Abstract: This paper presents a new finite difference method with irregular grids.This method is similar to the conventional finite element method is some aspects,but it can be used in the multi-phase folw reservoir simulator.Comparing with the widely used cartesian coordinate grid,it has the advantages of more flexible approximation of reservoir geometry,and convenient to refine locally.This paper set up the difference equations for the irregular grid system,and describes how to determine the grids automatically,and pre-sents the application of this method in a double porosity medium oil-water two-phase reservoir simulator with bottom water drive.