G3 Exploration Regulatory News (G3E)

20 September 2017

GREEN DRAGON GAS LTD.

('Green Dragon', 'GDG' or the 'Company')

CNOOC Accelerates Green Dragon's Asset Development via Supplementary Agreements

Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent companies involved in the production and sale of coal bed methane (CBM) gas in China, is very pleased to announce that it has finalised a Memorandum of Understanding on five Production Sharing Contracts (PSC) and two Supplementary Agreements with China United Coalbed Methane Corporation (CUCBM), a subsidiary of China National Offshore Oil Corporation (CNOOC), for Shizhuang South (GSS) and Shizhuang North (GSN) Blocks.

After eight years of administration, these agreements confirm GDG and CUCBM are firmly aligned and committed to maximising the value within the PSCs, with the prioritisation of gas sales being progressed forthwith.

The conclusion of these agreements resolves any uncertainty related to the historic drilling on the GSS and GSN Blocks with GDG's interests in the 1,139 wells on the GSS Block and 188 wells on the GSN Block drilled by CUCBM, at a confirmed direct investment of US$459.89 million, now agreed.

Highlights

· GSS Block, GDG reverts to its 70% interest in all 1,139 carried wells, while concurrently retaining its interest and operatorship in the 200 non-carried wells

· Completed independent audit for all the five PSC's on CUCBM's work programme and wells for 2007-2014 period resulting in US$941.01 million of cost recovery booked into the Joint Account. CUCBM investment of US$623.88 million and GDG investment of US$317.13 million, including:

n CUCBM confirmed direct investment of US$475.03 million and GDG US$229.58 million

n Deemed Interest for CUCBM of US$107.56 million and GDG of US$68.72 million, which will continue to accrue at 9% compound interest and booked at year end until all cost is recovered

n Overhead amount for CUCBM is US$41.29 million and GDG US$18.84 million

· CUCBM to invest US$100 million in GSN PSC by 30 March 2019, GDG will be fully carried for CUCBM to earn its additional 10% interest in the PSC resulting in an equal 50-50 participation

Mr. Randeep S. Grewal, Founder & Chairman of Green Dragon Gas commented:

"We are very pleased with the amicable conclusion of these Supplementary Agreements. This material milestone concludes eight years of discussions and commences a committed close cooperation between the parties to unlock the lucrative monetisation of the GSS and GSN Blocks. The joint cooperation will now fully focus on gas sales and achieving returns from the combined investment made by CUCBM and GDG. It will be the first time in eight years that the parties can focus on gas sales in the field rather than the administration of the PSC's. We are pleased to have a similar close cooperation with CUCBM as we do with CNPC on the GCZ Block.

"Furthermore, we expect to focus on concluding the GSS Zaoyuan ODP prior to year-end with CNOOC for which we have the Project Code from the government already in place. Upon such conclusion, the Zaoyuan ODP will embark on the commercial gas sales in Area 3 and Area 4. We expect to collectively conclude an additional ODP for Area 5 in 2018, of which the process is well under way.

"GDG continues to conclude material objectives for the year. With these agreements finalised, the balance sheet ambiguity has been eliminated, as we prioritise monetisation across our vast acreage. We are committed to keeping the market informed and will provide an update on progress in the near term."

Memorandum of Understanding

1. GDG's standby cost of US$11.61 million incurred from 1 January 2010 to 30 June 2013 in five Blocks, namely Panxie East (GPX), Fengcheng (GFC), Shizhuang South (GSS), Shizhuang North (GSN) and Qinyuan (GQY), booked into the Joint Account

2. The overhead of GSN, GQY, GPX, and GFC prior to 14 April 2016 shall follow the regulation of the PSC. The overhead rate for GSS shall be 10% from 1 January 2007 to 31 December 2013 and 5% from 1 January 2014 to 31 December 2016

3. GDG has an option to increase its participating interest in the GSS Block from 60% to 70% by investing two installments of US$6.5 million, one prior to 31 December 2017, and the second prior to 31 December 2018. Increasing interest in the Block will encompass CUCBM's legacy wells, which were drilled prior to 31 July 2014, following cost recovery

GSS Supplementary Agreement

1. The GSS PSC area of 388 km2 is demarcated into five sections with varying interests between parties, as follows:

i) Area 1: 149 km2 - GDG to operate CS3 and CS15 exploration area, 43 CUCBM wells to be transferred to GDG operatorship. GDG to bring 20 wells to production in Area 1 at a cost of US$670,000 prior to 14 April 2019

ii) Area 2: 60 km2 - GDG to operate CS 15 wells and CUCBM has exclusivity in CS3

iii) Area 3: 20 km2 - GDG to operate, while CUCBM to continue to operate the legacy wells in commercial production and included within Zaoyuan ODP

iv) Area 4: 30 km2 - GDG to operate, in commercial production and included within Zaoyuan ODP

v) Area 5: 128 km2 - CUCBM to operate and complete infrastructure for gas sales, complete ODP, and Joint Operating Team on all non-legacy wells. GDG has the option to connect its wells to CUCBM built infrastructure

2. Legacy wells investments to be recovered by both parties on an accelerated basis. 90% of gross profit to be distributed to the cost recovery instead of 70% as per PSC. Remaining 10% to be distributed between the participating interest of 60% GDG and 40% CUCBM

3. Parties to establish a Joint Gas Sales Agreement with cash disbursements to each party within ten days of monthly revenue receipts

GSN Supplementary Agreement

1. GSN PSC area of 324.9 km2 (50 km2 entrusted to a State Demonstration Project)

2. The exploration period extended to 14 April 2019. CUCBM, as operator, is due to bring 10 wells to production at an exploration expenditure of approximately US$2.4 million

3. Parties to establish a Joint Gas Sales Agreement with cash disbursements to each party within ten days of monthly revenue receipts

* Exchange rate used in conversion of RMB-USD is 6.50.

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

FTI Consulting

Edward Westropp / Kim Camilleri / Elizabeth Burnham / Ntobeko Chidavaenzi

Tel: +44 20 3727 1000

About Green Dragon Gas

Green Dragon Gas is a leading independent gas producer with operations in China and is listed on the main market of the London Stock Exchange (LSE: GDG). The Company has 559 Bcf of 2P reserves and 2,386 Bcf of 3P reserves across eight production blocks covering over 7,566 km² of license area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CUCBM (CNOOC), CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.