G3 Exploration Regulatory News (G3E)

27 February 2017

GREEN DRAGON GAS LTD.

("Green Dragon" or the "Company")

11th Year of Audited Reserves Growth

Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent companies involved in the production and sale of Coal Bed Methane (CBM) gas in China, is pleased to announce an increase in its 1P, 2P and 3P estimated reserves as at 31 December 2016. The estimates of reserves have been provided by independent reserve engineers Netherland Sewell and Associates Inc. (NSAI).

Highlights:

· 11th consecutive increase in both 1P and 2P reserve volumes

· Total OGIIP increase of 6% to 27.1 Tcf (2015: 25.6 Tcf)

· Net 1P reserves increase of 6% to 184 Bcf (2015: 173 Bcf)

· Net 2P reserves increase of 2% to 559 Bcf (2015: 549 Bcf)

· Net 3P reserves increase of 0.3% to 2,386 Bcf (2015: 2,379Bcf)

· Reserve migration includes first-time booking of 2P and 3P reserve volumes on Guizhou (GGZ) development asset

· Reduction in forecast capex of 0.2% and 32% for the development of 2P and 3P respectively

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

"I am pleased to announce the results of the 2016 reserves evaluation which represents the 11th consecutive increase in both 1P and 2P reserve volumes since coming to market in 2006. With GCZ and GSS in commercial production, Green Dragon continues to de-risk its project pipeline and in accordance to our objectives, I am particularly pleased to see initial reserve volumes being booked on the GGZ development asset in 2016. This builds on the first time bookings seen in respect of Coal Seam 15 on the GSS and GCZ blocks in 2015 and reaffirms the Company's focus on the continued development of our significant portfolio of assets.

With a focus on increasing sales volumes the Company has continued to innovate and re-examine aspects of how we drill and connect our wells. In 2016 we modified and enhanced our LiFaBriC drilling and completion methodology to improve gas recovery from existing wells. This in turn has led to anticipated capex and opex efficiencies in the further development of our acreage and has yielded enhanced NPV10 valuations in 2016. The 1P, 2P, 3P values of $1.3 billion, $4.3 billion and $16.2 billion respectively is demonstrative of these achievements.

Our plan to re-finance the USD denominated debt with the RMB debt is on schedule with the two terms sheets on hand. We are confident of aligning our revenue and debt currency in the near future to eliminate the currency volatility. Our current discussions envision early repayment of the Nordic Bond and funding of this year's capex.

The continued development and production innovation by our people underscores our commitment to Green Dragon's production present and development future."

Reserves Report Overview

Green Dragon Gas has total Original Gas In Place of 27.1 Tcf across all its blocks. The estimates and evaluation of the reserves and resources contained in this announcement were prepared by independent reserve engineers NSAI.

The report includes all 2,037 wells operated by Green Dragon, CNOOC and PetroChina across all blocks in which the Company has varying equity interests.

Prices at year end used in the reserves evaluation were USD $11.8/Mcf at the production block, inclusive of Government subsidies.

NPV10 has increased year over year as a result of:

· Lower total well count required to develop the acreage based on improved well performance

· Lower operating cost as greater volumes are expected to be recovered due to well and completion enhancements

While there has been some devaluation of the RMB to USD exchange rate in the period this has been more than compensated by the expected operational efficiencies. As a Company operating in China, and functioning in an RMB environment, the currency devaluation compared to the USD has limited operational effect on the Company.

Guizhou - first time reserve volumes

Reserve volumes reported at 31 December 2016 include first-time booking of 2P and 3P reserve volumes on the GGZ development asset located in Guizhou Province. The migration of resources to reserves reflects the development work undertaken during the year where nine wells are now on production with six of those wells having reached commercial production levels. Guizhou is an important asset to the company and an exciting prospect as it located in a market that is characterised by higher end user gas prices.

Guizhou Province is located in Southern China and currently sources the majority of its gas needs by pipeline from other provinces. As such, prices in Guizhou attract a transportation premium to encourage the delivery of gas to the province. It is expected that gas sourced and produced directly in Guizhou will also benefit from this premium as the premium is a factor in determining city-gate end user pricing.

Reported reserves and resources (with comparatives) are as follows:

Contingent resources

The 2016 reserve update also includes contingent resources in respect of the GSS and GCZ production blocks that reflect the anticipated extension of the associated PSCs.

*totals may not add due to rounding

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 Gas's China reserves have been reviewed by Hassan Sindhu, the Company's petroleum engineer who holds a Bachelor of Science degree from the China University of Petroleum.

Main NSAI assumptions behind the PV10:

1. Applicable well-head gas price (before subsidies) of US$10.19/Mcf (2017), increasing to US$12.38/Mcf (2021), and escalated 3% p.a. thereafter

2. Operating costs relating to direct lease and field level costs - US$1,200 per well per month and US$0.054/Mcf of gas produced (no corporate G&A included), and escalated 2% p.a. from 2017

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

Instinctif Partners

David Simonson / George Yeomans

Tel: +44 20 7457 2020

About Green Dragon Gas

Green Dragon Gas is a leading independent gas producer with operations in China and is listed on the main market of the London StockExchange (LSE: GDG). The Company has 559 Bcf of 2P reserves and 2,386 Bcf of 3P reserves across eight production blocks covering over 7,566km² of licence area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CUCBM (CNOOC), CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.

Glossary of terms

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