A multi-scale finite-volume (MSFV) method to solve elliptic problems with a plurality of spatial scales arising from single or multi-phase flows in porous media is provided. Two sets of locally computed basis functions are employed. A first set of basis functions captures the small-scale heterogeneity of the underlying permeability field, and it is computed to construct the effective coarse-scale transmissibilities. A second set of bases functions is required to construct a conservative fine-scale velocity field. The method efficiently captures the effects of small scales on a coarse grid, is conservative, and treats tensor permeabilities correctly. The underlying idea is to construct transmissibilities that capture the local properties of a differential operator. This leads to a multi-point discretization scheme for a finite-volume solution algorithm. Transmissibilities for the MSFV method are preferably constructed only once as a preprocessing step and can be computed locally. Therefore, this step is well suited for massively parallel computers. Furthermore, a conservative fine-scale velocity field can be constructed from a coarse-scale pressure solution which also satisfies the proper mass balance on the fine scale. A transport problem is ideally solved iteractively in two stages. In the first stage, a fine scale velocity field is obtained from solving a pressure equation. In the second stage, the transport problem is solved on the fine cells using the fine-scale velocity field. A solution may be computed on the coarse cells at an incremental time and properties, such as a mobility coefficient, may be generated for the fine cells at the incremental time. If a predetermined condition is not met for all fine cells inside a dual coarse control volume, then the dual and fine scale basis functions in that dual coarse control volume are reconstructed.