1. A method for simulating fluid flow in a fractured subterranean reservoir, the method comprising: (a) providing a reservoir model representative of a fractured subterranean reservoir, the reservoir model including porous matrix control volumes and a network of fractures overlying the porous matrix control volumes, the network of fractures defining fracture control volumes; (b) constructing a system of equations based on scale separation for fluid flow in the porous matrix control volumes and the fracture control volumes; and (c) solving sequentially the system of equations based on scale separation.