Oily sludge and waste oil are the most significant solid wastes generated in the petroleum industry. Due to these hazardous characteristics, the incineration is the most common way to treat oily sludge and waste oil from the petroleum industry. The high water content of the oily sludge and waste oil and the high temperature operation requirement make the incineration process expensive and difficult in operation. In this study, the oily sludge and waste oil were systematically examined for dewatering, drying and pelleting with agricultural or forestry residues. The results showed that the use of agricultural or forestry residues can be lower the water content of the oily sludge and waste oil significantly, make the drying process much easier. The pellets made from the oily sludge and waste oil mixtures with agricultural or forestry residues have a higher heating value and release much lower emissions when combusted. Blending agricultural or forestry residues with the oily sludge and waste oil to improve the dewatering and drying of high water content wastes and co-pelletizing such a dried mixture to improve combustion performance are the promising approach for safe disposal and generation energy of oily sludge and waste oil from the petroleum industry.