Reverse micelles have been used to create small particles of ferric sulfide catalyst for direct coal liquefaction (DCL). Tests were performed to determine the effect on DCL of the procedure and conditions for the production of the reverse-micellar catalyst. The parameters Varied include the water-to-surfactant ratio, the coal and catalyst mixing time, and the nature of the surfactant. The performance of the catalyst was quantified by the conversion and oil yield of the DCL experiments. After the optimum procedure for reverse-micellar catalyst production was determined, the optimal conditions were found to be a water-to-surfactant ratio of 10, a coal and catalyst mixing time of 60 min, and AOT as a surfactant. In further studies, hexane was found to affect coal liquefaction negatively. Hexane was found to have a significant effect on the surface area and pore volume distribution of coal. This may be due to small pores being plugged or due to the agglomeration of coal particles. (C) 2000 Elsevier Science B.V. All rights reserved.