GDG Signs Drilling Contracts

Green Dragon Gas Ltd
18 September 2006



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

                     GREEN DRAGON SIGNS DRILLING CONTRACTS

Green Dragon Gas Ltd. (AIM:GDG), the Chinese Coal Bed Methane ('CBM') business
which successfully listed in August to become the largest Chinese company on
AIM, today announces an update on the development of several of its Chinese
blocks.

The Company executed an agreement with PetroChina Planning & Engineering Ltd
('CPPEI'), a wholly owned subsidiary of PetroChina (0857.HK/PTR.N), to conclude
the Company's Shizhuang South Block Overall Development Program ('ODP'). CPPEI
has extensive expertise on surface facilities including pipelines, storage and
transport and primarily executes such tasks for most of PetroChina's
developments.

This ODP is due to be submitted to the relevant authorities in Beijing later
this year and earmarked to be China's first CBM ODP with a foreign party. Upon
ODP approval, the block is expected to enter development and commerciality. The
ODP will focus on developing the area and gas resources around the Company's
current successful pilot program in Zaoyuan, Shanxi.

The Company also announced the signing of drilling contracts with Shandong Coal
Geology Bureau ('SCGB') and Henan Yuzhong Geological Prospecting Engineering
('HYGP') to drill vertical wells in four of the Company's five blocks - SCGB to
drill Shizhuang South and Panxie, and HYGP to drill Shizhuang North and Qinyuan.
The drilling contract signing and awards, held in Beijing last Friday, were
presided over by the management teams from the Company and partners China United
Coal Bed Methane ('CUCBM').

Mr. Randeep S. Grewal, Green Dragon's Chairman and CEO commented 'I am very
pleased with our team's wide scale execution on each of the blocks. As a
developer of a large gas resource in five blocks, we expect to have drilling
operations in each block accomplishing our objectives for this year. The
drilling of these pilot wells is to provide us with relevant subsurface data to
design the development plans into next year.

'The inclusion of PetroChina's Planning and Engineering subsidiary into our ODP
is an important milestone structurally for our blocks and the CBM industry at
large. Facility and pipeline designs for CBM commercial production are a little
different than natural gas so I am pleased to have China's most experienced team
working on our behalf to further ensure a successful development period in the
years to come. This ODP will establish the model to be used for our other blocks
over the next two years and its approval by the authorities marks the beginning
of a commercial development for a block.

'The continued focus on gas supply by the upstream producers and importantly the
downstream citigas distributors, eagerly looking for incremental supply, has
fueled much needed adrenaline into the industry. CBM is clearly poised to be the
logical alternative gas resource with Green Dragon at the forefront of its
commercial production. We look forward to working with our partners CUCBM and
the rest of the industry in developing this critical onshore resource.'

The Company is presenting at the UBS Alternative Energy Conference today in
HongKong to institutional investors and at the China Coal Academy conference in
Qingdao on 20th September, 2006 to the industry at large on CBM developement.

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

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

Tim Thompson/ Mark Edwards/ Nick Melson
Buchanan Communications
0207 466 5000

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

18 September 2006





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