Abstract: Gordon et al. (2003) tested for subadditivity in the cost structure associated with transporting natural gas by Trans-Canada Pipelines Ltd. and showed that the subadditivity in gas transmission cost was evident and consequently, the possible benefits from increased competition resulting from splitting up the monopoly could be offset by the sacrifice of scale efficiencies. This paper outlined a proposal of natural gas pipeline integration and then justified this proposition applying the theory of economics. Because the natural gas pipeline is of natural monopoly and the up-stream of the natural gas industry in China is of oligopoly competition, separated from the gas producers, the pipeline integration will change the competition equilibrium of the up-stream market. Based on a series of assumptions, this paper conducted an oligopoly competition model of the natural gas market in China, under the framework of which the proposed integration was analyzed concerning the influences this change would bring and thereafter the end of this paper concluded that the pipeline integration is beneficial for Chinese gas producers as well as consumers and helps promote the social benefits as a whole.