Methods and systems for modeling a reservoir system are described. The method includes constructing a reservoir model of a reservoir system. The reservoir model includes a reservoir and a plurality of wells. Also, one or more material balance groups are constructed with each material balance group having a portion of at least one of the plurality of wells, a portion of the reservoir, and at least one well management algorithm to track material balance within the respective material balance group. Then, fluid flow through the reservoir model is simulated based on the material balance groups by a simulator and the results are reported.