The Tarim basin is the largest and least explored inland basin in China. The areal extent of the basin reaches 560,000 km². The interior of the basin is mostly covered by the Takla Makan Desert, which is about 330,000 km² in areal extent. The basin has become the object of special attention since China set aside first- and third-round onshore bidding blocks in the Tarim basin for foreign oil firms to explore.

The Tarim basin is a polyhistory superimposed basin that has experienced seven evolutionary stages: (1) Sinian-Cambrian-Ordovician aulacogen stage, (2) Silurian-Devonian intracratonic depression stage, (3) Carboniferous marginal sea stage, (4) Permian rift basin stage, (5) Triassic-Jurassic foreland basin stage, (6) Cretaceous-Paleogene Neo-Tethys bay stage, and (7) Neogene-Pleistocene foreland and inland basin stage. Both the basin's Paleozoic marine platform sequences and the Mesozoic-Cenozoic terrestrial fills are believed to contain substantial volumes of hydrocarbons.

After recent years of exploration, nine oil and gas fields have been proven and 23 discoveries have been made in the Tabei, Tazhong, and Southwest areas. Kekeya, Lunnan, Sangtamu, Jiefangqudong, Donghetang, and Tazhong 4 oil fields have been put into production. Output of crude oil was 2.6 million t (metric tons) (52,000 BOPD) in 1995. The production will increase to 5 million t (100,000 BOPD) in 1997. Giant oil and gas traps probably will be discovered in the Tarim basin. The prospect is promising.