Carbonaceous material such as petroleum coke is calcined in the upper part of an air-injected vertical shaft kiln, and steam injected into the lower part of the kiln reacts with hot coke below the combustion zone to produce hydrogen and carbon monoxide. A product gas stream rich in hydrogen and low in nitrogen is withdrawn from a level below the combustion zone in the kiln. High sulfur coke can be desulfurized in the process by maintaining the temperature in the calcining zone above 1400.degree. C.