Modern reservoir simulation must handle complex compositional fluid behavior, orders-of-magnitude variations in rock properties, and large velocity contrasts. We investigate how one can use nonlinear domain-decomposition preconditioning to combine sequential and fully implicit (FI) solution strategies to devise robust and highly efficient nonlinear solvers. A full simulation model can be split into smaller subdomains that each can be solved independently, treating variables in all other subdomains as fixed. In subdomains with weaker coupling between flow and transport, we use a sequential fully implicit (SFI) solution strategy, whereas regions with stronger coupling are solved with an FI method. Convergence to the FI solution is ensured by a global update that efficiently resolves long-range interactions across subdomains. The result is a solution strategy that combines the efficiency of SFI and its ability to use specialized solvers for flow and transport with the robustness and correctness of FI. We demonstrate the efficacy of the proposed method through a range of test cases, including both contrived setups to test nonlinear solver performance and realistic field models with complex geology and fluid physics. For each case, we compare the results with those obtained using standard FI and SFI solvers.