ABSTRACT Many horizontal wells are being drilled all over the world. One of the objectives is to increase the well productivity, compared to vertical wells. This increase in productivity occurs in a naturally fractured reservoir because many fissures are intercepted by the horizontal well. A two phase (oil and water), two dimensional simulation model, that uses the single porosity formulation and divides the reservoir into blocks that contain either matrix or fracture, has been solved implicitly to simulate naturally fractured reservoirs. This simulator is able to represent the transverse imbibition observed in a laboratory experiment. The impact of horizontal and vertical wells on the produced water oil ratio and the cumulative oil recovery, has been studied for fractured reservoirs with different matrix permeabilities. The horizontal well, in general, gives a lower water oil ratio and a higher cumulative oil recovery. It was also found that the horizontal well productivity is better in low matrix permeability, fractured reservoirs.