G3 Exploration Regulatory News (G3E)

8 November 2012

GREEN DRAGON GAS LTD

("Green Dragon" or "the Company")

Operations Update

Gas Production Rate Rises 16%, Annual Sales Capacity Built to 16 Bcf

Green Dragon Gas Ltd. (AIM: GDG), 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 an operations update to 31 October 2012.

Upstream

·; Proven LiFaBriC methodology for the Company's production block at Shizhuang South ("GSS") in Shanxi province continues to perform well and in line with previously announced targets and results. Up to and including 31 October, the Company has 49 LiFaBriC wells at GSS, representing a 145% increase on the number a year earlier and a 96% increase on the number at 30 June 2012. Across the other exploration blocks Green Dragon now has 9 LiFaBriC wells taking the total number of LiFaBriC wells across all blocks to 58, an increase of 123% on the number a year earlier. The recently accepted LiFaBriC wells are in various stages of being brought into production.

·; Exit annualized production of 1.952 BCFPY (151,000 cubic meters/day) at the 31 October 2012 compares with an exit annualized rate at the end of June 2012 of 1.668 BCFPY (129,457 cubic meters/day), a 16% increase.

·; Casing pressures in the most recently accepted wells continue to build and we target year end exit annualized production of approximately 2.5 BCFPY (200,000 cubic meters/day).

Midstream

·; Trial gas distribution commenced through our self built, piped natural gas ("PNG") pipeline on 4 October 2012. The 9.4 km pipeline, built and owned by the Company, connects GDG's existing integrated production facility ("IPF") to the Petro China West-East Gas Pipeline. The initial designed annual operating capacity of the Company's pipeline is 6.42 BCFPY (500,000 cubic meters/day). This can be increased to 12.88 BCFPY (1 million cubic meters/day) from the initial operating capacity to its maximum allowable.

·; 6 leased trucks and trailers were added for the distribution of gas production. This is in addition to the existing Company-owned fleet of 5 trucks and 10 trailers.

Downstream

·; PNG pipeline sales from the IPF in Shanxi to the West-East Gas Pipeline continue to be tested. Average daily sales through the pipeline to 31 October 2012 were 2 MMcf (58,621 cubic meters). Green Dragon continues to test sales through the pipeline.

·; 8 fully operational retail CNG stations are expected by the end of the year. These stations will provide annual gas distribution capacity of 2 BCFPY (58.4 million cubic meters).

·; Additional 20 retail CNG stations received all the required permits and, as per plan, will be launched concurrently with the upstream gas production increases. These additional stations will add 5.2 BCFPY (146 million cubic meters) in annual gas sales capacity.

·; Daily sales at the CNG retail station network totaled 3.88 MMcf (110,000 cubic meters/day) at 31 October 2012, a 60% increase from 30 June 2012.

·; 10 MW Caterpillar power station is fully commissioned and can act as a peak load power plant, on demand. The power station uses a maximum of 0.8 BCFPY (21.9 million cubic meters).

·; Year-to-date gas sales volume at BHY (Beijing Huayou) increased to 9.64 Bcf (273.2 million cubic meters) from 9.35 Bcf (265.1 million cubic meters) for the same period in 2011

Technology

·; Technology division has 9 registered design and 4 patents covering dispensers, compressors and software.

·; A further 5 patents have been applied for in the period to 31October 2012.

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

"These are exciting times. It is truly rewarding to see over 15 years of hard work come to bear fruit. The many years of diligent infrastructure planning, concurrent with the difficult exploration years, has started to show its returns.

Our IPF has three available sales channels: CNG, PNG and Power. These multiple sales channels provide maximum flexibility to the Company to capitalise on the very lucrative gas demand in China without a dependency on any single channel.

Importantly, in advance of the key period of expected production growth, we have executed a plan capable of delivering cash to the bottom line through multiple gas sales channels with a capacity that exceeds our production target of 18 BCFPY, through diligence and design."

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

Note

Bcf means billions of cubic feet; BCFPY means billions of cubic feet per year; MMcf means millions of cubic feet.