Abstract: Chunguang oilfield is characterized by high porosity, high permeability, strong edge water and smallscale sandstone reservoir, the natural edge water drive development mode is adopted. In the late stage of high water cut development, under the condition of the existing well pattern, aiming at the problems such as the remaining oil at the top and flank cannot be effectively produced, by using numerical simulation technology, the study on the reservoir adaptation conditions and injection production scheme design optimization of nitrogen artificial gas cap oil displacement is carried out. This technology has been tested in Chun22 well block and achieved good development results. It can be used as reference and guidance in the later stage of high water cut development of similar small-scale sandstone reservoirs with high porosity, high permeability and strong edge water at home and abroad.