Commercial accumulations of natural gas in China have been generated by marine carbonates in Proterozoic and Palaeozoic cratonic basins, and by lacustrine shales and coal measures in Mesozoic-Cenozoic continental basins. These accumulations occur in reservoir rocks of various types. The Chinese natural gas industry has developed rapidly over the past two decades, and proved reserves of gas have increased accordingly. To date, 138 gasfields and 110 gasfields with oil-rims have been found in China.

Based on its geological and geochemical characteristics, natural gas can be divided into three principal types: (i) biogenic (bacterial and biodegraded) gas; (ii) wet associated gas, sourced from either sapropelic or humic organic matter; and (iii) dry thermal gas, likewise sourced from sapropelic or humic OM.

Each type of gas has its own characteristics in terms of generation, migration, accumulation and distribution. Bacterial gas is concentrated in Quaternary strata (for example, in the Qaidam Basin of NW China); biodegraded gas occurs in shallow strata in the eastern oil provinces, often in association with tar mats. Associated gas occurs mainly in Mesozoic-Cenozoic continental basins, whereas dry thermal gas is generally confined to Proterozoic and Palaeozoic cratonic basins, especially in West China. Proterozoic and Palaeozoic gas resources make up about one half of the Chinese total, and are set to become a major exploration target in the future.