About 60 percent of the world's proven oil reserves and 40 percent of gas reserves are trapped in carbonate reservoirs. Recovery rates are relatively low in carbonate reservoirs, and it is extremely challenging to predict due to the heterogeneous nature of these reservoirs. The majority of carbonate reservoirs contain fractures which may vary in size from millimeters to kilometers. A typical example of this type of reservoirs is oil and gas fields in the northern Iraq. These fields are almost all developed by vertical wells. This study will investigate the use of horizontal wells to enhance the productivity in one of these reservoirs. CMG software is used to simulate the Upper Qamchuqa reservoir of the Khabbaz oil field northeastern of Iraq. The Upper Qamchuqa reservoir is a subsurface anticline with a major normal fault on the eastern flank. Moreover, it mainly consists of dolomite, dolomitic limestone, limestone and marly limestone. The simulation model was validated by the history matching the production rates. Subsequently, horizontal wells were added to the model, and the optimum placement and lateral length investigated. Furthermore, the reservoir parameters that have a significant influence on the history matching and the predicted horizontal wells' performance were identified for future development of the field. The results of this study can provide a guideline for reducing the operating costs and increasing the productivity of similar naturally fractured reservoirs in the area. iii DEDICATION This thesis is dedicated to my wonderful family and special relatives for their tremendous support, love, and encouragement throughout my life.