The late-stage development of gas reservoirs often encounters the paradox of significant remaining formation pressure coupled with low wellhead pressure, which indicates small drainage volume, low gas production rate, and low recovery efficiency, reducing gas supply and economic benefit. Owing to the lack of experimental research, the reasons behind this contradiction between gas production and producing pressure differential are unclear. The key factors affecting the development outcomes are reservoir permeability and initial water saturation, while the evaluation parameters include gas and water production rates, reservoir pressure, and recovery efficiency. Based on the characteristic properties of typical gas fields, physical simulation experiments of constant-rate gas production are conducted on spliced long cores with average permeabilities of 2.300, 0.486, and 0.046 millidarcy (mD). Furthermore, leveraging the multi-point embedded pressure measurement technique, the pressure drawdown propagations and the macroscopic and microscopic characteristics of connate water production at the initial water saturations of 0%, 20%, 40%, and 55% are investigated. By connate water, we mean water that occurs naturally within the pores of rock. Pre- and post-experiment core weighing and nuclear magnetic resonance testing are performed. In addition to the mercury injection tests, the results indicate that during gas reservoir depletion, connate water primarily stems from macropores and mesopores, with micropores and nanopores capturing water through capillary imbibition. Moreover, lower permeability and higher initial water saturation lead to greater pressure gradients, increased connate water production, and reduced recovery efficiency. Reservoirs with permeabilities below 0.1 mD are significantly affected by connate water, exhibiting steep pressure profiles. Owing to connate water, the near-wellbore pressure quickly decreases, while distant reservoir pressure barely decreases, implying a limited drainage area. To enhance the recovery efficiency, measures like infill drilling and reservoir stimulation are recommended for low-permeability gas reservoirs.