The fate of carbon dioxide (CO2) injected into a deep saline aquifer depends largely on the geological structure within the aquifer. For example, low permeability layers, such as shales or mudstones, will act as barriers to vertical flow of CO2 gas, whereas high permeability channels may assist the lateral migration of CO2. It is therefore important to include permeability heterogeneity in models for numerical flow simulation As an example of a heterogeneous system, a model of fluvial-incised valley deposits was used. Flow simulations were performed using the generalized equation-of-state model—greenhouse gas software package from Computer Modelling Group, which is a compositional simulator, specially adapted for CO2 storage. The impacts of residual gas and water saturations, gas diffusion in the aqueous phase, hysteresis, and permeability anisotropy on the distribution of CO2 between the gaseous and aqueous phases were examined. Gas diffusion in the aqueous phase was found to significantly enhance solubility trapping of CO2, even when hysteretic trapping of CO2 as a residual phase is taken into account.