26 January  2015

GREEN DRAGON GAS LTD

("Green Dragon" or the "Company")

Operations Update

Green Dragon Gas Ltd. (LSE: GDG), the leading independent gas producer with operations in China is pleased to announce an operations update for the six months ending 31 December 2014. Green Dragon is implementing a programme to deliver an imminent step change in production and cash generation, maximising value from its strategic locations in China's strong growth gas market.

Operational Highlights

·       H2 2014 gross production of 4.17 Bcf (H2 2013: 4.16 Bcf)

·       2014 gross gas production of 8.2Bcf  (2013: 8.2 Bcf)

·       10 LiFaBriC wells completed in 2014

·       Closer cooperation with partners CNOOC/CUCBM and CNPC/PetroChina

·       CNG realized gas sales price of US$18.6/mcf

2015 Operational Outlook

·       Gas prices stable and unaffected by oil price weakness

·       Year end exit production objective of 12bcf

·       Continued drilling of LiFaBriC wells   at the commercial GSS block

·       Drilling of exploration wells across all 8 blocks

·       CNOOC/CUCBM to cooperate to build significant infrastructure within GSS Block

·       GSS block pipeline and gas gathering capacity to increase to 53 bcf

·       Coal seam 15 within GSS and GCZ to be explored

Randeep S. Grewal, Chairman and Founder of Green Dragon, commented:

"2014 was a milestone year for Green Dragon. Following the execution of very constructive and lucrative agreements with all our partners in the first half, the latter part of the year was productively focused on our operations. The combined management teams of Green Dragon and our partners are working closely together and sharing extensive technical information to the benefit of all parties.

"The 10 LiFaBriC well drilling campaign was completed on time at GSS and is already showing positive results. This re-confirms our belief in the LiFaBriC completion method and its applicability to the Qinshui basin coal seams, and we look forward to commencing the initial phase of our busy 2015 drilling programme.

"At the same time, in accordance with our agreement, CNOOC/CUCBM continues to invest in the infrastructure needed to monetise the current and expected production from the additional circa one thousand wells which will be put online in due course.

"Furthermore, as expected, Chinese government policies towards gas utilization objectives and prices are unaffected by the drastic fall in crude prices. I am pleased to confirm that our realized gas prices remain stable, as forecasted, putting us in a very strong position for the year ahead. We remain confident that Green Dragon Gas will continue to deliver value to its shareholders through this turbulent global commodity price environment."

Operational performance summary

Upstream

Production

·       H2 2014 gross gas production of  4.17  Bcf/ 118.37m cubic metres, a  0.24% increase compared to H2 2013 (H2 2013:  4.16 Bcf / 117.97 m cubic metres)

-       GSS production operated by Green Dragon of  1.53 Bcf / 43.51m  cubic metres vs.  1.43 Bcf (40.51m cubic metres) in H2 2013

-       GSS production operated by CUCBM of 0 .55  Bcf/ 15.64 m cubic metres  vs. 0.57Bcf/16.25m cubic metres in H2 2013

-       GCZ production operated by Petrochina of  2.094  Bcf/ 59.22m  cubic metres vs  2.16 Bcf  / 61.20m cubic metres  in  H2 2013

·       2014 gross gas production of 8.2Bcf

·       Total number of wells as at the end of H2 2014:

-       1,938 wells drilled across all blocks

-    1,595 wells across GSS Production Block (inclusive of GCZ)

-    343 wells were across the exploration blocks Fengcheng ("GFC"), Qinyuan ("GQY"), Shizhuang North ("GSN"), Panxie East ("GPX") and Baotian Qingshan ("GGZ")

-       Of the 1,938 wells drilled across all blocks 87 are LiFaBriC, of which 26 are in production and connected to infrastructure

·       Workovers were performed on 24 producing wells to service downhole production equipment.

Drilling

·       10 LiFaBriC wells were completed in 2014, of which 2 wells connected to existing infrastructure, 4 wells are producing gas, and 6 wells are dewatering

GSS Infrastructure

·       Annual gross capacity of 10 Bcf through 2 gathering stations, Greka Zaoyuan IPF and CUCBM Guxian facility

·       CNOOC/CUCBM funded planned infrastructure:

-       2 gathering stations under construction with an expected 13 Bcf of gross capacity

-       3 gathering stations planned for construction with an expected 30 Bcf of gross capacity

-       construction of all 5 gas gathering stations expected to be completed in 2015

Downstream

·       H2 2014 piped Natural Gas (PNG) sales from GSS of 2.63 Bcf, a 22% increase compared to H2 2013 (H2 2013: 2.16 Bcf)

-       500 MMcf from GSS operated production

-       139 MMcf from GSS production operated by CUCBM

-       1.99 Bcf from GCZ production, operated by PetroChina

·       H2 2014 Compressed Natural Gas (CNG) sales of 324 MMcf (H2 2013: 444.46 MMcf), as follows:

-       industrial customer sales: 10.6 MMcf (H2 2013:156.42 MMcf);

-       retail station sales: 313.66 MMcf, an  8.89 % increase compared to H2 2013 (H2 2013: 288.04 MMcf)

·       Weighted average CNG price in Greka retail stations of US$ 18.6/mcf (4.09 Rmb/m3) , a 9.35% increase compared to US$17.01/Mcf (3.74 Rmb/m3) in H2 2013

Operations

·       Industrial CNG sales from GSS have recently resumed following the lifting of the government restrictions put in place during H2. During this period, we continued to service the needs of our customers using gas purchased from third parties

Health and Safety

·       The Company carried out strict safety inspections throughout its Upstream and Downstream operations, and has continued to maintain a 100% record in safety training and HSE compliance

·       In 2014, the company recorded 576,727 incident free man-hours

Enquiries:

For further information on the Company and its activities, please refer to the website at  www.greendragongas.comor contact: