A novel process was developed for the bitumen emulsion upgrading, wherein emulsion breaking and upgrading occurred in the same reactor using H, generated in situ from the water in the emulsion via the water gas shift reaction (WGSR). In this study, dibenzothiophene (DBT) was chosen as a model compound to investigate the effect of water and in situ H-2 on hydrodesulfurization (HDS). All the experiments were performed in a 1-L autoclave reactor at temperatures between 300 and 380 degrees C using in situ H-2 and ex situ H-2 (externally supplied H-2) over a dispersed Mo catalyst formed from phosphomolybdic acid (PMA). At very low water content, water was found to promote the HDS reaction in the ex situ H-2 run probably because it facilitates the formation of more active dispersed MoSx species. At higher water content, however, water inhibits every individual reaction in the reaction network in the HDS of DBT, blocking the hydrogenation pathway more than the hydrogenolysis pathway. The relative reactivity of the in situ and ex situ H-2 depends on the water content present in the reaction system. At an optimized mole ratio of H2O:CO (1.35), higher HDS activity was observed in the in situ H-2 run compared to ex situ H2 run, and particularly, the hydrogenation pathway was promoted in the in situ H-2 run. (C) 2006 Elsevier B.V. All rights reserved.