The Labuan Basin flanking the eastern margin of the Kerguelen Plateau is the largest sedimentary basin in the region. It is about 1000 km long, 250 km wide and contains 3 to 5 km of sediment. Structural style and sedimentary fill of the basin are highly variable. The nature of the crust underlying the Labuan Basin and the age of its sedimentary fill are very poorly constrained. Its basement has never been sampled and most of the evidence comes from comparisons to the adjacent Kerguelen Plateau.

Plate tectonic reconstructions of the Southern Ocean show that prior to the onset of the fast spreading between Australia and Antarctica in the Eocene, the Labuan Basin reconstructs against the Diamantina Zone. Pre-Eocene reconstructions using satellite gravity imagery suggest a possible structural similarity between these regions. Large basement ridges in the outer part of the Diamantina Zone and in the eastern Labuan Basin appear to form one continuous province.

The Labuan Basin is floored by a highly faulted and heterogeneous crust, 7 to 8 km thick. Interpretation of the seismic and magnetic data has allowed a subdivision the basin into 3 structurally different domains:

• Western Labuan dominated by SW facing extensional style faults.
• Eastern Labuan characterised by large dome-shaped basement highs lacking magnetic signature and a very deep linear trough (9s TWT) in the east.
• Southern Labuan with the smooth basement largely unaffected by faulting and uninterrupted sedimentary sequences.

The Labuan Basin is floored by a highly faulted and heterogeneous crust, 7 to 8 km thick. Interpretation of the seismic and magnetic data has allowed a subdivision the basin into 3 structurally different domains:

• Western Labuan dominated by SW facing extensional style faults.
• Eastern Labuan characterised by large dome-shaped basement highs lacking magnetic signature and a very deep linear trough (9s TWT) in the east.
• Southern Labuan with the smooth basement largely unaffected by faulting and uninterrupted sedimentary sequences.

The origin of the crust in the Labuan Basin is likely to be heterogenic. The Western domain is likely to represent extended and downfaulted magmatic crust of the Kerguelen Plateau. Large amagnetic bodies in the eastern domain may have formed as peridotite intrusions, whereas smooth basement of the Southern Labuan may represent oceanic crust of Valanginian age trapped on the Antarctic plate. Metamorphic and granitic rocks dredged from a basement high in the in the northern part of the Labuan Basin and on one of the Southern Kerguelen outcrops may indicate the possible presence of continental fragments within the Labuan Basin crust.

There are no direct or indirect indicators of hydrocarbons known from the deep water (> 4 km) Labuan Basin and its petroleum prospectivity is speculative. However, one positive indicator has been noted on seismic data: a bottom-simulating reflector that may indicate the presence of gas hydrates. If present, the hydrates could be of biogenic, thermogenic or mixed origin. A likely possible source rock could be Late Cretaceous marine shales. Basal and near-basal Late Cretaceous sandstones and younger turbidites are possible reservoir facies. These potential reservoirs would be predominantly in the west of the basin close to the Kerguelen Plateau.