G3 Exploration Regulatory News (G3E)

11 August 2014

GREEN DRAGON GAS LTD

("Green Dragon" or the "Company")

 PetroChina Cooperation Agreement

Green Dragon Gas Ltd. (AIM:GDG), one of the largest independent companies involved in the production and sale of CBM gas in China, is pleased to announce that, further to the binding Memorandum of Understanding ("MOU") entered into with PetroChina Company Ltd. ("PetroChina") and announced in December 2013, Green Dragon has entered into a Cooperation Agreement (the "Cooperation Agreement") with China National Petroleum Corporation ("CNPC") in respect of the Chengzhuang block (the "GCZ Block"), a 67 square kilometre area included within the Shizhuang South ("GSS") Production Sharing Contract ("PSC") first entered into in January 2003. The Cooperation Agreement reaffirms Green Dragon's 47% interest in the GCZ Block and secures future cashflows from the 104 wells drilled on the GCZ block, which have been producing since 3 March 2010.

Under the terms of the Cooperation Agreement, which ends on 31 March 2033, CNPC and China United Coalbed Methane Corporation Ltd. ("CUCBM") will transfer their rights and obligations under the PSC relating to the GCZ Block to Petrochina. The participating interests of the parties in the GCZ Block will be PetroChina, 53% and Green Dragon, 47%. PetroChina will be the operator of the GCZ Block.

The parties have agreed that PetroChina shall, in accordance with the cost recovery mechanism of the PSC, recover in full all unrecovered exploration costs, development costs, operating costs and deemed interest from the effective date of the PSC, which have been audited, before Green Dragon recovers its unrecovered exploration costs and receives its allocation under the PSC. Gas production and sales from the GCZ Block commenced on 3 March 2010.

From the effective date of the GSS PSC to 31 December 2013 PetroChina incurred RMB 790 million of total costs , whilst the unrecovered balance stood at RMB 173 million of exploration and development costs on the GCZ Block for the same period.

The parties have agreed that they will seek to apply to the relevant ministry for approval not to prepare or submit an Overall Development Plan (ODP) with respect to the GCZ Block. Instead the parties intend to formulate expenditure and work programmes in accordance with operational progress, after having been approved by the joint management committee (as provided for within the GSS PSC), which will now be convened regularly in respect of the GCZ Block, and approved by CNPC.

All decisions of the joint management committee, on which Green Dragon is represented, will be made unanimously and the first meeting will be convened no later than 45 days from the date of execution of the Cooperation Agreement.

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

"Under the terms of the Cooperation Agreement we look forward to a twenty year partnership with PetroChina and CNPC within the GCZ Block. This agreement cements Green Dragon's ability to get its proportionate share of the cashflows from the GCZ Block following the return of the development investment which we expect to be in 2015. In conclusion, Green Dragon got carried on the entire development of the coal seam 3 while retaining the 47% direct equity interest. An outcome, we are quite pleased with following several years of negotiations. "

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

About Green Dragon Gas

Green Dragon is a focused upstream (Exploration & Production) company, concentrating on its core asset value proposition over eight blocks, two of which are producing. The Company's blocks are located within six Production Sharing Contracts across four Provinces: Shanxi, Anhui, Jiangxi and Guizhou.

Status update on Green Dragon blocks:

o 1,869 wells drilled across all blocks

o 1,580 wells across GSS Production Sharing Contract

o 289 wells were across the exploration blocks GFC,GQY GSN, GPX, GGZ

o Including a total of 78 LiFaBriC wells