The Potwar region of upper Indus Basin in Pakistan is well known for its complexities in drilling because of high pressure subsurface conditions at shallow depths and presence of loss circulation zones. Lignite mud system is applicable preferentially in such conditions because of its low cost, inhibitive properties rind tolerance to high mud weights. A study has been undertaken to evaluate the characteristic properties of lignite from Lakhra Coal mines, district Jamshoro, Sindh Province as drilling mud additive. The rheological properties, filtration loss and tolerance to high mud weight were investigated using API standard procedures. The results were positive. This paper presents the characteristic properties of lignite front Lakhra for use as drilling mud additive. The study has been curried out in Mud Engineering and Cementing laboratory of Petroleum .1.ngineering Department at NED University of Engineering and Technology. Karachi.