Method of producing a colloidal fuel from coal and a heavy petroleum fraction

A method is provided for combining coal as a colloidal suspension within a heavy petroleum fraction. The coal is broken to a medium particle size and is formed into a slurry with a heavy petroleum fraction such as a decanted oil having a boiling point of about 300 DEG -550 DEG C. The slurry is heated to a temperature of 400 DEG -500 DEG C. for a limited time of only about 1-5 minutes before cooling to a temperature of less than 300 DEG C. During this limited contact time at elevated temperature the slurry can be contacted with hydrogen gas to promote conversion. The liquid phase containing dispersed coal solids is filtered from the residual solids and recovered for use as a fuel or feed stock for other processes. The residual solids containing some carbonaceous material are further processed to provide hydrogen gas and heat for use as required in this process.