TECHNOLOGY FOCUS - ORGANIC CHEMISTRY - Preferred Process: The liquefaction is performed at 250-370 degrees C. The dehydration or hydrogenation is performed at 250-400 degrees C and under a pressure of 1-20 MPaG. The aqueous phase containing a water-soluble organic substance separated after liquefaction and/or dehydration is reused as some or all of the water to be used for liquefaction. The organic solvent separated from the mixture after dehydration or hydrogenation is reused as some or all of the organic solvent for liquefaction. The aromatic hydrocarbon solvent separated from the mixture after dehydration is reused as some or all of the aromatic hydrocarbon solvent for liquefaction. Preferred Components: The aqueous phase containing a water-soluble organic substance separated after dehydration or hydrogenation is reused as some or all of the water to be used for liquefaction. The organic solvent is an aromatic hydrocarbon having 6-12C (preferably xylene). EXAMPLE - Oak wood was ground with a cutter mill and then dried. Subsequently, the dried product having a size of 1 mm or less was prepared. This oak powder was further dried with a dryer and then adjusted to have a moisture percentage of 15 wt.%. A biomass liquefaction reactor was charged with the oak powder (42 g). While xylene (360 g) for liquefaction was transferred via a high-pressure pump and an aqueous solution containing potassium carbonate (90 g) was transferred via another high-pressure pump, where the solvent comprising xylene and an aqueous solution containing potassium carbonate was heated by a solvent heater to 300 degrees C. The solvent was allowed to pass through the above biomass liquefaction reactor for 1 hour order to perform biomass liquefaction. The reaction pressure during liquefaction was adjusted to 12 MPaG. A liquefied fuel oil dehydration reactor charged with a zeolite catalyst H/ZSM-5 (50 g) was arranged downstream of the biomass liquefaction reactor. Following biomass liquefaction, dehydration was performed. The temperature and pressure of the dehydration reactor were the same as those for liquefaction (300 degrees C and 12 MPaG, respectively). The weight of the water-insoluble liquefied fuel oil recovered after biomass liquefaction and dehydration was 392 g (80.7 wt.%), the weight of the aqueous phase was 75 g (15.4 wt.%), and the weight of loss (unreacted solids and gas products) was 19 g (3.9 wt.%).