This study presents a new approach to characterize hydraulic (flow and no flow) units in reservoirs with laminated, structural, dispersed, or general shaly contents. Here, reservoirs with shaly contents are characterized by normalizing true formation resistivity in terms of the various shaly correlations. This normalized resistivity is, then, used in a graphical crossplotting technique to yield unique parameters about the hydraulic units. Permeability is estimated for the flow unit with shaly contents using any of three selected/generalized models in terms of the cementation exponent “m". A new permeability model is also utilized in the characterization process. The concept of Reservoir Quality Index, RQI, is adapted for shaly formations where a Shale Zonation Index, SZI, is uniquely generated to delineate each hydraulic unit. Shale free formation and formation with laminated or dispersed shaly contents are shown to exhibit characteristic slopes within the graphical solution. This paper demonstrates the integration of laboratory information along with conventional well log data to define reservoir bodies with shaly contents at the wellbore and documents the characterization technique. The technique is applicable to shaly clastic and carbonate reservoirs including those with natural fractures. The reultant hydraulic units should improve developing both the static and dynamic modeling of the reservoir.