S. H. And Santamarina, Capillarity and both gas and water permeabilities change as a function of gas saturation. Typical trends established in the discipline of unsaturated soil behavior are used when simulating gas production from hydrate-bearing sediments. However, the evolution of gas saturation and water drainage in gas invasion (i.e., classical soil behavior) and gas nucleation (i.e., gas production) is inherently different: micromodel experimental results show that gas invasion forms a continuous flow path while gas nucleation forms isolated gas clusters. Complementary simulations conducted using tube networks explore the implications of the two different desaturation processes. In spite of their distinct morphological differences in fluid displacement, numerical results show that the computed capillarity-saturation curves are very similar in gas invasion and nucleation (the gas-water interface confronts similar pore throat size distribution in both cases); the relative water permeability trends are similar (the mean free path for water flow is not affected by the topology of the gas phase); and the relative gas permeability is slightly lower in nucleation (delayed percolation of initially isolated gas-filled pores that do not contribute to gas conductivity). Models developed for unsaturated sediments can be used for reservoir simulation in the context of gas production from hydrate bearing sediments, with minor adjustments to accommodate a lower gas invasion pressure Po and a higher gas percolation threshold.