A three-dimensional, colocated, fully implicit, control volume based calculation procedure, MEATY [1] has been used to simulate fluid flow and heat transfer in shell-and-tubs heat exchangers. The three-dimensional numerical model uses the distributed resistance method along with volumetric porosities and surface permeabilities to model the tubes in the heat exchanger. Turbulence effects are modeled using a modified k-epsilon model with additional source terms for turbulence generation and dissipation by tubes. Shea and baffle walls are modeled using the wall function approach. Tubes and baffles are modeled using volumetric porosities and surface permeabilities. Baffle-shea and baffle-tube leakages are modeled using a Bernoulli type formulation. Specialized geometry generators compute baffle, nozzle, and tube region porosities and permeabilities. This article presents the foundation and fluid mechanics of the problem. A subsequent article will discuss modeling of shell-side and tube-side heat transfer. The three-dimensional numerical model is validated by comparison of computed pressure drops with the experiments conducted at Argonne National Labs [2] in E shell type heat exchangers. The effect of baffle cut and baffle spacing on the pressure drop is studied. Good agreement is obtained between the computed results and the experiments.