Drilling Update

21 Jan 2009 12:13



21 January 2009

GREEN DRAGON GAS LTD.

("Green Dragon" or the "Company")

DAILY GAS PRODUCTION EXCEEDS ONE MILLION CUBIC FEET

Green Dragon Gas Ltd (AIM: GDG), the Chinese coal bed methane ("CBM") business, today announces an update on its continued success in developing its large coal bed methane resource across its six blocks in conjunction with its joint-venture partner, CUCBM.

Shizhuang South (GSS), the Company's most advanced gas production block, continues to increase as the de-watering wells convert to gas. The production at the Zayoun station has exceeded 33,000 cubic meters or 1,165,890 CF per day and continues to rise as the water table is reduced and casing pressures in the wells are reduced through production.

The Surface-to-In-Seam (SIS) wells drilled on the GSS block have proved successful within months of commencing production. A total of 2,880 meters was drilled in the coal seam utilizing Mitchell Energy proprietary technology, with whom the Company has a joint-venture. The first well GSS008 turned to gas production in excess of 8,000 cubic meters or 282,000 CF per day. The water table was reduced to 55 meters above the coal seam within 15 days of commencing production. The second well GSS031 is successfully de-watering with a demonstrative consistent reduction in the water table to 66 meters above the coal seam at present, alongside an increase in the casing head pressures. Gas production is expected once the water table is at the coal seam which is forecasted for the month end.

Randeep Grewal, Chairman & CEO commented:

"The SIS wells represent significant progress for the Company. The success of our GSS wells gives us the confidence to pursue and expand our development plans for the GSS block providing for significantly more horizontal wells than originally planned. The SIS wells enable greater gas drainage at a faster rate, with less surface footprint and related infrastructure. Although it is still early on the production curve, our decade long experience with coal seams allows us to appreciate the significant benefit of the SIS technology. With the application of the same proprietary technology, we are repeating in China the Australian Queensland success."

The information contained in this announcement has been reviewed by Elton Dong, Vice General Manager Production, Bachelor of Science at Xi'an Petroleum Institute

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

Randeep S. Grewal / Betty Cheung, 

Green Dragon Gas +852 3710 0168

Dr Azhic Basirov / David Jones, 

Nomad & Broker, Smith &Williamson +44 20 7131 4000

Tim Redfern, 

Broker, Evolution Securities +44 20 7071 4300

Tim Thompson / Christian Goodbody, 

Investor Relations, Buchanan +44 20 7466 5000