Drilling Update

Green Dragon Gas Ltd
29 January 2007



29 January 2007

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

                   2006 SUCCESSFUL DRILLING PROGRAM OVERVIEW


Green Dragon Gas Ltd (AIM:GDG), the Chinese coal bed methane ('CBM') business,
today provided an overview of the 2006 drilling programme which will be
concluded by the Chinese New Year in mid-February 2007. 47 wells were drilled in
record time with all of the wells successfully drilling through the target coal
seams in each of the Company's five blocks. The Company and its partner, CUCBM,
had a total of 26 rigs working concurrently at the peak of the drilling
operations. The Company did not encounter any material surprises during these
pilot phases. The drilling programme by the Company and its farmout to CUCBM is
summarized below:


BLOCK       WELLS DRILLED  WELLS DRILLED  COAL SEAM    COAL SEAM   COAL SEAM 
                2006          TOTAL          DEPTH       NUMBER    THICKNESS
-----------   -------        -------      ---------     --------   ---------
SHIZHUANG S     26              41        550-600 m        3          6.5m
----------                                      
SHIZHUANG N     4               4        950 -1000 m       3           5m
----------                                                        
QINYUAN         6               6         900-950 m   3,8,9,15,16      7m
----------                                                           
FENGCHENG       6               8         750-800 m        B4         3.5m
----------                                                         
PANXIE EAST     5               7         600-700 m     13,16,17      6.5m
----------   -------         -------     ----------     ---------   ---------
TOTAL WELLS    47               69  


As the 2006 down-hole drilling programme concludes, the Company will focus its
efforts on completing the wells over the next quarter. Data accumulated during
these drilling operations is being analysed and will further enhance the 2007
drilling plan being concluded concurrently. The Company is designing the optimum
extraction methodology of its gas resources (16 TCF as set out the Competent
Person's Reoprt by Scott Pickford) to suit its long term strategic business plan.

The Company's overall drilling programme is being approached from a
manufacturing perspective, whereby the Company intends to convert knowledge
being acquired from the 2006-2007 programmes into fine-tuning future drilling
and completion techniques so as to make the gas supply predictable for decades
to come. Extensive CBM experience in the US, Canada and Australia has proven
that the probability of approaching CBM drilling as a predictable manufacturing
cycle as long as the specific coal seam characteristics are analysed during the
pilot programmes in the coal seams.

The Overall Development Program ('ODP') for Green Dragon's most advanced block,
Shizhuang South, is to be submitted to the pertinent authorities by the end of
this quarter. This first ODP, being compiled by the Company, CUCBM and CPPEI (a
PetroChina subsidiary), is the first ODP in China for CBM purposes. The ODP
approval will allow the Company's partners to obtain authorisation to pay for
their 40% working interest of development expenses and furthermore confirm the
commerciality of the block.

Company Chairman and CEO, Mr. Randeep S. Grewal, commented,

'This has been a year of growth and success for the Company. Following almost an
eight year long tenure taken up by planning, evaluating, studying and other
pertinent logistics, it is rewarding to be in the field executing the plan
successfully. The Company's achievements in a short period, ramping up and
operating 14 rigs over five blocks is demonstrative of the viability and reality
of our business plan.

'We plan to conclude similar field evaluations during 2007 and are targeting
2008 and beyond as our steady state drilling and gas supply era where we
envision a compounding of our supply chain. Conservative estimates by the
International Energy Agency indicate 6% of China's exponentially growing energy
demand being gas at 100 billion cubic meters a year by 2010. Green Dragon, the
only international energy company headquartered and managed in China, is ideally
poised and adequately resourced to be a key domestic supplier.'

Mr. Grewal added, 'The Company's strategic objective is to be a vertically
integrated gas supplier which encompasses a focus on drilling primarily vertical
wells that provide long term consistent supply enabling a reliable distribution
system.

'We continue to demonstrate that the Company has the assets, hands on experience
and a strategic business plan being executed by a proven management team. All
this is enhanced by a seasoned China experienced Board that has a clear vision
on our growth.'

The Company will be a presenter at the UBS Greater China Conference in Shanghai
on Tuesday, 30 January 2007.


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

Randeep S. Grewal                              Tim Thompson / Nick Melson
Chairman & CEO                                 Investor Relations
Green Dragon Gas                               Buchanan Communications
[phone]                                   [phone]

Dr Azhic Basirov/ David Jones                  Daniel Fox-Davies
Nominated Adviser & Broker                     Broker
Smith & Williamson Corporate Finance Ltd       Fox-Davies Capital Ltd
[phone]                               [phone]




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