A method of online real-time estimation of production performance properties includes receiving real-time field data taken by downhole sensors, and estimating formation properties and production performance properties by applying the field data to a two or threedimensional numerical transient thermal multiphase reservoir flow model, and automatically calibrating the model. Calibrating includes: selecting calibration parameters corresponding to values of selected model parameters, and applying the calibration parameters to the model to generate predicted properties that correlate with the selected model parameters, the predicted properties including flow rates and/or formation properties; automatically calculating a difference between the predicted properties and measured properties that correlate with the selected model parameters, and calculating an objective function value; performing an inversion that includes iteratively adjusting the selected model parameters until the objective function reaches a select
