In this work, we investigate the effect of flow reversals from co-current to counter-current flow on the displacement performance of Water Alternating Gas (WAG) injection processes. In WAG processes, gas migrates towards the top of the formation while water tends to move towards the bottom of the formation. The segregation of gas, oil and water phases will result in counter-current flow occurring in the vertical direction in the reservoir. Previous experimental and theoretical studies of counter-current flow have shown that the relative mobility of each of the phases in the system is considerably less when counter-current flow prevails as compared to co-current flow settings. A reduction of relative permeability in the vertical direction results in a dynamic anisotropy in relative mobility. This effect has, to the best of our knowledge, not previously been considered in the simulation of WAG processes.A new flow model that accounts for flow reversals in the vertical direction has been introduced into a three-phase compositional IMPEC simulator. In order to investigate the impact of flow reversals, results from the new flow model are compared to cases where counter-current flow effects are ignored. A range of displacement settings, covering relevant gravity numbers and miscibility conditions (near-miscible and multi-contact miscible), have been investigated to gauge the impact of mobility reductions due to flow reversals. Simulations with different slug sizes are also included in this study. Significant differences, in terms of saturation distribution and oil recoveries, are observed between the conventional flow model (ignoring mobility reductions due to counter-current flow) and the proposed new model accounting for counter-current flow effects on phase mibilty in the vertical direction. Accordingly, we recommend that an explicit representation of flow transitions between co-current and counter-current flow (and the related impact on phase mobilities) should be considered to ensure accurate and optimal design of Water Alternating Gas injection processes.