Produced water handling has become one of the central concerns for the oil and gas industry today. Produce water (water cut) increases as the field grows old, which brings the additional handling cost to the project. The additional expense could be in terms of lifting cost, treatment, maintenance, tubular scaling, corrosion problems, bacteria, naturally occurring radioactive material and environmental regulations, etc. To address this problem, the hydrocarbon industry developed the downhole oilwater separation (DOWS) technology in the 1990s. In spite of having such cost-effective and environment-friendly solutions, the industry has limited sites using this technique. Thus, there is uttermost need to evaluate the problems in practicality of the current hydrocyclone-based and gravity-based DOWS and find a reliable solution to it. The membrane-based separation methodology represents the coherent solution to robust the downhole separation system that does not require any moveable equipment with advance sensors and mechanical tools. If the reservoir is well characterized and a reliable simulation model is built, it is possible to predict the optimal time for the placement of a specific length of membrane in the well depending on the layer concerned and inclination of the well. Apart from designing the thin and porous hydrophobic and oleophilic membranes, there are plenty of field challenges which have put constraints on the practicality of membrane-based DOWS. The major constraints are durable range of separation pressure, fouling, separation process design, membrane-shear durability. The objective of this study is to present a novel model of PTFE (polytetrafluoroethylene) membrane-based downhole oilwater separation system with its over all functionality and addresses the constraints mentioned above with promising existing working solutions. Moreover, the study also literature reviews and compares the expenditure and maintenance involved in manufacturing, installation, operating and maintenance of system, between the conventional hydrocyclone-based downhole water separation and the proposed (PTFE) membrane-based DOWS.