Development of optimal depletion strategies for hydrocarbon reservoirs remains a top priority for petroleum companies in their asset management. There is a clear need for technologies that enable engineers to realize the synergy across a spectrum of reservoir management processes and subsequent establish optimal operation strategies in a fully integrated fashion. Considering the fact that a typically oil and gas production system involves multiple dynamics at different scales, effective representation and modeling of the system has been one of the greatest challenges facing the industry. In conventional approaches, furthermore, the computational intensity associated with the optimization of an integrated system (e.g. unified subsurface reservoirs, wells, and surface facilities) is either beyond current hardware capability or counteractive.In this paper, a dynamic scaling formulation is proposed together with a nonlinear domain decomposition algorithm in order to address multiscale physics from reservoir geophysics and fluid flow at a very fundamental level. The proposed numerical scheme derives sets of dynamic scaling factors that provide a means by which the general conservations of mass, momentum and energy can be tailored and qualitatively ascertained at run time in accordance with the different physical phenomena and scales of objective domains, while the nonlinear domain decomposition technique provides an effective way to synthesize a multidomain problem into a desired global one. The methodology can be extended to simulate various systems of interest in hydrocarbon production processes, but this paper focuses only on subsurface reservoirs to accurately capture the effects of various scale fluid flow phenomena ranging from hydrocarbon components to statistical reservoir heterogeneities.