A quasi three‐dimensional, areal model based on finite‐difference approximations is applied to the hydrothermal field at Wairakei, New Zealand. The model simulates heat transport associated with the flow of steam and water through porous media. An analysis is made of the production aquifer under steady‐state and transient flow conditions, allowing vertical flow of heat and fluid through confining beds. Computed steady‐state results correlate well with observed data and indicate that portions of the aquifer had a steam cap prior to exploitation. Computed transient results also match observed data and support the hypothesis that the production aquifer is recharged through underlying confining beds. The limiting factor on production is the amount of mass available, both from storage and leakage. Although simulation results indicate that the field can maintain production rates to the year 2000, such long range predictions are unreliable due to the lack of information on the leakage properties of the confining beds.