Abstract: Xihu Sag is a giant depression basin with coal beds of Pinghu Formation as its main hydrocarbon source rocks. The depositional environment of Pinghu Formation was stable, broad and it is a coastal-low-land wetland which was densely covered by shallow lakes and ponds. The coal beds of Pinghu Formation were characterized by excessive, thin, scattering, extensive and even distribution. The extensively presence of coal beds indicates vast hydrocarbon potential in Xihu Sag.