Computational fluid dynamics (CFD) simulation is presented to investigate the annular flow behavior in the vertical pipe by using ANSYS Fluent platform 17.2. The study was analyzed complex behavior of annular flow in two cases (upward and downward flow) for different air superficial velocities and range of Reynolds number for water, in order to obtain the effect of orientation flow and increasing superficial gas and liquid velocities on the base film, mean disturbance wave thickness, the average longitudinal size of disturbance wave as well as pressure gradient. For multiphase flow model, the volume of fluid method (VOF) for two-phase flow modelling was used and coupled with RNG k-ϵ turbulence model to predict fully annular flow structures in the upward and downward flow direction. From CFD simulation results, it is clear to see how increases in air velocity result in reductions in film thickness and increase in pressure gradient. Additionally, the results showed monotonic enhancement of film thickness occurring in tandem with increases in the liquid flow rate. However, due to the effect of gravitational force and interfacial friction, the film thickness and pressure gradient are slightly larger for the upward flow than for the downward flow. The results agree with the recent experimental data that studied the annular flow behavior and pressure drop in the upward and downward flow direction. This study will be very helpful in understanding multiphase flow behavior in natural gas wells.