Canada is the country with world largest oil sands resource，where 80% of the resources need to be produced by thermal recovery methods. The methods used widely include steam assisted gravity drainage（SAGD）and cyclic steam stimulation（CSS）. The mismatch between reservoir simulation results and history production is one of the main challenges.Studies suggest that the large-scale lateral gradient change in the western Canadian sedimentary basin and small-scale vertical gradient change within the oil reservoir are very common for the composition and physical properties of crude oil and that the composition and properties of crude oil on bottom and top of oil reservoir are completely different. Reservoir simulation study was conducted on effects of the variation of viscosity gradient of crude oil on the thermal production. The results show that the viscosity gradient change is the main reason for mismatch between reservoir simulation results and production history. However，variable viscosity model can be used to predict cumulative oil production more accurately. And the prediction result of fixed viscosity model is too optimistic. Case studies on production well position optimization with variable viscosity model have shown the best produced degree and economic benefits should be 8 m above oil-water interface for ASGD. Heterogeneity of reservoir fluids，especially viscosity heterogeneity，and heterogeneity of reservoir rocks was combined and was applid to reservoir description and numerical simulation，which can predict accurately production dynamics and development effect of oil sand thermal recovery，optimize production management and ensure the best recovery efficiency and economic benefits.