### abstract

- 2016 Elsevier Ltd Three-phase flow in a reservoir model has been a major challenge in simulation studies due to slowly convergent iterations in Newton solution of nonlinear transport equations. In this paper, we examine the numerical characteristics of three-phase flow and propose a consistent, C1-continuous discretization (to be clarified later) of transport equations that ensures a convergent solution in finite difference approximation. First, we examine three-phase relative permeabilities that are critical in solving nonlinear transport equations. Three-phase relative permeabilities are difficult to measure in the laboratory, and they are often correlated with two-phase relative permeabilities (e.g., oil-gas and water-oil systems). Numerical convergence of non-linear transport equations entails that three-phase relative permeability correlations are a monotonically increasing function of the phase saturation and the consistency conditions of phase transitions are satisfied. The Modified Stone's Method II and the Linear Interpolation Method for three-phase relative permeability are closely examined for their mathematical properties. We show that the Linear Interpolation Method yields C1-continuous three-phase relative permeabilities for smooth solutions if the two phase relative permeabilities are monotonic and continuously differentiable. In the second part of the paper, we extend a Hybrid-Upwinding (HU) method of two-phase flow (Lee, Efendiev and Tchelepi, ADWR 82 (2015) 27-38) to three phase flow. In the HU method, the phase flux is divided into two parts based on the driving forces (in general, it can be divided into several parts): viscous and buoyancy. The viscous-driven and buoyancy-driven fluxes are upwinded differently. Specifically, the viscous flux, which is always co-current, is upwinded based on the direction of the total velocity. The pure buoyancy-induced flux is shown to be only dependent on saturation distributions and counter-current. In three-phase flow, the buoyancy effect can be expressed as a sum of two buoyancy effects from two-phase flows, i.e., oil-water and oil-gas systems. We propose an upwind scheme for the buoyancy flux term from three-phase flow as a sum of two buoyancy terms from two-phase flows. The upwind direction of the buoyancy flux in two phase flow is always fixed such that the heavier fluid goes downward and the lighter fluid goes upward. It is shown that the Implicit Hybrid-Upwinding (IHU) scheme for three-phase flow is locally conservative and produces physically-consistent numerical solutions. As in two phase flow, the primary advantage of the IHU scheme is that the flux of a fluid phase remains continuous and differentiable as the flow regime changes between co-current and counter-current conditions as a function of time, or (Newton) iterations. This is in contrast to the standard phase-potential-based upwinding scheme, in which the overall fractional-flow (flux) function is non-differentiable across the transition between co-current and counter-current flows.