Oily sludge, produced mostly in petroleum refineries and petrochemical industries. is one of the major industrial wastes that require treatment. Typically, these sludge wastes are water-in-oil emulsions that are stabilized by fine solids. These fine particles adsorb at the droplet surface and by lowering the demulsification rate constant, act as a barrier to prevent droplet coalescence. In this investigation, the effects of different electrical potential gradients and amphoteric surfactant on effectiveness of phase separation were investigated. It was concluded that lower electrical potential (0.5 V/cm) produced a higher demulsification rate. The solid phase remaining after the experiment was of a more compact and stable consistency. It was concluded that application of the amphoteric surfactant does not improve the total efficiency of the process. The role of oil constituents in stabilizing water-in-oil emulsions, and their effect on the dynamics of the process, were considered in every step of the experiment. Analysis of pH changes, resistance evolution, and hydrocarbon polarity analysis confirmed that the application of lower electrical gradient results in better phase separation. (c) 2005 Elsevier Inc. All rights reserved.