CO2 Enhanced Oil Recovery (EOR) techniques have gained massive attention by oil companies as they target the oil industry's two main concerns of CO2 contribution to the climate change and the decline in oil production. Carbonated Water Injection (CWI) is a promising EOR technique that promotes safe and economic CO2 storage, moreover, it mitigates the pitfalls of CO2 injection which include low sweep efficiency, early CO2 breakthrough, and the risk of CO2 leakage in subsurface formations. Upon the contact of Carbonated Water (CW) with oil inside the reservoir, CO2 molecules cross the interface between the two fluids moving towards the oil phase due to the concentration gradient and its higher solubility in hydrocarbons. Subsequently CO2 molecules diffuse inside the oil until thermodynamic equilibrium is reached. CO2 dissolution in oil causes it to swell and consequently leads to changes in its physical properties (viscosity and density). Such changes in oil properties lead to improved sweep and displacement efficiency and thus higher recovery factor. Several experimental studies have been reported in the literature, but little work has been done on the simulation of CWI due to the complex multi-physics nature of this process. In this paper, Schlumberger equilibrium-based compositional simulator (ECLIPSE300) has been used to investigate the oil recovery and CO2 storage during CWI. The carbonated water has been simulated using two injector wells placed at the same location where they inject free CO2 and water at a certain volumetric ratio to account for the mass fraction of dissolved CO2 inside the carbonated water. CO2SOL option has been used to account for CO2 solubility inside the water phase and a 2D cartesian model (x, y) has been considered to avoid the effects of gravity which might reduce the amount of CO2 dissolved inside the oil phase. A sensitivity analysis on CW injection rate, and the effect of CO2 diffusion have been investigated. It was found that low injection rate promotes longer contact time thus more CO2 molecules will get transferred to the oil leading to high oil recovery and CO2 storage. In addition, it was found that CO2 diffusion between grid cells has minimal impact on oil recovery and CO2 storage in this case study. © 2022, The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.