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We present results from a new numerical model capable of simulating two-phase flow in a porous medium and the electrical potentials arising due to electrokinetic phenomena. In a series of simulations using an idealised reservoir we show that, during water-flood of an initially oil-filled reservoir, electrical potentials measured at the production borehole may be indicative of the approaching waterfront. The magnitude of the signals is much larger than the expected ambient electrical noise, and water approaching the well may be detected as far away as 100m. This data may be used in conjunction with 'smart' wells to optimise production in real time. Therefore, we suggest that passive monitoring of electrokinetic potentials downhole may be used to enhance hydrocarbon recovery and reduce the environmental impact of production.