Abstract: Mud shales have plenty of micro-fractures which are difficult to plug and seal. Mud filtrates infiltrate swiftly deep into the formation under the action of osmotic pressure, capillary force and differential chemical potential, causing the formation to become unstable. A micro emulsion has been developed. Measurement of the size distribution of the emulsion droplets showed that the micro emulsion was stable, and the droplet sizes remained stable during a certain period of time in laboratory experiment. The size of the emulsion droplet became slightly bigger after dilution. When the dilution factor reached 20, the size of the droplet did not change anymore. The micro emulsion also had good high temperature stability; it remained stable at 150℃. Diluted micro emulsion had median droplet size of about 30 nm, and was able to enter into shale formations. The droplets can coalesce to form droplets with bigger diameters at certain salinities. In micro emulsion containing 5% NaCl, droplets sized in nanometers disappeared. When the concentration of CaCl₂ in the micro emulsion exceeded 0.2%, the median droplet size was several nanometers. These enlarged droplets can be adsorbed inside pores of fractures in mud shale formations and stay there, becoming coalesced, thereby improving the plugging performance of the micro emulsion. Contact angle measurement showed that the micro emulsion remarkably changed the wettability of shales, altering the wettability of the surface of shale from hydrophilicity to some hydrophobicity. In surface tension measurement, addition of 2% of the micro emulsion reduced the surface tension to 31.4 mN/m, indicating that the micro emulsion had some inhibitive capacity. The micro emulsion developed had good compatibility with drilling fluid used and showed only slight effect on the rheology of the drilling fluid. It also helped improve the quality of mud cake and the filtration property of drilling fluid.