Abstract: Oily sludge is a representative hazardous waste generated during the processes of petroleum extraction, refining, and transportation. Improper disposal of this waste can lead to severe environmental pollution. Compared with the traditional methods of oily sludge disposal, the smoldering method is notably energy-efficient and highly effective. Based on the principle of material smoldering, this study developed a self-sustaining smoldering disposal process and corresponding equipment for oily sludge treatment. The fuel characteristics of oily sludge from a refinery in Qinghai, and the influencing mechanisms of smoldering reactions were investigated to achieve efficient degradation of petroleum hydrocarbons. Experimental results indicated that all treatments were successfully ignited and smoldered to completion. The oil content of the ash after smoldering was only 0.05% to 0.28%, achieving a petroleum hydrocarbon removal efficiency of 97.36% to 99.53%. The smoldering efficiency of oily sludge was influenced by factors such as Darcy air flux, quartz sand mixing ratio, and oil content. When the Darcy air flux increased from 1.5 cm/s to 5.5 cm/s, the average smoldering rate and peak temperature did not increase linearly but instead exhibited a trend of initial increase followed by a decrease. The optimal Darcy air flux was determined to be 4.5 cm/s, at which the average smoldering rate and peak temperature reached 0.08 m/h and 575.15 °C, respectively. Within a reasonable mixing range, a higher quartz sand mixing ratio (2∶1) significantly enhanced the smoldering rate, although it affected the peak temperature during the smoldering propagation phase. As the oil content increased, the average peak temperature of smoldering also rose. This study demonstrates that the oily sludge smoldering disposal equipment can successfully treat the on-site oily sludge samples from this refinery, while also having economic advantages of low cost. However, it is necessary to continuously monitor the risk of excessive carbon monoxide and non-methane total hydrocarbons in the exhaust gas. It is advisable to consider upgrading the feasible exhaust gas purification system, and adding a secondary combustion chamber in the smoldering equipment to further burn off the carbon monoxide and non-methane total hydrocarbons in the exhaust gas. Only after confirming that the exhaust gas meets the standards can the engineering application of the smoldering technology be promoted.