Reservoir simulation is an area of reservoir engineering in which computer models are used to predict the flow of fluids (typically, oil, water, and gas) through porous media.

Reservoir simulation models are used by oil and gas companies in the development of new fields. Also, models are used in developed fields where production forecasts are needed to help make investment decisions. As building and maintaining a robust, reliable model of a field is often time-consuming and expensive, models are typically only constructed where large investment decisions are at stake. Improvements in simulation software have lowered the time to develop a model. Also, models can be run on personal computers rather than more expensive workstations.

For new fields, models may help development by identifying the number of wells required, the optimal completion of wells, the present and future needs for artificial lift, and the expected production of oil, water and gas.

For ongoing reservoir management, models may help in improved oil recovery by hydraulic fracturing. Highly deviated or horizontal wells can also be represented. Specialized software may be used in the design of hydraulic fracturing, then the improvements in productivity can be included in the field model. Also, future improvement in oil recovery with pressure maintenance by re-injection of produced gas or by water injection into an aquifer can be evaluated. Water flooding resulting in the improved displacement of oil is commonly evaluated using reservoir simulation.