Abstract: An improved multistep liquefaction process for organic carbonaceous mater which produces a virtually completely solvent-soluble carbonaceous liquid product. The solubilized product may be more amenable to further processing than liquid products produced by current methods. In the initial processing step, the finely divided organic carbonaceous material is treated with a hydrocarbonaceous pasting solvent containing from 10% and 100% by weight process-derived phenolic species at a temperature within the range of 300.degree. C. to 400.degree. C. for typically from 2 minutes to 120 minutes in the presence of a carbon monoxide reductant and an optional hydrogen sulfide reaction promoter in an amount ranging from 0 to 10% by weight of the moisture- and ash-free organic carbonaceous material fed to the system. As a result, hydrogen is generated via the water/gas shift reaction at a rate necessary to prevent condensation reactions. In a second step, the reaction product of the first step is hydrogenated.