The Tertiary System of Western Qaidam Basin has become the major yield area in recent years, where the hydrocarbon\|bearing stratigraphy is discovered in the Nanyi Mountain area with the higher production. According to the oil\|source correlation, the source derives from the Xiaoliang Mountain Sag in the Nanyi Mountain oilfield. The study on hydrocarbon source rocks indicates that the hydrocarbon source rocks of Xiaoliang Mountain Sag is mainly dark lime mudstone and mud limestone with a little of carbonates; the source rocks are primarily distributed in Lower Ganchiagou Formation (E²₃), Upper Ganchaigou Formation(N₁), Lower Youshashan Formaiton(N¹₂) and Upper Youshashan Formation(N²₂) characterized by low quantity of organic carbon, high quantity of chloroform bitumen A, and total hydrocarbon at the average of 100×10^-6above (peak value is more than 1 000×10^-6); the organic matter is domiantly type Ⅱ ranging from the immature to mature stages. The hydrocarbon source rocks in Upper Ganchaigou Formation (N₁) and Lower Youshashan Formation (N¹₂) have high abundance of organic matter and have the great potential to generate hydrocarbons.