A new technique for upscaling highly variable permeability descriptions is developed and demonstrated. The method provides coarse scale numerical properties (transmissibilities) that are specifically adapted to a particular flow scenario. Global coarse scale simulations are used for the determination of the local boundary conditions required for the upscaling calculations. Near-well effects are incorporated directly into the coarse scale description. The technique avoids the need for any global fine scale simulations and introduces only a modest overhead compared to existing methods that do not account for global effects. A thresholding procedure, which provides computational efficiency and acts to minimize the number of anomalous coarse scale transmissibilities, is introduced. The method is demonstrated on highly heterogeneous channelized systems in two dimensions. Results are presented for flows driven by boundary conditions and wells and for cases with changing well rates. The method is well-suited to highly heterogeneous systems, where existing methods often do not suffice. Significant improvement in the accuracy of the coarse simulations is achieved for both single and two-phase flow scenarios.