This paper presents recent development of in situ upgrading technology (ISUT) for producing heavy oil and bitumen in which a mixture of catalyst, hydrogen, and vacuum residue are injected together with steam to improve oil quality by converting heavy oil components into lighter oil components. Consequently, the produced oil is upgraded and the oil recovery factor is increased while less steam is used, which results in lower capital and operational costs. This technology helps to reduce environmental impacts and greenhouse gas emissions. Numerical simulation of a steam-assisted gravity drainage (SAGD) well pattern was conducted to study the improvement of oil production by applying coinjection of steam and the ISUT mixture (ST-ISUT). The results show that ST-ISUT method can increase the oil recovery factor by 36% and lowers the requirement of steam by 50% in comparison with the conventional steam injection method, and the produced oil has much better quality.