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Grounding  has licensed Epic Games’ Unreal Engine 3 for its upcoming game, “Project Draco”.

“Because this is Grounding’s first high-definition game, we looked at many technology options and picked Unreal Engine 3 as the best solution,” said Yukio Futatsugi, director at Grounding. “We began development in September 2010 when Microsoft first announced the title. While our team size is only 15 people and we had merely one year from the start of the project, the productive tools and efficient processes of Unreal Engine 3 meant we could come up with a high-quality playable demo in a very short time.”

Futatsugi added, “While none of our team had experience with the Unreal Engine before, the devoted support of Epic Games Japan ensured a very smooth development process. We feel like there’s an invisible teammate named ‘Unreal’ sitting with us. With crunch time coming up, it’s reassuring to have such a dependable partner on our side.”

“Unreal Engine 3 is usually seen as a solution for a big team working on a large-budget title, especially in Japan,” said Taka Kawasaki, territory manager of Epic Games Japan. “‘Project Draco’ provides a great example of how smaller studios can still fully enjoy the power of Unreal Engine 3. It has been especially impressive to see Grounding harness the capability of Unreal Kismet, our visual scripting system, to design complex, intertwined flight paths for playable dragons and enemies in three-dimensional space. Mr. Futatsugi has always delivered cool games with very unique settings and gameplay design, such as ‘Panzer Dragoon’ and ‘Phantom Dust,’ and I can’t wait to see the new world he brings to life with Unreal Engine 3.”

Kinect’s Project Draco details have been revealed via Famitsu and it is supposedly an on-rail shooter. Here is a brief translation courtesy of a Neogaf member. You can check out more screenshots of the game here, and we have to say it really does look good.

You can control dragons, duh! And you can also level them up unlocking new abilities for them as you play the game. It is set 150-200 years in the future, where survivors of a catastrophe tame dragons and use it as transport and of course weapons of war.

There are 150 different skills that you can get by leveling up your dragon. You can feed them food which unlocks new abilities. The dragon moves by itself, since it’s a rail shooter but that was a design choice according to the developers.

The game will release in 2012 for XBLA and is in development for a year; it is expected to be the best Kinect game, quality wise. Tell us what you think in the comments section below.

Check out some new screenshots from Kinect Project Draco. The game looks stunning as you can see in these screenshots. The project was revealed during Natal’s launch and finally revealed at the Tokyo Game Show. Microsoft showed off a lot of games at the TGS with Forza 4 being the main star.

Project Draco will be finished next year, so stay tuned to GB for more updates. Tell us what you think in the comments section below.