The accretionary wedge in the incipient arc-continent collisional zone offshore southwestern Taiwan is rich in gas hydrates as inferred from reflection seismic data and the geochemical analyses of shallow sediments. In this study, 2D and 3D seismic data were used to investigate the role of structural factors including mud diapirism on the formation of gas hydrates and associated free gas in the Quaternary Lower Fangliao Basin, a semi-enclosed slope basin situated on the upper accretionary wedge. Albeit limited drilling information on lithostratigraphy and petroleum potential in the area together with seismic reflection data show that mud diapirs have influenced the formation of bottom-simulating reflectors (BSRs) and the distribution of gas hydrates and free gas. On reflection seismic profiles, five seismic facies were observed and are characterised by: stratified parallel reflections; contorted reflections; semi-parallel, high-amplitude reflections; oblique, continuous high-amplitude reflections; and generally transparent reflections. These seismic facies were respectively interpreted as hemipelagic sediments, mass transport deposits (MTDs), sandstone-rich turbidites, overbank deposits and mud diapirs. The gas hydrate stability zone (GHSZ) is characterized by (i) high amplitude reflections with an analogous phase to that of seafloor, possibly indicating potential porous sandstone-rich turbidite reservoirs; (ii) BSRs showing polarity reversal relative to seafloor, suggesting higher impedance gas hydrates overlying lower impedance intervals with free gas; (iii) blanking reflections in fault zones, interpreted as gas-bearing fluid conduits; (iv) strong reflections on the flanks of mud diapirs (e.g. flank drags) and above buried mud diapirs, demonstrating the presence of gas hydrates; (v) high amplitude reflections dragging on diapiric flanks with reversed phase to that of seafloor, indicating free gas -charged zones abutting mud diapirs; and (vi) the presence of focused advection and diffusion flow through mud diapirs and faults, which is interpreted to control the migration of thermogenic gas. Based on the distribution of seismic amplitude characteristics and reflection strength with respect to depth of the BSRs, hydrocarbon prospects can be divided into gas-hydrate compartments above BSRs, free gas compartments above BSRs, and free gas compartments below BSRs. From a combination of geobody extraction and Monte Carlo simulation, the prospects appear to hold about 2048 Bcf (billion cubic feet) of total gas volume over a study area of 60 km2. These observations provide first-order estimates of methane resources in the Lower Fangliao Basin offshore southwestern Taiwan.