Abstract: An analysis is made to study the factors influencing operational cost of pipeline and compressor station in the long-distance natural gas transmission pipeline over hilly terrain. Combined with the characteristics of hilly natural gas transmission pipeline system and taken the minimum final cost of the pipeline as an objective function, with the restrictions such as the conditions of hydraulic, thermal condition and flow pattern, a mathematical model of optimal operation of such pipeline system is established and the model is solved with the penalty function method. Calculation result shows that the model is helpful for coaching the optimal operation of gas pipelines.