Shale gas is abundant in the Paleozoic of the Yangtze Platform, and several high-yield shale gas fields have been built in the Upper Yangtze Platform, China. The Permian of the South Yellow Sea Basin (SYSB) in the Lower Yangtze area is considered a potential target for shale gas exploration; however, the fundamental geological conditions of shale gas have not been studied. Based on the first whole-cored scientific drilling borehole (CSDP-2) in the SYSB, detailed tests involving petrology, organic geochemistry, and reservoir physical properties were conducted to evaluate the shale gas potential of the Lower Permian. The Lower Permian is dominated by organic-rich siliceous, clay, and clay-mixed shales. The average total organic carbon content is 5.99%, and the organic matter is mainly type II1−II2, which has entered the high-over mature evolution stage. The pore types of organic-rich shales mainly include organic pores, dissolution pores, and intergranular pores, of which the meso-/macropores are well developed. The average porosity is 3.04%, and the total specific surface area and pore volume are 3.47 m2/g and 7.21×10−3 cm3/g, respectively. The average Langmuir volume obtained from the methane adsorption isotherms is 2.70 cm3/g, and methane is mainly adsorbed in the meso-/macropores. The lower Permian shales are rich in methane as indicated by gas logging results, with an average content of 7.3%, which can reach up to 65.9%. A comparison of the study area with typical shale gas fields shows that the Lower Permian is brittle and shallowly buried and has a high potential for shale gas exploration and low-cost development. The depression areas of the SYSB are overlain by thick Mesozoic–Cenozoic sediments, show higher organic matter maturity, and may have greater shale gas potential. The shale gas exploration breakthrough of the study area is of great significance to ensure the energy supply of economically developed areas on the east China.