This work presents a numerical simulation of a vertical, upward, isothermal two-phase flow of air bubbles and water in an annular channel applying a Computational Fluid Dynamics (CFD) code. For this, the Two-Fluid model is applied considering interfacial force correlations, namely: drag, lift, wall lubrication, turbulent dispersion, and virtual mass. The turbulence k-ε model effects and the influence of One-group Interfacial Area Transport Equation (IATE) are taken into account, in this case, the influence of two source term correlations for the bubble breakup and coalescence IATE is analysed. The work assesses whether the code properly represents the physical phenomenon by comparing the simulation results with experimental data obtained from the literature. Six flow conditions are evaluated based on two superficial liquid velocities and three void fractions in the bubbly flow regimen. The annular channel adopted has an outer pipe with an internal diameter of 38.1 mm and an inner cylinder of 19.1 mm. To represent this geometry, a three-dimensional mesh was generated with 160,000 elements, after a mesh sensitivity study. The void fraction distribution, taken radially to the flow section, is the main parameter analysed as well as interfacial area concentration, interfacial gas velocity, and bubble sizes distribution. The CFD model implemented in this work demonstrates satisfactory agreement with the reference experimental data but indicates the need for further improvement in the phase interaction models.