After conventional water-flooding processes the residual oil in the reservoir remains as a discontinuous phase in the form of oil drops trapped by capillary forces and is likely to be around 70% of the original oil in place(OOIP). Surfactant flooding has been proved to be effective in reducing the oil residual saturation in laboratory experiment and field projects through reduction of interfacial tension mobility ratio between oil and water phases. A critical step for optimal design and control of surfactant flooding recovery processes is to find the relative contributions of design variables such as, chemical concentrations, in the variability of given performance measures, considering a heterogeneous and multiphase petroleum reservoir.There has been an increasing interest in surfactant-polymer(SP) and alkali- surfactant- polymer(ASP) flooding because of the need to increase oil production from water-flooded reservoirs. Because of the high cost of chemicals, surfactant flooding of oil fields has high risk. Modeling can help minimize that risk by improving our understanding of the effect of process changes. This paper describes a surfactant compositional flood model for a three- component(water, petroleum, surfactant), two phase(aqueous, oleic) system. This model assumes a homogeneous, two- dimensional, isothermal reservoir and no free gas or alkali is present. The system consists of the continuity equations for the traort of each component, Darcy’s equation for the traort of each phase and other auxiliary equations. The equations are solved by finite- differences using a procedure implicit in pressure and explicit in saturation. For validation of this model, the results obtained from modeling were compared with CMG simulators and Buckley-Leverett theory. The results of modeling showed good agreement with CMG results, and the comparison with Buckley-Leverett theory is explained according to different assumptions. After validation of the model the effect of system parameter (partition coefficient, surface tension, oil viscosity, surfactant injection concentration and surfactant injection rate) and the performance variable (cumulative oil recovery) is investigated in order to study sensitivity analysis. Finally, the oil recovery between water-flooding and surfactant-flooding was compared. The results showed higher oil recovery with changes in capillary number when the partition coefficient is greater than unity. The changes in fractional flow showed that oil recovery was decreased when oil viscosity increased.. Moreover, the study of surfactant injection concentration and rate indicated that, the oil recovery was increased by increasing the two parameters. The comparison between water-flooding and surfactant-flooding showed that, the oil recovery was increased when surfactant was injected to the system. Key Words : surfactant flooding, numerical simulation, finite difference, two phase- three component system, partition coefficient.