Abstract: In oilfield distribution networks, the presence of inappropriate transformer capacity and excessively high current density in certain lines may lead to excessive distribution of reactive power in distribution networks; low operating power factor, increased network losses, degraded voltage quality, and Grid capacity cannot be fully utilized. In view of the above issues, based on the power flow calculation of distribution network, the maximum annual net profit of the distribution network is used as the objective function, and the voltage and capacitor capacity are the constraints to establish a mathematical model for reactive power compensation optimization. The sensitivity analysis method is used to determine the compensation. Compensate the position, determine the compensation capacity with the criterion of the optimal network loss and increase the rate, thus carry on the simple reactive power compensation. Improve equipment utilization and grid operation power factor and reduce network loss. The computation of the IEEE30-bus system verifies that the proposed reactive power optimization model and algorithm are correct and effective.