Drilling Successes

Green Dragon Gas Ltd
25 October 2006



                     For Immediate Release 25 October 2006

                             GREEN DRAGON GAS LTD.
                       ('Green Dragon' or the 'Company')

                   GREEN DRAGON ANNOUNCES DRILLING SUCCESSES

Green Dragon Gas Ltd (AIM:GDG), the Chinese coal bed methane business, today
announces postive drilling results from its five blocks in central China,
including the successful spudding of coal bed methane ('CBM') production wells
and the drilling of two pinnate horizontal pilot wells.

Shizhuang South, Shanxi ('GSS') covers an area of 455 km(2), 2,640 BCF of gas in
place of which 48.5 BCF in P1 and 413.3 BCF in P2 reserves (Source: Scott
Pickford Competent Person's Report - August 2006). It is the most advanced of
the Company's blocks as it has been producing gas from pilot wells for five
years. The drilling programme started on 6 October 2006 with a spud in ceremony
of well GSS001 by contractor Shangdong Coalfield Geological Bureau ('SCGB'). The
target coal seam No. 3 was successfully drilled, confirming a 6.5m thickness and
the well has been completed. The second well, GSS002, has been spud in along
with the third well GSS003, spud with a second drilling rig which has been added
to further expand the production well drilling operations. Twenty five well
locations have been selected for drilling. The gas production from these wells
will be directed into the Company's existing gas gathering system and the Zayoan
compressor station which is owned and operated by the Company.

Under a farmout agreement signed by the Company with China United Coal Bed
Methane ('CUCBM') for a 67 km2 section of the GSS block, two pinnate horizontal
wells (DS01-1 and DS02-1) were successfully drilled by Orion Energy
International. Well DS01-1 was drilled into coal seam No. 3 for a total
displacement of 5,506 metres and has current gas production of 7,000 cubic
metres per day and water production of 20 cubic metres per day. Well DS02-1 was
drilled into coal seam No. 15 for a total displacement of 1,198 metres into the
coal seam and has water production of 12.5 cubic metres per day as is in the
dewatering stage. Both wells are pilot test wells drilled to evaluate pinnate
horizontal well cost-efficiency and performance. Two additional horizontal wells
are expected to be completed by the end of this year resulting in a four well
pilot programme. Under the farmout agreement, CUCBM is the operator on this
section and bears all drilling risk, while the Company retains a 50% optional
interest in the farmout.

The Overall Development Programme continues to be compiled with cooperation
between the Company's technical staff, CUCBM and PetroChina. This is a key
milestone towards commecialising the resource and is expected to be delivered to
the authorities for approval in the near future..

Shizhuang North, Shanxi ('GSN') covers an area of 375 km(2), 2,660 BCF of gas in
place of which 648.2 BCF in P3 reserves is contiguous to GSS with similar
geological conditions (Source: Scott Pickford Competent Person's Report - August
2006). Well GSN001 was spud in by drilling contractor Henan Yuzhong ('HYGPE') on
16 October 2006. Drilling operations are proceeding as expected and targeted
coal seam No. 3 is expected to be reached at a depth of 686 metres. The current
programme is for five pilot wells to be completed by the end of 2006 while an
additional ten locations have been prepared for the next phase of drilling
operations.

On 20 October 2006, the Company executed an agreement with CUCBM that will
further enhance the current drilling operations. Under the terms of this
agreement, CUCBM will drill wells on an agreed portion of the block over the
next two years as a subcontractor to the Company. While all initial drilling
costs and the associated capital risks will be bourne by CUCBM, all successful
wells and related reserves resulting from the process will be included into the
Company's Overall Development Programme and approved costs reimbursed through
the standard cost recovery agreement included within the terms of the Production
Sharing Contract.

Qinyuan, Shanxi ('GQY') covers an area of 3,665 km(2), 8,580 BCF of gas in place
and is the largest block by acreage (Source: Scott Pickford Competent Person's
Report - August 2006). Drilling operations are being conducted by Shanxi Coal
Geology Unit 114 ('SCG') and HYGPE. Well GQY001 was spud in by SCG on 26 July
2006 and coring completed to a depth of 1,100 meters. Coring results are
currently being compiled. Well GQY006 was spud in by HYGPE on 28 September 2006
and target coal seams No's 3, 15 and 16 were successfully drilled confirming a
combined thickness of 6m. The Company has also concluded the engineering works
on ten well locations and twenty exploratory well locations throughout the
block, in preparation for the next phase of drilling. Coring and drilling
results from the existing drilling programme will support and enhance the
current development plan for operations in 2007.

Fengcheng, Jianxi ('GFC') covers an area of 1,541 km(2), 1,566 BCF of gas in
place with 536 BCF in P2 reserves (Source: Scott Pickford Competent Person's
Report - August 2006). Drilling operations were started by contractor Dadi
Technology Development Corporation ('DADI') spudding in well GFC003 on 11 July
2006. The target coal seam was successfully drilled confirming a thickness of
3.7m and the well has been completed. Two additional coal seams were also
drilled with thicknesses of 1.15m and 1.9m, respectively. DADI encountered a
cavity in drilling well GFC010 and this has been abandoned temporarily until the
current drilling operation is concluded. Well GFC002 was spud in on 4 October
2006 and drilling operations are proceeding as expected. The Company has
completed the preparatory engneering works on 23 wells in the current drilling
programme to complement the two wells drilled last year to consolidate into a
central gathering system.

Panxie, Anhui ('GPX') covers an area of 584 km(2), 1,110 BCF of gas in place
(Source: Scott Pickford Competent Person's Report - August 2006) Drilling
operations were started by contractor SCGB by spudding in well GPX001 on 29
September 2006. The well successfully drilled target coal seam No. 13 and
additionally found seams No. 16 and No. 17 with total thicknesses confirmed of
6m. SCGB spud in a second well, GPX002, on 21 October 2006 and currently
drilling is progressing as expected. The Company has completed the preparatory
engineering works on 5 pilot wells to be completed by the current year end which
will form the basis of the drilling program for 2007.

Company Chairman and CEO, Mr Randeep S. Grewal, commented, 'This macro overview
demonstrates the ability of our China based management team to successfully
execute the first stages of our growth and development plan. Years of geological
and engineering studies, the hands on experience of our local technical staff
and the strong support from our partner, CUCBM, have been key ingredients to
advancing the Company's development programme since its admission to trading on
AIM in August 2006. In addition, the Company's strategic plan to be vertically
integrated is being diligently worked on by the business development division.
The Company has the gas resources and the capacity to be a significant gas
supplier in central China.'

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

Randeep Grewal
Chairman and Chief Executive, Green Dragon Gas Ltd.
[phone]

Tim Thompson/ Nick Melson
Buchanan Communications
0207 466 5000

Dr Azhic Basirov/ David Jones
Smith & Williamson Corporate Finance Limited
020 7131 4000


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