Qaidam basin is a composite sedimentary basin developed on typical continental crust. It comprises a Jurassic foreland basin and a Cenozoic extensional basin. The geologic history of the Cenozoic Qaidam basin can be divided into two megastages on the basis of stratigraphy and structure. The first megastage, from latest Cretaceous to Oligocene, consisted of two periods of rifting due to upwelling of the hot upper mantle. This is demonstrated by two tectono-sequences formed by the rifting, the synrifting magmatic thermal activity, and the control of protobasin development by syndepositional faults. The second megastage comprises three tectono-sequences that developed in the Miocene and Pliocene and was a period of structural inversion that consisted of compressive downwarping and reverse faulting. This tectonic inversion may be ascribed to the long-distance propagation of compressive stress caused by the collisions of the Indian and Eurasian plates.
The thick sequence of primary oil source rocks was deposited in the major rifted depression and the restricted drainage graben of the rifted protobasin. During the tectonic inversion megastage they were subject to deep burial and prolonged heating. A major and a minor oil-generating basin have developed. The tectonic inversion processes produced several structural features that may contain potential hydrocarbon reservoirs and traps.