This paper discusses the development and application of a stochastic three-dimensional reservoir model for gas-water flow. The model treats the occurence of natural fractures and shales in the reservoir as random, and as such the discontinuities may be arbitrarily distributed among the reservoir grid blocks. A simple shale management scheme that does not require the formulation of a sand-shale permeability relationship 1s used. However, the developed model requires the estimation of effective flow properties for the fractured reservoir nodes. By this, we attempt to simulate the effective permeability measured by the slope of a fractured reservoir build-up curve. The model may be used to compute the reservoir performance of a fractured, lenticular sand gas reservoir as well as that of a conventional blanket sand. Results of demonstration problems based on published data on Paludal zones 3 and 4 of the Mesaverde formation 1n western Colorado suggest that the effects of sand lenticularlty may not be as marked as have previously been calculated by modifying sand thickness by sand lense factor.

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