due to  higher
engineering and audit services.


<PAGE>
Supplemental Information
The following unaudited information is intended to supplement the financial
statements  included  in  this Form 10-Q with  data  that  is  not  readily
available from those statements.

                             Nine Months Ended
                               September 30,
                               2006      2005
                              ------    ------
Oil production in            27,155    28,059
barrels
Gas production in mcf        25,312    25,919
Total (BOE)                  31,374    32,379
Average price per barrel  $    63.59
of oil                                 50.84
Average price per mcf of  $     7.52
gas                                    6.56
Partnership               $  1,275,63  1,025,00
distributions                3         0
Limited partner           $  1,147,99  922,500
distributions                7
Per unit distribution to  $   113.14
limited partners                       90.91
Number of limited            10,147    10,147
partner units

Operating Results
The  following  discussion compares our results for the nine  months  ended
September  30,  2006 and 2005.  Unless otherwise indicated,  references  to
2006  and  2005  within  this  section refer to the  respective  nine-month
period.

Income from net profits
Oil  and  gas  prices continued to climb to record levels compared  to  the
previous  two  years.  Comparing 2006 to 2005, oil and gas sales  increased
$320,800,  of  which price variances accounted for a $370,700 increase  and
production variances accounted for a $49,900 decrease.

Production in 2006 (on a BOE basis) was 3% lower than 2005.

In  2006,  our  realized  oil price was 25% higher  than  2005,  while  our
realized gas price was 15% higher.  Historically, the markets for  oil  and
gas have been volatile, and they are likely to continue to be volatile.  We
have  very little control over the prices we receive for our production  at
the  wellhead since most of our physical marketing arrangements are market-
sensitive.

Oil  and gas production costs on a BOE basis increased from $14.39 per  BOE
in  2005 to $17.09 per BOE in 2006.  The increase in oil and gas production
costs was due primarily to well repairs on two oil wells.

Expenses
Depletion  on  a BOE basis decreased 9% in 2006.  Comparing 2006  to  2005,
depletion expense decreased $1,300, of which rate variances accounted for a
$1,000 decrease and production variances accounted for a $300 decrease.

Accretion  expense  increased 60% in 2006 due primarily to  fourth  quarter
2005  revisions in previous estimates related to increased  costs  to  plug
wells.

General  and  administrative ("G&A") expenses were 16% higher  in  2006  as
compared  to 2005.  The increase in general and administrative expenses  is
primarily  due  to higher professional fees for audit, tax and  engineering
services.

Liquidity and Capital Resources
Partnership distributions during the nine months ended September  30,  2006
were  $1,275,633,  of  which  $1,147,997 was  distributed  to  the  limited
partners   and   $127,636  to  the  general  partners.    Cumulative   cash
distributions  of  $11,458,435 have been made to the  general  and  limited
partners  as  of September 30, 2006.  As of September 30, 2006, $10,334,410
or  $1,018.47 per limited partner unit has been distributed to the  limited
partners, representing 204% of contributed capital.






<PAGE>
Texas Margin Taxes

In  May  2006, the State of Texas adopted House Bill 3, which modified  the
state's  franchise  tax  structure, replacing the  previous  tax  based  on
capital  or  earned  surplus with a margin tax  (the  "Texas  Margin  Tax")
effective with franchise tax reports filed on or after January 1, 2008. The
Texas  margin Tax is computed by applying the applicable tax rate  (1%  for
the  Partnership's  business)  to the profit  margin,  which  is  generally
determined  by total revenue less either cost of goods sold or compensation
as   applicable.   However  the  Partnership  believes,   based   on   it's
interpretation, that the Texas Margin Tax does not apply to the Partnership
since  substantially  all  of it's income is derived  from  a  net  profits
interest.

Recent Accounting Pronouncements

There  were  no  recent accounting pronouncements that  had  a  significant
effect on the partnership.


<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

The  Partnership  is  not a party to any derivative or embedded  derivative
instruments.

Item 4.   Controls and Procedures

The  Managing  General  Partner  has established  disclosure  controls  and
procedures   that  are  adequate  to  provide  reasonable  assurance   that
management will be able to collect, process and disclose both financial and
non-financial information, on a timely basis, in the Partnership's  reports
to  the  SEC.   Disclosure controls and procedures  include  all  processes
necessary  to  ensure  that material information  is  recorded,  processed,
summarized  and  reported within the time periods specified  in  the  SEC's
rules  and  forms,  and  is  accumulated and  communicated  to  management,
including our chief executive and chief financial officers, to allow timely
decisions regarding required disclosures.

     With respect to these disclosure controls and procedures:

          management  has  evaluated the effectiveness  of  the  disclosure
          controls  and procedures as of the end of the period  covered  by
          this report;

          this evaluation was conducted under the supervision and with  the
          participation  of management, including the chief  executive  and
          chief financial officers of the Managing General Partner; and

          it  is  the  conclusion of chief executive  and  chief  financial
          officers  of  the Managing General Partner that these  disclosure
          controls   and   procedures  are  effective  in   ensuring   that
          information  that is required to be disclosed by the  Partnership
          in   reports  filed  or  submitted  with  the  SEC  is  recorded,
          processed,  summarized  and  reported  within  the  time  periods
          specified in the rules and forms established by the SEC.

Internal Control Over Financial Reporting
There  has  not been any change in the Partnership's internal control  over
financial  reporting that occurred during the nine months  ended  September
30,  2006  that  has  materially  affected,  or  is  reasonably  likely  to
materially affect, its internal control over financial reporting.



<PAGE>

                        PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

         None

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matter to a Vote of Security Holders

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

        (a)  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



<PAGE>

                                SIGNATURES


Pursuant  to the requirements of the Securities Exchange Act of  1934,  the
registrant  has duly caused this report to be signed on its behalf  by  the
undersigned thereunto duly authorized.

                          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:  November 13, 2006

<PAGE>

                    SECTION 302 CERTIFICATION                Exhibit 31.1


I, L. Paul Latham, certify that:

1.   I  have  reviewed  this quarterly report on  Form  10-Q  of  Southwest
Royalties Institutional Income Fund VIII-B, L.P.

2.Based  on my knowledge, this report does not contain any untrue statement
  of  a  material fact or omit to state a material fact necessary  to  make
  the  statements  made,  in light of the circumstances  under  which  such
  statements  were made, not misleading with respect to the period  covered
  by this report;

3.Based  on  my  knowledge, the financial statements, and  other  financial
  information  included  in  this report, fairly present  in  all  material
  respects  the financial condition, results of operations and  cash  flows
  of the registrant as of, and for, the periods presented in this report;

4.The  registrant's other certifying officer(s) and I are  responsible  for
  establishing  and  maintaining disclosure  controls  and  procedures  (as
  defined   in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for   the
  registrant and have:

  a)Designed  such  disclosure  controls and  procedures,  or  caused  such
     disclosure   controls  and  procedures  to  be  designed   under   our
     supervision,  to  ensure  that material information  relating  to  the
     registrant, including its consolidated subsidiaries, is made known  to
     us  by others within those entities, particularly during the period in
     which this report is being prepared;

  b)Evaluated  the  effectiveness of the registrant's  disclosure  controls
     and  procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end
     of the period covered by this report based on such evaluation; and

  c)Disclosed  in  this  report  any change in  the  registrant's  internal
     control over financial reporting that occurred during the registrant's
     most recent fiscal quarter (the registrant's fourth fiscal quarter  in
     the  case  of  an annual report) that has materially affected,  or  is
     reasonably  likely  to  materially affect, the  registrant's  internal
     control over financial reporting; and

5.The  registrant's other certifying officer(s) and I have disclosed, based
  on  our  most  recent  evaluation  of  internal  control  over  financial
  reporting,  to  the  registrant's auditors and  the  audit  committee  of
  registrant's  board  of directors (or persons performing  the  equivalent
  functions):

  a)All  significant deficiencies and material weaknesses in the design  or
     operation   of   internal  control  over  financial  reporting   which
     reasonably  likely  to  adversely affect the registrant's  ability  to
     record, process, summarize and report financial information; and

  b)Any  fraud, whether or not material, that involves management or  other
     employees  who  have  a significant role in the registrant's  internal
     control over financial reporting.


Date:  November 13, 2006           /s/ L. Paul Latham
                                   L. Paul Latham
                                   President and Chief Executive Officer
                                   of Southwest Royalties, Inc., the
                                   Managing General Partner of
                                   Southwest Royalties Institutional Income
Fund VIII-B, L.P.



<PAGE>
                    SECTION 302 CERTIFICATION                Exhibit 31.2


I, Mel G. Riggs, certify that:

1.   I  have  reviewed  this quarterly report on  Form  10-Q  of  Southwest
Royalties Institutional Income Fund VIII-B, L.P.

2.Based  on my knowledge, this report does not contain any untrue statement
  of  a  material fact or omit to state a material fact necessary  to  make
  the  statements  made,  in light of the circumstances  under  which  such
  statements  were made, not misleading with respect to the period  covered
  by this report;

3.Based  on  my  knowledge, the financial statements, and  other  financial
  information  included  in  this report, fairly present  in  all  material
  respects  the financial condition, results of operations and  cash  flows
  of the registrant as of, and for, the periods presented in this report;

4.The  registrant's other certifying officer(s) and I are  responsible  for
  establishing  and  maintaining disclosure  controls  and  procedures  (as
  defined   in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for   the
  registrant and have:

  a)Designed  such  disclosure  controls and  procedures,  or  caused  such
     disclosure   controls  and  procedures  to  be  designed   under   our
     supervision,  to  ensure  that material information  relating  to  the
     registrant, including its consolidated subsidiaries, is made known  to
     us  by others within those entities, particularly during the period in
     which this report is being prepared;

  b)Evaluated  the  effectiveness of the registrant's  disclosure  controls
     and  procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end
     of the period covered by this report based on such evaluation; and

  c)Disclosed  in  this  report  any change in  the  registrant's  internal
     control over financial reporting that occurred during the registrant's
     most recent fiscal quarter (the registrant's fourth fiscal quarter  in
     the  case  of  an annual report) that has materially affected,  or  is
     reasonably  likely  to  materially affect, the  registrant's  internal
     control over financial reporting; and

5.The  registrant's other certifying officer(s) and I have disclosed, based
  on  our  most  recent  evaluation  of  internal  control  over  financial
  reporting,  to  the  registrant's auditors and  the  audit  committee  of
  registrant's  board  of directors (or persons performing  the  equivalent
  functions):

  a)All  significant deficiencies and material weaknesses in the design  or
     operation   of   internal  control  over  financial  reporting   which
     reasonably  likely  to  adversely affect the registrant's  ability  to
     record, process, summarize and report financial information; and

  b)Any  fraud, whether or not material, that involves management or  other
     employees  who  have  a significant role in the registrant's  internal
     control over financial reporting.


Date:  November 13, 2006           /s/ Mel G. Riggs
                                   Mel G. Riggs
                                     Vice  President  and  Chief  Financial
Officer of
                                   Southwest Royalties, Inc., the
                                   Managing General Partner of
                                   Southwest Royalties Institutional Income
Fund VIII-B, L.P.







<PAGE>
                                                               Exhibit 32.1

               CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
                          CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C.  1350 and in connection with the accompanying  report
on  Form  10-Q for the period ended September 30, 2006 that is being  filed
concurrently with the Securities and Exchange Commission on the date hereof
(the  "Report"),  each of the undersigned officers of  Southwest  Royalties
Institutional  Income Fund VIII-B, L. P. (the "Company"), hereby  certifies
that:

     1.    The Report fully complies with the requirements of section 13(a)
     or 15(d) of the Securities Exchange Act of 1934; and

     2.   The  information contained in the Report fairly presents, in  all
          material  respects,  the  financial  condition  and  results   of
          operation of the Company.


                                   /s/ L. Paul Latham
                                   L. Paul Latham
                                   President and Chief Executive Officer
                                        of Southwest Royalties, Inc., the
                                        Managing General Partner of
                                         Southwest  Royalties Institutional
                                   Income Fund VIII-B, L.P.

                                   November 13, 2006


                                   /s/ Mel G. Riggs
                                   Mel G. Riggs
                                   Vice   President  and  Chief   Financial
                                   Officer of
                                        Southwest Royalties, Inc., the
                                        Managing General Partner of
                                         Southwest  Royalties Institutional
                                   Income Fund VIII-B, L.P.

                                   November 13, 2006

<PAGE>