Abstract: The ultra?heavy oil development effect by steam assisted gravity drainage (SAGD) process mainly depends on the size of steam chamber, which is greatly influenced by reservoir heterogeneity. Based on the typical heterogeneous geological model of Wellblock?Z32 and Wellblock?Z37 pilot areas in Fengcheng oilfield of Junggar basin, the influences of reservoir permeability, intercalation physical properties and intercalation distribution on the SAGD process was studied using numerical simulation approach. The results show that the intercalations above the horizontal gas injector mainly affect the vertical migration of steam during the production stage of SAGD, and impede the normal vertical development of the steam chamber, and lead to a lateral extension of the steam chamber along the bottom of the intercalation and postpone the peak of oil production. The intercalations between injectors and producers would cause low producing degree of the horizontal section and lower the efficiency of circulation preheating, increasing the preheating time. As a result, the hot fluid can not be recovered as expected and the production effect is poor. In order to obtain a better result, the SAGD horizontal well groups should be deployed in horizontal sections where permeability difference is less than 3.0 and avoid intercalations with a permeability less than 100 mD; moreover, the discontinuous intercalations should be more than 3.0 m away from horizontal injectors, the intercalation closures between injectors and producers should be less than 40%, and those above the gas injectors less than 50%