Lignite may be hydrogenated to a Jow-sulfur, low-ash, heavy fuel oil in the absence of added catalysts by use of synthesis gas and the moisture in the coal as the reducing agent. Conversions of 90-94% and oil yields near 60% (moisture, ash-free basis) have been obtained routinely at temperatures of 425-450°C and pressures of 3000-4000 psig. These conversions and oil yields are higher than those obtained with hydrogen at the same conditions. The effectiveness of carbon monoxide in hydrogenating lignite is, in part, due to the presence of the carbonates of the alkali and alkaline earth metals which react with carbon monoxide, in the presence of water, yielding formates, the active reducing agents.