Marine seismic reflection data collected from offshore southwestern Taiwan show that prominent seismic bottom simulating reflectors (BSRs) are presented that indicate the existence of gas hydrate in the seafloor sediment with free gas zone underneath. It is of great interest to estimate the energy resource potential of the gas hydrate in this region. This study intends to derive accurate velocity values and performed amplitude versus offset analysis techniques to estimate the gas hydrate and free gas saturations in the substrata where gas hydrate present. The saturation estimates are extremely sensitive to the input velocity values, therefore, accurate velocity determination is crucial for correct reservoir characterization. In order to obtain good velocity values, we apply pre-stack depth migration method to analyze large-offset seismic reflection data where prominent BSRs are observed through the use of iterative migration velocity analysis (residual moveout method). The resultant interval velocity model shows large lateral velocity variations in the hydrate layer and low velocity zones associated with free gas at the location of structural traps. Velocity structures derived from pre-stack depth migration show that the hydrate-bearing sediments generally have velocity ranges from 1750 to 2000 m/s, with most values around 1900 m/s. Low velocity zones observed beneath the gas hydrate bearing sediments clearly indicate the presence of free gas below. For the case of gas-saturated sediment below the methane hydrate layer, Poisson's ratio and P-wave velocity of the gas-saturated sediment should be lower than the methane hydrate layer producing Class-3 AVO response. All the seismic characters described above suggest that a gas hydrate layer exists together with a free gas layer below it along strong BSRs in the area offshore southwestern Taiwan, and the saturation of gas hydrate could reach 30% where velocity anomalies are high. In study areas where no well data are available and lithologic heterogeneities are poorly understood, implementing a seismic-based technique like the one presented here can provide valuable pre-drill information for site selection and for planning future characterization studies of gas hydrate-bearing sediments.