16th February 2010

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					16th February 2010

                                     GREEN DRAGON GAS LTD

                               (“Green Dragon” or “the Company”)

                            Reserves Upgrade and Operations Update

Green Dragon, one of the largest independent companies involved in the production of CBM gas and
the distribution and sale of wholesale gas in China, is pleased to announce its’ 2009 year end gas
reserves and value estimate conducted by NSAI and to provide the following operations update.

Reserves Highlights:

      Total gas in place of 25.5 Tcf
      Net 1P reserves increase to 32.9 Bcf - increasing the 1P NPV 10 to US$168.2m
      Net 2P reserves increase to 261.3 Bcf - increasing the 2P NPV 10 to US$1.25bn
      Net 3P reserves increase to 2,333.1 Bcf - increasing the 3P NPV 10 to US$9.35bn
      Reserves & value increase based on:
       o Employment of SIS technology – increasing coal in-seam drilling efficiency
       o Improving gas pricing environment in China

Operational Highlights:

      Production:
       o Gas production was 131,750 mcf in the fourth quarter of 2009, representing an increase
             of 120% over the same period in 2008
       o Gross gas production expected to exceed 1 Bcf in 2010
      Drilling:
       o Five of the ten wells drilled in 2009 were drilled using proprietary ‘Dymaxion’ SIS
             technology. SIS drilling technology is being deployed in 3 blocks in 2010
       o 100 additional wells planned for 2010
      Distribution Infrastructure:
       o Footprint of pipeline and sales network now expanded beyond Beijing Development
             Area and now includes additional surrounding industrial districts on the outer perimeter
             of the 5th ring road in Beijing and one location in Shandong Province
       o Plans to add 100km of distribution pipeline in 2010 - bringing total to 321km by end
       o      27km of additional pipeline being laid in producing Shizhuang South Block (“GSS”) to
             expand gas sales in Henan, China’s most populated province
       o Access to 20 additional refuelling stations planned in 2010 in Henan region with
             proximity to gas producing block - GSS
      Sales:
           o Company’s CBM gas is being sold downstream at market prices of $13.82 per mcf
              through wholly owned CNG retail stations
           o Gas sales from midstream distribution stations targeted to be 6 Bcf annually
           o Gas sales in Beijing are expected to be 10 Bcf with growth in line with the market
     Financials:
           o Total discretionary growth capex targeted at US$250m over the next two years
           o Capex funding through:
                   Current cash position
                   Debt
                   Gas sales
                   PSC partner participation
                   ConocoPhillips option to farm-in for US$120m by the end of December 2010
                      and a resulting revised capex split in 2011 and beyond

       Two year development programme aimed at:
           o Gross gas production of 18 Bcf
           o Demand for gas in China expected to increase to 9.7 Tcf by 2020
                    Gas supply today is 4% of overall energy mix
           o Strong national and local government support for the development of CBM in China

Commenting, Mr. Randeep Grewal, Chairman and CEO of Green Dragon Gas, said:

“ Today’s reserve report reflects Green Dragon’s exceptionally strong asset position in China. Today
the Group is the one of the largest independent CBM companies in China, with a resource base of
over 25.5 Tcf of gas in place. We already have the drilling technology, distribution and sales
infrastructure in place which will allow us to fully exploit our strong asset position and dramatically
increase production and sales 18 fold over the medium term. The Company remains financially well
positioned with all the key foundations in place to achieve its ambitious growth plans”.
Reserves Report

Total gas in place of 25.5 Tcf, 1P reserves increased to 32.9 Bcf, 2P reserves increased to 261.3 Bcf
and 3P reserves increased to 2,333 Bcf. The estimates and evaluation of the reserves and resources
contained in this announcement were prepared by independent reserve engineers, Netherland
Sewell & Associates, Inc.

     PSC (Block)            Dec 2008                   Dec 2009 (Net* Bcf)             Dec 2009
                             (US$m)                                                     (US$m)
                            3P NPV 10            1P           2P          3P           3P NPV 10
    Shizhuang S              3,341.9            32.9         232.4      1,081.8         4,335.5
    Shizhuang N              2,958.1              -            -        1,023.7         4,014.6
      Qinyuan                   -                 -            -           -
     Fengcheng                929.5               -          28.9        227.7           1,000.6
    Panxie East                 -                 -            -           -
      Guizhou                   -                 -            -           -
      TOTAL                  7,229.5            32.9         261.3      2333.1           9,350.7

* The estimates shown above do not reflect the option held by ConocoPhillips to farm-in to the
Shizhuang South, Shizhuang North and Qinyuan blocks pursuant to the agreement announced in
August 2009.

This increase in reserves, and in particular the increase in proven reserves, is largely due to the
employment of the Company’s in seam SIS drilling technology over the past year. Green Dragon
drilled its first SIS well in the Qinyuan block commencing on November 20th 2009. This well
successfully completed with the horizontal well being drilled in-seam for a total distance of 1,330m.

The success of this well is a breakthrough for the Company. It proves the technology can be
deployed to the Company’s other blocks which are now piloting the technology.

The SIS technology has enabled Green Dragon to substantially increase the accuracy of its drilling
programme, allowing a far greater percentage of productive metres drilled in-seam successfully. Not
only does this technology make drilling far more efficient but also significantly increases the gas
production potential of individual wells. As an example, drilling a 600m vertical well may open a 6m
coal seam, whilst drilling a 1,500m SIS horizontal well could open 1,000m in seam; thus increasing
the productive drilled meters from 10% to 66%.

Green Dragon gained the proprietary SIS technology as part of the PACE acquisition made in May
2008 and intends to remain at the forefront of deploying the technology in China. In August 2009,
the Company also entered an agreement with ConocoPhillips that is funding a programme aimed at
proving that SIS wells can lead to a significant rise in gas recovery rates within the anthracite coals in
Operations Update


Gas production from Shizhuang South increased by 120% in 2009 over 2008 to 48 million cubic feet
per month. This block, which has been producing commercial gas since 2008, continues to improve
its production profile in-line with expectations. Gas produced is currently being flared and choked
ahead of the wells being connected to the Company’s distribution infrastructure in the second
quarter. This increase in production was as a result of additional wells drilled coming on stream
quicker than initially expected and the increase in the total in-seam metres drilled.

Drilling Activities

The Company drilled 10 additional wells in 2009, bringing the total number of wells drilled to 203.
The additional wells drilled were within the Shizhuang South and Qinyuan Blocks.

As a result of the introduction of the SIS drilled technology in 2009, drilling efficiency improved
significantly, with the percentage of metres drilled within the productive coal seams increasing from
10% in 2008 to 37% of the 14,794 metres drilled in total during 2009.

To date, the Company has drilled a distance of over 95 km. In 2010, that number is expected to
increase by up to 70km, through 100 additional wells. The capital expenditure estimated for this
drilling programme is approximately US$100m. Individual SIS wells are currently taking 29 days to


Through the Company’s 29% interest in Beijing Huayou, a gas distribution Company operating in the
Beijing Development Area, Green Dragon has access to a pipeline network covering 221 km. Over
the last year, the footprint of this network increased and now also includes locations in Shandong as
well as additional locations along the 5th ring road in Beijing.

Green Dragon also plans to add a further 27km to the existing pipeline network in the producing
Shizhuang South block, which will improve significantly our ability to target gas sales into China’s
most populated province, Henan.

In addition to the pipeline network, Green Dragon also has an interest in 2 CNG distribution stations,
both profitable and annually dividend paying. Gas sales from the two profitable distribution stations
are forecasted to be are 6 Bcf annually.

Sales and CBM Market

Unlike other gas markets in China, CBM is deregulated, allowing Green Dragon to sell gas at market
prices. The price being achieved through wholly owned CNG refuelling station is currently US$13.82
per mcf.

Sales through CNG retail stations are made through two Company owned stations and third party
owned stations. Green Dragon also provides third parties with CNG dispensers and currently has a
contract to provide Petrochina with 38, of which 14 have been delivered.
Green Dragon currently supplies gas to 20,000 taxis in Shakou and a further 13,000 in Jiyuan on a
monthly basis. The initiative, as mentioned above, to develop gas sales in the Henan region is
expecting to add access to a further 20 CNG retail stations. The internal cost for this is estimated at
US$1 million approximately per station not including the land costs which can vary.

In addition to Vehicle sales, Green Dragon also supplies gas to 26,076 residential customers.


Over the next two years, total discretionary growth capex is targeted to be in the region of
US$250m. This capex programme is aimed at achieving a substantial increase in upstream CBM gas
gross production to 18 Bcf annually and total group gas sales, including gross wholesale gas of 6 Bcf
in midstream and gross sales of 10 Bcf in downstream. This capex programme will be funded
through a combination of existing cash, gas sales, PSC partner participation, debt and the agreement
put in place with Conoco Phillips.

The market for gas in China remains extremely robust, with expectations of growth in the region of
approximately 10% per annum. Currently, gas represents only 4% of the total energy mix in China.

With this positive increase in reserves, proven technology, an established distribution network and a
strong discretionary targeted growth capex programme in place to grow production into an
expanding market, management considers Green Dragon to remain extremely well placed for the

The estimates in this announcement have been prepared in accordance with definitions and guidelines set forth
in the 2007 Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers.
The information in this announcement pertaining to Green Dragon’s China reserves has been reviewed by Mr.
Craig H. Adams, a Vice President of Netherland, Sewell & Associates, Inc. He is a registered Professional
Engineer in the State of Texas and is a member of the Society of Petroleum Engineers.

For further information on the Company and its activities, please refer to the website at or contact:

Stephen Hill / Betty Cheung: Green Dragon Gas                                          +852 3710 0168

Dr Azhic Basirov/ David Jones: Nominated Adviser & Broker /Smith &                   +44 20 7131 4000
Williamson Corporate Finance Limited

Tim Redfern: Broker / Evolution Securities                                           +44 20 7071 4300

Nick Morgan: Broker / GMP Securities Ltd                                             +44 20 7647 8455

James Henderson: Investor Relations / Pelham Bell Pottinger                          +44 20 7337 1500

1P            Proved reserves
2P            Proved plus probable reserves
3P            Proved plus probable plus possible reserves
Bcf           billion of cubic feet
CBM           Coal bed methane
CNG           compressed natural gas
Mcf           thousands of cubic feet
NPV 10        net present value calculated using a 10% discount rate
PSC           production sharing contract
Reserves      reserves are those quantities of hydrocarbons anticipated to be
              commercially recoverable by application of development projects to
              known accumulations from a given date forward under defined
SIS           surface-to-inseam
Tcf           trillion of cubic feet

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