This paper presents an algorithm to compute transmissibility when there is permeability heterogeneity and anisotropy at the subgrid scale. The need for a tensor representation of macroscopic transmissibility in order to scale properly the effects of microscale permeability variations is demonstrated. Methods for computing tensor transmissibility and the use of tensor transmissibility in reservoir simulation are described. The proposed method is applicable even when the variance of permeability is large and the principal directions of the transmissibility tensor are not aligned with the coordinate axes. Examples demonstrate that the general tensor scaling procedure can give accurate, efficient production estimates on a coarse grid.

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