Wellbore instability and formation damage are the two major problems encountered by the petroleum industry. It is commonly accepted that formation damage is mainly caused by fluid-rock interaction due to the change in pore fluid chemistry which is caused by invading mud filtrate. Invasion of mud filtrate can be reduced by forming a tight filter cake on the wellbore wall. A tight filter cake can also provide support to the wellbore wall and prevent wellbore collapse. Therefore, the most effective option for solving wellbore instability and formation damage problems is to design a drilling mud that is compatible with formations in relation to both fluid-rock interaction and mud caking characteristics. This paper considers a number of mud systems with novel features and investigates their potential use in drilling and completion of tight gas formations in Central Australia, which are highly susceptible to formation damage. Among the four (4) muds investigated, ester based mud has been found to be the most effective in reducing formation damage by producing a tight filter cake on the wellbore wall.