The present invention provides a method for recovering a natural gas contaminated with high levels of carbon dioxide. A gas containing methane and carbon dioxide is extracted from a reservoir containing natural gas, where carbon dioxide comprises at least 50 vol. % of the extracted gas. The extracted gas is oxidized with an oxygen containing gas in the presence of a partial oxidation catalyst at a temperature of less than 600° C. to produce an oxidation product gas containing hydrogen, carbon monoxide, and carbon dioxide. The oxidation product gas is then utilized to produce a liquid hydrocarbon or a liquid hydrocarbon oxygenate.