Conventional drilling technology restricts drilling efficiency and is unfavorable to protect oil and gas formation in low pressure and low permeability reservoir. Underbalanced drilling and horizontal drilling were analyzed and applied in Daniudi gas field. The paper introduced the underbalanced drilling technology about the process overview, advantages and the application in horizontal well of Daniudi gas field. It was showed that underbalanced drilling technology can provide timely discovery and effective protection of oil and gas formation, improvement of drilling efficiency and evaluation on oil and field formation with low pressure and low permeability. The problems and technical difficulties in application were also put forward.