Taking the fault-bounded block Hua 17 in the North Jiangsu Basin as an example, this paper analyzed the oil and gas distribution rules and controlling factors. The results show that the oil/water interface in the reservoir is an undulating curved face, and its height above the free water surface increases with the growth of capillary pressure. The thickness of the oil/water transition zone is only controlled by capillary pressure when the saturation is equal to interstitial oil saturation and bound water saturation. Furthermore, the greater the differences are, the thicker the oil/water transition zone. The result proves that this method is effective in geometric arrangement of wells for oil field production.