G3 Exploration Regulatory News (G3E)

8th March 2011

GREEN DRAGON GAS LTD

("Green Dragon" or "the Company")

Reserves Upgrade

Green Dragon, 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 increase in its audited reserve numbers and value estimate, as provided by independent reserve engineers Netherland Sewell & Associates, Inc (NSAI).

Reserves Highlights:

·; Total original gas in place of 25.5 Tcf on all blocks

·; Net 3P reserves increase 11% to 2.6 Tcf (2009: 2.3 Tcf) - 3P NPV 10 increase to US$12.3bn

·; Net 2P reserves increase 4% to 273 Bcf (2009: 261 Bcf) - 2P NPV 10 increase to US$1.5bn

·; Net 1P reserves increase 24% to 41 Bcf (2009: 33 Bcf) - 1P NPV 10 increase to US$250m

·; Reserves & value increase driven by the roll out of the proven SIS methodology

Randeep Grewal, CEO and Founder of Green Dragon Gas, commented:

"This further substantial increase in reserves in 2010 is a reflection of the Company now having reached the point at which it is able to roll out production wells having proved the SIS drilling methodology works as an effective and commercial method of extracting CBM gas from Chinese coal seams at our Shizhuang South (GSS) CBM block.

The US$250m discretionary capex plan will see us drill in excess of 100 production wells on GSS. This underpins our expected rapid growth in production to the annualized exit production rate of 18 Bcf, an almost eighteen fold increase on current volumes. We are producing CBM into a market that has exceptional demand for gas and where achievable well head prices today range between US$6 and US$7 per Mcf."

Reserves Report

Overview

Green Dragon Gas has total original gas in place volumes of 25.5 Tcf on all blocks. The estimates and evaluation of the reserves and resources contained in this announcement were prepared by independent reserve engineers, NSAI. Whilst the Company is not required by the London Stock Exchange to conduct this update, this independent review is provided to shareholders for the purposes of transparency.

This increase in reserves is largely based on the deployment of the Company's SIS drilling methodology. The development of this methodology has now reached the point at which it is a proven method of commercially extracting CBM gas from the particular coal seams found within China and can be rolled out to increase production. With the development phase of this methodology complete, the drilling of individual production wells is expected to take substantially less time.

The SIS methodology enables the drilling of horizontal wells through the complex geology found within China's coal seams, greatly increasing both drilling and production efficiency.

Block Reserves

As outlined by the table above, the clear majority of the Company's increased reserves are located in the GSS block, as it has been to date and will continue to be the focus of the Company's drilling and production in the near term.

The main focus of activities in 2011 and 2012 will remain on the GSS Block, where Green Dragon intends to drill in excess of 100 production wells this year. In 2012, the intention is to accelerate the drilling programme further. The GSS block is where the significant uplift in production to 18 Bcf is expected, following the capex program of US$250m. GSS is currently producing at annualized rate of over 1 Bcf.

SIS wells drilled typically take 120 days to dewater and start producing gas post completion. The average production per well is expected to be approximately 300 Mcfpd.

The estimated production uplift over the next 20 months will be primarily sold though the Company's chain of vehicle fuel stations based in and around Henan province. The achievable price for gas sold through these stations ranges between US$15 and US$16 per Mcf. Henan is one of China's most populous provinces, with approximately 100 million people.

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 has been reviewed by Mr. Nathan C. Shahan, Petroleum Engineer and Mr. John G Hattner, a Senior Vice President of Netherland, Sewell & Associates, Inc. Mr Shahan is a registered Professional Engineer and Mr Hattner is a Professional Geologist, both in the State of Texas.

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

For further information please contact:

Definitions