It was observed that many hydraulically fractured horizontal shale gas wells exhibit transient linear flow behavior. A half-slope on a type curve represents this transient linear flow behavior. Shale gas wells show a significant skin effect which is uncommon in tight gas wells and masks early time linear behavior. Usually 70-85 percent of frac water is lost in the formation after the hydraulic fracturing job. In this research, a shale gas well was studied and simulated post hydraulic fracturing was modeled to relate the effect of frac water to the early significant skin effect observed in shale gas wells. The hydraulically fractured horizontal shale gas well was described in this work by a linear dual porosity model. The reservoir in this study consisted of a bounded rectangular reservoir with slab matrix blocks draining into neighboring hydraulic fractures and then the hydraulic fractures feed into the horizontal well that fully penetrates the entire rectangular reservoir. Numerical and analytical solutions were acquired before building a 3D 19x19x10 simulation model to verify accuracy. Many tests were conducted on the 3D model to match field water production since initial gas production was matching the analytical solutions before building the 3D simulation model. While some of the scenarios tested were artificial, they were conducted in order to reach a better conceptual understanding of the field. Increasing the water saturation in the formation resulted in increasing water production while lowering gas production. Adding a fractured bottom water layer that leaked into the hydraulic fracture allowed the model to have a good match of water and gas production rates. Modeling trapped frac water around the fracture produced approximately the same amount of water produced by field data, but the gas production was lower. Totally surrounding the fracture with frac water blocked all gas production until some of the water was produced and gas was able to pass through. Finally, trapped frac water around the fracture as combined with bottom water showed the best results match. It was shown that frac water could invade the formation surrounding the hydraulic fracture and could cause formation damage by blocking gas flow. It was also demonstrated that frac water could partially block off gas flow from the reservoir to the wellbore and thus lower the efficiency of the hydraulic fracturing job. It was also demonstrated that frac water affects the square root of time plot. It was proven by simulation that the huge skin at early time could be caused by frac water that invades and gets trapped near the hydraulic fractures due to capillary pressure.