The present invention is a system and method for steam production for extraction of heavy bitumen. The method includes mixing fuel and oxidizing gases, combusting the mixture, mixing combustion gas with water containing solids and organics, separating solids, using heat from the separated gas to produce distilled water, recycling the distillation facility brine with the combustion gas and removing solids thereof, generating steam from the distilled water and injecting the steam through an injection well or using it above ground for oil recovery. The system includes a combustion boiler, a direct contact steam generator, a gas-solids separator, and a heat exchanger with a water treatment facility like a distillation facility. The water feed of the present invention can be water separated from produced oil and/or low quality water salvaged from industrial plants, such as refineries and tailings as make-up water.