Recently the marine controlled-source electromagnetics (CSEM) is applied commercially to the problem of detecting the presence of hydrocarbon filled layers in the sub-sea formations, and a number of companies are now providing this service.In this paper, we return to fundamentals of electromagnetic (EM) method. Transmission frequencies used in the marine CSEM are typically between 0.01 and 10Hz. As such low frequencies, the behavior of EM field in subsurface is governed by the diffusion equation rather than the wave equation. The EM field radiated by an electric source can be considered to consist of two different modes : a TM mode component and a TE mode component. An analysis of both the TE and TM mode holds the potential to determine if the increase in the measured EM field is caused by the presence of hydrocarbon saturated reservoir or other resistive bodies in the subsurface. The physics of CSEM in shallow water is also examined by using simple 1-D models. This would show that the concept of air interaction, rather than air wave, is appropriate because of complex coupling between signals interacting with seafloor and air.We then apply the inversion analysis to frequency-domain CSEM sounding data acquired in the offshore of Australia, investigate how the marine CSEM could reconstruct resistivity image of gas bearing formation. The survey area comprises two towed lines, covering discovered gas field. The transmitter antenna is a horizontal electric dipole of length about 250m, towing along profiles at an average of 30m above the receivers. For the inversion process, we use a starting model with homogeneous background of 1.0 ohm-m below the sea bottom. No further a priori information is utilized during the inversion. The inversion reaches acceptable data misfit, produced images of the resistive target which can be interpreted gas bearing formation.