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We present two-dimensional discrete element method (DEM) analyses to simulate a borehole in granular material. This simulation is two-dimensional plane strain, and we have succeeded in developing an approach for flow coupling to steady-state flow conditions. Results of these simulations suggest a number of behavioral features and deformation mechanisms. The stress distribution around the borehole clearly reflects a type of non-linear elastic behaviour with elasto-plastic dilatant mechanisms. In anisotropic stress fields, the simulated borehole demonstrates the development of breakouts at 90° to the direction of application of the principal stress. An outwardly directed fluid-flow has a dramatic stabilizing effect on the material in the borehole wall; conversely, if fluidflow is inwardly directed, the pore fluid gradient has a destabilizing effect on the borehole. We also discuss some implications of pore-fluid injection on in-situ hydraulic fracturing in unconsolidated reservoirs. It is evident that DEM methods have great power in emulating realistic behaviour of granular or fractured geomaterials in complex conditions. Whereas they are not a design tool at the present time, they provide more insight into mechanisms, and this insight helps guide other numerical analysis approaches.