Acquisition

Green Dragon Gas Ltd
20 December 2006

                                                                20 December 2006

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

                 GDG ACQUIRES STAKE IN BEIJING GAS DISTRIBUTOR

Green Dragon Gas Ltd. (AIM: GDG), today announces the acquisition of a 49%
equity interest in Kesi Hengrun (Beijing) Technology Co. Ltd ('KHBT') for a
total consideration of US$26.0 million (US$1.1 million in cash and US$24.9
million in new GDG ordinary shares issued at a price of US$6.75 per share).

KHBT, a holding company, has as its only significant asset a 59% interest in
Beijing Huayou United Gas Development Co Ltd (BJHY); the balance of 41% is owned
by China National Petroleum Company (CNPC). The transaction has been approved by
the Chinese Ministry of Commerce (MOFCOM) and the Administration of Industry and
Commerce (AIC).

KHBT, since incorporation, has been focused on developing a gas distribution
network through its interest in BJHY within the Business Development Area (BDA)
in southeastern Beijing. BDA is a rapidly expanding planned industrial zone
within the city limits strategically located on the Beijing-Tianjin expressway.
BJHY presently owns 166 km of pipelines with an annual capacity of 4 billion m3
that is strategically fed by CNPC proprietary citigas stations being supplied by
the West-East pipeline network. Its customers include a gas-fired power plant,
industrial customers such as Mercedes Benz and approximately 7000 residential
clients. Gas prices in Beijing in 2006 were between US$0.23-0.24/m3 and expected
to rise 8% in 2007 to US$0.25-0.26/m3.

Under the terms of the KHBT equity purchase, GDG will have: a Board seat on KHBT
and BJHY; the right to appoint the KHBT General Manager; and pre-emption rights
over future equity sales in KHBT among others.

In the year ended 31 December 2005, BJHY made an EBITDA of US$1.3 million on
sales of US$7.6 million. These revenues were achieved from an estimated 2%
utilisation of 3 billion m3 of pipeline capacity; the capacity has now increased
to 4 billion m3 and the utilisation level is expected to increase significantly
over the coming years as the BDA continues its growth and transition to gas as
an energy source. As at 31 December 2005, BJHY had net assets of US$4.3 million
and KHBT had net assets of US$2.4 million.

The 3,685,167 new GDG shares being issued pursuant to this investment in KHBT
are expected to be admitted to AIM on 3 January 2007.

Company Chairman and CEO, Mr. Randeep S. Grewal commented, 'A remarkable year
for Green Dragon's continued growth concludes with this fitting acquisition. We
have strategically focused on downstream gas distribution network expansion
while the successful upstream drilling operations continue. The dual prong
growth strategy provides us with a vertically integrated business plan building
our balance sheet and P&L concurrently. BJHY is one of the main gas distributors
in one of China's biggest citigas consumption markets. A solid partner like CNPC
and its vast gas distribution network coupled with assured supply to Beijing
provides significant foundation for the business's continued expansion'.

'Green Dragon joins a very small group of vertically integrated gas companies in
China. In addition to our large gas resource in place, strong equity
partnerships with CNPC subsidiaries in both the upstream and downstream sectors
facilitate our strategically China exclusive and Coal Bed Methane focused gas
supplier business plan' Mr. Grewal concluded.

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

Randeep S. Grewal
Chairman and Chief Executive
Betty Cheung
Green Dragon Gas Ltd.
[phone]

Tim Thompson / Nick Melson
Buchanan Communications
020 7466 5000

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

Daniel Fox-Davies
Fox-Davies Capital Limited
020 7936 5200





                      This information is provided by RNS
            The company news service from the London Stock Exchange