Hydraulic fracturing (HF) is a mulit-scale and multi-physics process which makes numerical modelling challenging. Conventional numerical models focus on multi-physics nature of HF but the multiscale nature is compromised by idealization of reservoir to be continuous, homogeneous and isotropic. However, natural fractures take a significant role in the success of HF for exploration of unconventional resources like Shale gas. Advancement in microseismic monitoring provides useful data for simulation in a much greater details. There is an urgent need to develop a suitable numerical tool for multi-scale threedimensional simulation to better understand the roles of discontinuities and heterogeneity in reservoir and its interaction with HF, especially to address the environmental concerns such as induced seismicity. In this paper, a simple discontinuum numerical method – Lattice Element Method (LEM) is proposed to model HF in a large scale three-dimensional model. A reservoir is modelled as a lattice network composed of 1D Hookean’s spring. Fracturing is modelled simply by removing lattices that meet a specified threshold as determined by the critical energy release rate of the rock. By introducing disorder in the model, mesh dependency in modelling fracture growth is minimized. Fluid flow is simplified as flow in pipe network and the permeability of pipe is related to fracture aperture by cubic flow law. Therefore, fracture flow and rock deformation are fully coupled. In this paper, four simulations of the same configuration except with different degrees of reservoir heterogeneity are presented. Fractures formed are diffusive and two groups of fracture are identified – connected fractures and isolated fracture without clear spatial correlation. The former forms a ‘fracture cloud’ and contributes to fluid flow and modeled by pipe network. The flow of fluid is highly tortuous and pipe network is sparely connected. The degree of reservoir heterogeneity controls the growth of ‘fracture cloud’ and pipe network. Microseismic monitoring often shows diffusive fracturing during HF on site and hence the outcome of the proposed model can be compared to such monitoring results.