Oily waste is separated by gravity settling into a light oil phase forming an upper layer and a heavy phase forming a lower layer. An overflow stream of oil passes from the upper layer to a raw fuel storage tank while an underflow from the lower layer, after addition of diesel oil, is centrifugally separated into a light component of oil with some water which is returned to the gravity settling, an intermediate component of clarified water which is discharged to a sewer, and a heavy sludge component which is fed to a second centrifuge for separation into substantially dry solids and a mixture of water and residual oil which is returned to the gravity settling.