Reliable input data for reservoir simulation of production-induced changes in matrix and fault permeabilities are essential for the successful planning and management of oil and gas reservoirs. Withdrawal and injection of reservoir fluid causes a change in pore pressure, which in turn changes the 3D effective-stress state. The stress path followed by the reservoir controls the evolution of the effective-stress state, and with it the changes in stresses, which cause reservoir-rock deformation and permeability changes. A stress-sensitive simulation that uses a nonlinear finite-element geomechanical model coupled to a finite-difference fluid-now simulator reveals the effects on the reservoir performance by dynamic changes in permeability and the reactivation of faults.