Operations Update

RNS Number : 8387S

Green Dragon Gas Ltd

28 November 2011

 



28 November 2011

GREEN DRAGON GAS LTD

("Green Dragon Gas" or "the Company")

Operations Update - Quarterly production increases 227%

Green Dragon Gas (AIM:GDG), one of the largest independent companies involved in the production of CBM gas and the distribution and sale of wholesale gas in China, is pleased to announce that its Q3 2011 total production was 406 MMcf, a 227% year-on-year increase on Q3 2010.  Production came entirely from the Shizhuang South (GSS) block, where Greka Drilling Limited's (AIM: GDL) LiFaBriC enhancement of its horizontal SIS methodology applied to line faulted brittle coals continues to increase production rates.  The Company remains on track to achieve its previously-stated annualised production rate target of 18 Bcf following a discretionary expenditure programme of US$250m.

Construction work has commenced on the GSS Integrated Production Facility (GSS-IPF) upgrade project, which includes upgrading the CNG compression capacity to 4 Bcf annually and the power generating capacity to 10MW (an additional 6MW).  Progress of the upgrade project to date is in accordance with plan and broadly on schedule.  The project is expected to be substantially completed by year end.

In addition to the timely upgrade to the GSS-IPF, the connection to the West-East pipeline is progressing concurrently.  The pipeline has a specified capacity of 6 Bcf annually.  The connection is expected to be substantially completed by year end enabling sales to PetroChina Huabei to commence in January 2012.

Randeep Grewal, Chairman and Chief Executive of Green Dragon Gas, commented:

"This is an exciting time for the Company.  We are experiencing exponential growth in every segment of the business, from upstream gas production, to mid-stream power generation and compression capability, to downstream gas distribution and CNG dispenser manufacturing capacity.

We are most excited about gas production from our LiFaBriC wells.  Several of these wells have exceeded our production expectations by 30% and are sustaining their production rates without any decline.  Our longest producing well has produced 338,880 Mcf over the last 43 months while maintaining a consistent production rate.

As planned, the significant increase in gas production coincides with the development of our infrastructure which will enable us to expand sales in 2012.  Barring any weather-related impact in this quarter, we expect to complete our GSS-IPF upgrade project broadly on time, enabling a significant gas handling capacity enhancement.  We expect the current capacity upgrades to provide for our power needs through most of next year while the enhanced compression capacity will probably be further increased.

Finally, Greka Drilling's enhanced LiFaBriC drilling technology is expected to permit faster deployment enabling us to meet our ambitious drilling objectives and annualised gas production target of 18 Bcf."

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

Stephen Hill Green Dragon Gas	[phone]
Dr Azhic Basirov / David Jones Smith & Williamson - Nomad & Broker	[phone]
Matthew Tyler / Neil Elliot / Adam James Evolution Securities - Broker	[phone]
Paul Connolly / John Dwyer / Steve Baldwin Macquarie Capital (Europe) - Broker	[phone]
James Henderson / Phillip Dennis Pelham Bell Pottinger - Investor Relations	[phone]
Robyn Joseph Kreab Gavin Anderson - Public Relations	[phone]

Note

MMcf means millions of cubic feet; Bcf means billions of cubic feet; MW means megawatt.

 

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