G3 Exploration Regulatory News (G3E)

12 May 2014

GREEN DRAGON GAS LTD

("Green Dragon Gas" or the "Company")

Reserves Update

Significant 113% increase in 1P reserves to 126 Bcf with a net present value of US$898m

Net present value of 3P reserves of US$16.1bn, a 27% increase

Green Dragon Gas, one of the largest independent companies involved in the production and sale of CBM gas in China, is pleased to announce an increase in its estimated reserve values as at 31 December 2013, as provided by independent reserve engineers Netherland, Sewell & Associates, Inc ("NSAI").

Reserves Highlights

· Total Original Gas In Place of 25.2 Tcf on six blocks

· Net 1P reserves increase 113% to 126 Bcf (2012: 59 Bcf) - 1P NPV 10 increase to US$898m (2012: US$324m)

· Net 2P reserves increase 22% to 382 Bcf (2012: 314 Bcf) - 2P NPV 10 increase to US$2.81bn (2012: US$1.82bn)

· Net 3P reserves decrease 5% to 2,382 Bcf (2012: 2,509 Bcf) - 3P NPV 10 increase to US$16.12bn (2012: US$12.68bn)

The increase in audited reserve numbers and resulting NPV, incorporates the 1300 wells approximately drilled by the Company's partners across the acreage. Drilled wells not in commercial gas production as of 2013 year-end, were not included by NSAI in their 1P and 2P categories. As the wells de-water and commence commercial gas production, the related reserves will migrate into the 1P and 2P category respectively. As announced in October 2013, the Company estimates its total reserves (including such wells) to be 300 Bcf in 1P and 600 Bcf in 2P which it expects to be realised as the required infrastructure is built over the next fifteen months. As announced on 2 April, the Company's partner CUCBM expects to spend up to US$250m in completing this objective.

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

"The Company is going through a transformational growth trajectory and this reserve audit values the paradigm shift at a static point, 31 December, 2013. With an equity interest in over 1800 wells which are in varying stages of commerciality, the reserve migration towards 1P will continue. The material transactions with CNOOC, CUCBM, PetroChina, CNPC and resulting beneficial economic benefits to Green Dragon from over US$1 billion of deployed capex have been included by the independent reserve engineers when concluding the net present values in this audit of the forecasted revenues.

We de-risked our large asset base by developing the LiFaBriC completion methodology in March 2008. The first such well, GSS008, just crossed its sixth anniversary of continuous gas production cumulating 717MMcf through 31 March 2014. This well's long term stable production is complemented by over fifty additional such wells within the GSS block.

This year end reserve report acknowledges the superior LiFaBriC economics and returns from this completion method and are accordingly reflected in the net present values of the vast reserve base we control. Our commitment to voluntarily subject ourselves to this stringent independent audit by NSAI annually, complies with the corporate governance standards we pride ourselves in maintaining. Green Dragon has a track record of providing such transparency since 2006, the year we listed on AIM.

We look forward to continuing our field successes and maintaining the seven year track record of reserves progression".

Reserves Report Overview

Green Dragon Gas had total Original Gas In Place of 25.2 Tcf on all blocks. The estimates and evaluation of the reserves and resources contained in this announcement were prepared by independent reserve engineers, NSAI.

Reserves Report Summary

Summary of Reserves Valuation

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

The estimates in this announcement have been prepared in accordance with definitions and guidelines set forth in the 2007 Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers. The information in this announcement pertaining to Green Dragon's China reserves (other than the Company's own 1P and 2P estimates) has been reviewed by Mr. Nathan C. Shahan, a Vice President and Petroleum Engineer of Netherland, Sewell & Associates, Inc. Mr Shahan is a registered Professional Engineer in the State of Texas. The Company's own 1P and 2P estimates of 300Bcf and 600 Bcf respectively have been reviewed by Hassan Sindhu, the Company's Petroleum engineer with a Bachelor of Science degree from China University of Petroleum and Elton Dong, the Company's Chief Engineer and Vice General Manager, Bachelor of Science at Xi'an Petroleum Institute.

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