In a synthetic crude oil plant, a dry pulverized high-sulfur bituminous coal with ultimate analysis of 72.5% carbon, 5% hydrogen, 9% oxygen, 3.5% sulfur, and 10% ash is contacted with a hot synthesis gas stream to produce a raw coal oil, a high methane content gas, and a devolatilized char. The high methane content product gas has a dry basis analysis (in mol percent) of 11% CH4, 18% CO, 25% CO2, 42% H2, and 4% HS, and the gas is found to contain 48 moles H2O per 100 moles water-free gas. The raw coal oil has an ultimate analysis of (in weight percent) 82% C, 8% H, 8% O, 2% S, and about 150 lb raw oil is produced from 1000 lb dry coal. The devolatilized char from the first pyrolysis stage is transferred to a second stage in which it is gasified with steam and oxygen to produce the hot synthesis gas for the first stage containing (in mole percent) 3% CH4, 12% CO, 23% CO2, 42% H2O, 20% H2, and a char consisting essentially of fixed carbon and ash. The raw product gas from the first stage is sent to the purification system where it is purified of HS, CO, and H2O. The result is a product gas consisting of 15 mol percent CH4 and CO and H2 in a 1:3 molar ratio suitable for methanation. The gas is split, and the larger portion is recycled to the hydrotreating plant. In the hydrotreating plant, the raw coal oil is subjected to a mild hydrogenation using the recycle product gas as well as some makeup H2 to produce a synthetic crude oil consisting of 87.5% C and only a very small amount of sulfur. Hydrotreating essentially removes oxygen and sulfur from the raw oil and somewhat increases the hydrogen content of the oil. The off gases from the hydrotreating plant contain 4 mol CO and 15 mol H2 per 1 mol H2O and only 0.4 mol% HS. These are sent to the purification system for removal of the HS and H2O.