The concern for the depletion of crude oil and natural gas and the increasing price of them are building up the interest in abundant, cheap, and world-widely spread coal among the fossil fuels. In addition, there are lots of ongoing studies on coal gasification to efficiently control the emission of pollutants from coal. The purpose of this study is to characterize the catalytic methanation reaction converting the synthesis gas produced by coal gasification into methane, and finally to develop an efficient process to produce synthetic natural gas (SNG) of which major component is methane. First, a conventional methanation reaction was studied by using equilibrium reaction calculations to elucidate the effects of temperature, pressure, and feed composition on the performance of methanation reaction based on synthesis gas. In the exothermic methanation reaction, lower temperature and/or higher pressure were favorable to increase CO conversion to methane. However, there was a limitation in the methanation reaction using the original composition of synthesis gas for high CO conversion. It could be overcome by adding additional H2 to feed gas, resulting in high CO conversion more than 99%. Further, a sorption enhanced methanation reaction where the by-product H2O is removed by adsorption simultaneously with methanation reaction was newly developed to increase the efficiency of methanation reaction. The novel process could overcome the thermodynamic limitation, enhance the CO conversion to methane, and contribute to the development of a compact SNG production system.