G3 Exploration Regulatory News (G3E)

31 August 2012

GREEN DRAGON GAS LTD

("Green Dragon" or "the Company")

Operational Highlights - GSS production drilling increases 74%; total GSS gas production increases 31%; Sales at Retail Stations increases 58%

Interim Results to be announced on 5 September 2012

Green Dragon Gas, 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 that sales at its existing gas refueling stations increased 58% to 151.1 MMCF YoY, for the 6 months to 30 June 2012. The ability to price Green Dragon's upstream gas at retail outlets validates the vertically integrated business model of the Company. The Company intends to announce its interim results for the 6 months ended 30 June 2012 on 5 September 2012.

OPERATIONAL HIGHLIGHTS

Upstream - Gas Production:

§ Total gas production at the GSS Production Block was 832.4 MMcf in the first 6 months of 2012 a 31% increase year-on-year (635.2 MMcf in H1 2011)

§ 34 additional wells drilled across all 6 blocks in H1 2012

§ 34,805 meters drilled at the GSS Production Block in H1 2012 (9,452 meters in H1 2011)

§ 15,325 meters were drilled in the exploration blocks meeting the minimum Capex requirements under all the 6 PSCs (Production Sharing Contracts)

§ 50,131 total meters drilled in H1 2012, a 74% increase on H1 2011

§ 8,789 in-seam meters drilled in H1 2012, an 11% increase on H1 2011

§ 10 MW Power plant facility with Caterpillar engines completed and on-line

Midstream Wholesale Gas:

§ Gas sales volume through the distribution stations in ZPH (Zhengzhou Petro-China Hengran) and APH (Anhui Petro-China Hengran) increased 1.0% from 1.38 in H1 2011 to 1.39 Bcf in H1 2012

§ 9.4 km pipeline installed and completed to PetroChina Huabei from the GSS Production Block.

§ Downstream Sales of Gas: Gas sales volume at BHY (Beijing Huayou) decreased to 6.3 Bcf in H1 2012 from 6.57 Bcf in H1 2011 representing a 4% decrease over the same period last year due to a large BHY customer temporarily closing a power facility for an upgrade which is now back on line

§ In Beijing, BHY added an additional 12km of pipeline in H1 2012, bringing the total to 321km

§ Sales volume through the Company's retail stations increased from 95.8 MMcf in H1 2011 to 151.1 MMcf in H1 2012, an increase of 58% over the period

§ Industrial customers sales volume through Greka Gas Distribution increased from 166.5 MMcf in H1 2011 to 177.0 MMcf in H1 2012, an increase of 6% year-on-year

§ 3 additional retail stations are nearing completion; planning consents for a further 11 are approved and 9 have received partial applications and approvals

Technology and Manufacturing:

§ 2 well-head compressors were added onto GSS production wells, bringing the total to 11

§ 5 additional SCADA systems were installed to the wells in GSS during the first half of 2012 bringing the total to 17, with 19 under construction

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

"The first half of this year was spent on materially increasing the drilling activity within the GSS Production Block and related planned infra-structure enhancements. The building blocks continue to fall into place for us to achieve our 18 Bcf production target at the end of our capex program from this block in southern Shanxi province. This half year witnessed the finalization of the installation of the 10 MW Caterpillar Power Plant and the pipeline completion from the GSS production facility to the PetroChina Huabei facility connecting onto the West East Pipeline infrastructure.

The Company is focused on moving GSS gas production through the Integrated Production Facility and on to our wholly owned retail stations. This is a vital part of demonstrating our vertically integrated model, and proving our ability to sell our in-house produced gas at market prices which continue to hold at US$16.2 per Mcf (RMB 3.55 per cubic meter).

In my view, our ability to meet our corporate targets and to monetize our production is within reach. It is worth noting that the target of 18 Bcf can be achieved from a little over 200 LiFaBriC wells and hence this is an achievable ask. We will continue to surround GSS with infra-structure enhancements and retail outlets to monetize the production growth in a timely fashion.

In Beijing, our jointly controlled entity Beijing Huayou saw a revenue decline due to a large customer closing a power facility for an upgrade. We are already seeing a return of that customer back to historical volumes and expect BHY to continue to grow revenues year-on-year."

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

Note

Mcf means thousands of cubic feet; MMcf means millions of cubic feet; Bcf means billions of cubic feet.