Abstract: Penglai A Oilfield is currently facing a series of production problems, such as rapid production decline, prominent interlayer interference, and serious water flooding of the main formation. To improve the development effect of oil formation I in the Upper Member of Guantao Formation of Penglai A Oilfield and clarify the distribution characteristics of remaining oil, research on the reservoir heterogeneity of the oil formation I and its impact on water injection development was carried out. Results show that the permeability heterogeneity and stratification coefficient reflect comprehensively the strong interlayer heterogeneity of the oil formation I. The strong interlayer difference resulted in the formation of high-permeability channel in the main layer of the oil formation I, resulting in the rapid rise of overall water cut and poor production of non-main layers. The study of the plane heterogeneity revealed an obvious corresponding relationship of the plane high-permeability area to the permeability breakthrough coefficient, the high-value area of permeability range, and the low value area of residual oil saturation. The tongue-shaped penetration phenomenon is obvious. The directionality is strong and the plane contradiction is clear. The intra-layer rhythm shows that the first oil formation in the Upper Member of Guantao Formation is dominated by positive rhythm, followed by homogeneous rhythm, and the anti-rhythm is less developed. Positive rhythm is easy to form bottom water flooding, and homogeneous rhythm has better oil displacement effect. Reservoir heterogeneity is the most critical geological factor affecting oilfield development. This study provided a geological basis for oilfield layered system development and well pattern adjustment.