Abstract: The favourable gas-generating condition is the indispensable precondition of biogenic gas formation.The size and composition of source rock as well as the type and abundance of organic matter control the gas-generating ability and intensity of methane bacteria.Yahu area is located in the north of Qaidam Basin.The Well Yashen 1 shows that the thickness of the Upper Tertiary gas source rock is(about) 1 600 meters.The average value of total organic carbon of the dark mudstone is 0.36% and obviously contains tricyclic terpane and pregnane.The kerogen is humic mixed organic type and the source rocks form in weak preducing to weak oxidizing environments with salt water.The R_o value is between 0.4% and 0.5%,showing in the early stage of thermal evolution.Lithologies of mudstone,pelitic siltstone,siltstone and a little sandstone exist in the cross section.The loose fine grain sediments have relatively larger porosity and is in eogenetic stage.These are favorable for bacteria's living and breeding and indicate that the Upper Tertiary dark mudstone in this region have conditions of biogenic gas formation.The biogenic gas exploration in Yahu area have good future.