A system and method of automatic local grid refinements in reservoir simulation systems is described. In one aspect of the disclosure, a method is directed to a computer-implemented method of modeling a formation. The method includes applying a coarse grid to a geologic formation of interest, the coarse grid having a plurality of coarse grid blocks and identifying a structure of interest disposed in the formation. Further, the method includes determining a fine grid zone around the structure based upon a time period for flow simulation of the geologic formation and a geologic characteristic of the geologic formation in a local region adjacent the structure and applying a fine grid to the coarse grid blocks encompassed by the fine grid zone.