Abstract: The Xingbei Block in the Subei Oilfield is an extremely complex fault-block heavy oil reservoir with bottom water which is typically small, fractured, deep, thin and low. High contents of crude colloid and asphaltene, high viscosity and poor crude oil fluidity bring about obvious development contradictions. In order to beneficially develop this type of complex small fault-block heavy oil reservoir, this paper put forward the compound huff and puff technology of CO₂ and viscosity reducing agent for the heavy oil reservoir with bottom water. Viscosity reducing agent is the core for the successful implementation of this technology. A novel viscosity reducing agent of polymer surfactant type was synthesized by introducing the benzene structure into the molecules of viscosity reducing agent to reduce the π-π stacking between colloids and asphaltenes. The field application results show that this novel viscosity reducing agent is better resistant to temperature and salt and it presents good viscosity reducing effects in various heavy oils in the Subei Oilfield. In addition, during the mixed injection of CO₂ and this viscosity reducing agent, the viscosity reducing rate is still stable under the conditions of reservoir temperature and pressure. In conclusion, this novel viscosity reducing agent does well in the oil production increase and water production reduction of Xingbei Oilfield, and it application prospect is promising.