G3 Exploration Regulatory News (G3E)

2nd February 2017

GREEN DRAGON GAS LTD.

('Green Dragon' or the 'Company')

Operations Update and 2017 Outlook

And Evaluation of Dual Listing in China

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 pleased to announce an operations update for the year ended 31 December 2016.

Operational highlights

· Total equity gas sales increased by 5.6% to 3.41 bcf (2015: 3.23 bcf)

· Gas sales from GDG operated wells on GSS increased by 34% to 1.88 bcf (2015: 1.41 bcf)

· GCZ ODP substantially complete - submission to the NDRC expected this quarter.

· Renewed Central Government support - GCZ, GSS, GSN and GGZ specifically identified by the Central Government as priority CBM projects within the 13th Five Year Plan

· GGZ exploration program successful

2017 Operational Outlook and Targets

· First Half 2017

o Attain ODP approval for GCZ together with CNPC

o Secure RMB denominated debt for continued development

o Redeem Nordic $88m Bond

o Conclude sale of downstream operations

o Execute CNOOC Agreements

· Second Half 2017

o Launch GSS LiFaBriC drilling programme to further increase sales volumes in 2018

o Complete and file GSS ODP plan together with CNOOC

o Commence initial gas sales from the GGZ block in Guizhou Province

o Conclude fourth development block in addition to GCZ, GSS, GGZ

o Continue exploration on GQY, GFC, GPX

Evaluation of Dual Listing in China & Financing Update

· The Board intends to evaluate the merits of a Dual Listing in China, alongside London, to deliver enhanced shareholder value as it pursues its growth plans

· The Group is in discussions with a range of Chinese financial institutions with regard to both re-financing its USD debt with RMB debt and additional growth funding

· The Board will come to a decision on the merits of a Dual Listing in the first half of 2017

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

"2016 has been a year of significant operational progress. In addition, we take huge comfort from the 13thFive year plan, issued by the Chinese Government late in 2016. As part of that plan, the Central Government has specifically identified our joint projects at GCZ, GSS, GSN and GGZ, where we partner with CNPC, CNOOC and PetroChina respectively, as priority CBM projects.

Not only is this explicit support invaluable as we move to ODP approval for GCZ and GSS but it has also made possible RMB debt financing with Chinese financial institutions seeking opportunities aligned with longer term government policy.

With this increased domestic interest, the Board has decided to evaluate the merits of a Dual Listing to potentially access the Chinese financial markets where the prospects in Chinese CBM energy investment have broader appeal and understanding. While we do not expect to issue any new shares, we hope this will help narrow the discount to our asset value and deliver increased value to all shareholders. The results and conclusion of the Board's evaluation of the Dual Listing will be presented to the Shareholders concurrently with the publication of the annual results.

Operationally, in 2016 we have made continued progress in increasing gas sales on GSS through the enhancement, modification and upgrade of our infrastructure. The compression enhancements made to the gathering system infrastructure have borne fruit during the year in terms of increased sales volumes from existing wells. These enhancements and modifications, together with further geologic analysis undertaken on GSS during 2016, will help to ensure that future LiFaBriC wells are completed and connected optimally to deliver gas for sale more rapidly.

With the ongoing support of the Central Government, increasing interest and access to capital domestically as well as increasing sales from our core assets, we are excited about 2017 and look forward to a year of growth.."

Upstream

Production and infrastructure

· Focus is maintained on infrastructure at GSS and recovering increased volumes of gas for sale from existing wells

· The compression project at GSS that commenced in 2016 continues with focus on rebalancing compression across the gathering system through the redeployment of existing compressors and the addition of new compressors

· Following the successful screw compressor pilot test undertaken in April 2016 a further 3 screw compressors have been added to the system (total 4 screw compressors servicing 9 wells) with additional screw compressors to be deployed in 2017

· Of the 47 compressors available at GSS, a total of 46 have been installed and are connected to the gathering system (including the 4 screw compressors)

· Successfully completed low cost re-drills of the lateral portion of 2 LiFaBriC wells realising commercial gas sales levels within90days

· Installed more than 40 gas dehydration vessels with automated liquid control valves to convert the existing gathering system to a 'dry-gas' system. This will reduce the level of water accumulation in the system to guard against freezing and will deliver dry gas to the IPF thereby improving the efficiency of IPF processing and the quality of gas delivered to customers

· Increase of 10 LiFaBriC wells connected to sales infrastructure at GSS giving a total of 101 out of 126 GDG-operated wells on line and producing gas for sale at year-end

· Well count summary (all areas) at 31 December 2016 is as follows:

· Gross production capacity across all licence areas increased by 9% to 11.22 bcf (2015: 10.31 bcf)

· End of year gross production capacity exit rate of 12.05 bcf per annum (2015: 12.12 bcf per annum)

· The end-of-year gross production capacity exit rate calculation and gross production capacity calculations have been impacted by a change in measurement methodology by CNOOC in respect of their operated well stock where flared gas is excluded from capacity statistics.

Exploration

· The GGZ block located in Guizhou province remains the focus of exploration activity ahead of reserve certification submission that is expected in 2017

· Well performance testing continued through 2016 as part of the reserve compilation process with 9 wells currently on production (H1 2016: 2 wells)

· Of the 9 wells on production 6 have reached commercial rates of production fulfilling the per-well commercial production requirement for reserve certification

The three further blocks - GFC, GPX and GQY - have been re-evaluated and work-plans to conclude exploration established for implementation in 2017

Downstream

· Total equity gas sales increased by 5.6% to 3.41 bcf (2015: 3.23 bcf)with PNG representing 88% of the equity gas sales mix (2015: 90%)

· Sales at GSS increased by 34% year-on-year to 1.88 bcf (2015: 1.41 bcf)

· Sales analysis by channel is as follows:

Addition subject to rounding*excludes CNOOC sales, subject to auditGlossary of terms

GDG Green Dragon GasCNOOC China National Offshore Oil CompanyCNPC China National Petroleum Corp.GSS Shizhuang South (production block)GCZ Chengzhuang (production block)GGZ Boatian-Quingshan (exploration block))PSC Production Sharing ContractODP Overall Development PlanCRR Chinese Reserve ReportMLR Ministry of Land ResourcesNDRC National Development and Reform CommissionPNG Pipeline Natural GasCNG Compressed Natural GasBCF Billion Cubic FeetUSD United States DollarRMB Chinese RenmimbiGBP Great Britain PoundsEquity gas Gas sourced from own production entitlement (excludes third party purchases)

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

 Instinctif PartnersDavid Simonson / George YeomansTel: +44 20 7457 2020

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 StockExchange (LSE: GDG). The Company has 549Bcf of 2P reserves and 2379Bcf of 3P reserves across eight production blocks covering over7,566km² of licence area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CUCBM (CNOOC, 0.833.HK), CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.