Heavy oil, such as petroleum residual oil, requires upgrading for use in the production of transportation fuels in the petroleum industry. Heavy oil has low hydrogen to carbon (H/C) ratio and high viscosity, and contains impurities such as sulfur and metals. Various conventional upgrading processes including coking, visbreaking, hydrotreating, hydrocracking, residue fluid catalytic cracking (RFCC), and deasphalting have been developed 1). Hydrogen addition is useful to convert heavy oil to light fractions with high H/C ratio and low sulfur content, resulting in lower coke yield, but hydrogen is expensive. Water has good potential as a hydrogen source for the upgrading of heavy oil. Upgrading of heavy oil with water requires the following catalyst properties: high activity to decompose heavy oil, stable activity under severe hydrothermal or steam conditions, and resistance to deposition of coke, sulfur, and metals. Upgrading of heavy oil with water has been reported using various catalysts, such as nickel potassium 2) 4) , cerium oxide 5),6) , titania _ zirconia 7) , and iron oxide 8) 21). Iron oxide is inexpensive and is a candidate catalyst for industrial upgrading of heavy oil with water. We previously developed a zirconia-supporting iron oxide catalyst to decompose petroleum residual oil under a steam atmosphere 8). The physical durability of the catalyst was enhanced by addition of aluminum to iron oxide 9),10). Upgrading of oil sand bitumen was investigated with iron oxide-based catalysts using suband super-critical water 17). Catalytic cracking of petroleum residual oil can be achieved with silicasupported iron oxide catalysts in supercritical water 16). Steam catalytic cracking of petroleum residual oil is possible using zirconia-impregnated macro-mesoporous red mud, which contains iron oxide and alumina 18),19). This review examines catalytic cracking of heavy oil using iron oxide-based catalysts containing zirconium and aluminum under a steam atmosphere. 2. Catalytic Cracking of Heavy Oil with Steam 2. 1. Oxidative Cracking of Heavy Oil Catalytic cracking of atmospheric residual oil (AR) with steam was conducted at 748 K under atmospheric pressure using a fixed-bed reactor. Figure 1 shows the schematic experimental apparatus 11). A complex metal oxide catalyst was prepared by a coprecipitation method using a water solution of iron chloride, aluminum chloride, and zirconium oxychloride. The catalyst was treated at 873 K for 1 h under a steam atmosphere and sieved to obtain particles of 300-850 μm. The molar composition of the catalyst was Zr/Fe 0.063, Al/Fe 0.13, abbreviated as Zr _ Al _ FeOx. The obtained cata-323