1. A method for performing simulation of a reservoir represented by a model having a plurality of matrix nodes, a plurality of fracture nodes, at least one fracture zone and at least one fracture-free zone, the method comprising computer-implemented steps of: for each of a plurality of matrix nodes comprising interconnected zones, characterizing the matrix nodes, wherein the matrix nodes represent a pore system characterized by high pore volume and low conductivity; for a block comprised of one or more dual matrix nodes, eliminating the block and updating a coefficient matrix and Right Hand Side (“RHS”) vector for the model accordingly, wherein the dual matrix nodes represent matrix nodes with matrix-to-fracture connectivity; determining in-fill patterns between fracture nodes, including virtual fracture nodes, that will result from the elimination, wherein the fracture nodes represent a pore system characterized by low pore volume and high conductivity and the virtual fracture nodes represent fracture nodes with matrix-to-matrix connectivity; for one or more virtual fracture nodes, merging the virtual fracture nodes to a fracture grid and updating the coefficient matrix and RHS vector for the model accordingly; solving the resultant linear system using a linear solver; backsolving for the eliminated dual matrix nodes, thereby simulating the reservoir; and implementing a drilling plan for utilizing during a drilling process based upon the reservoir simulation.