Abstract: Suspended droplets of oil are separated from a waste water stream by the method and apparatus of the present invention. The oil and water mixture is injected into a partially submerged, vertical pipe. Gas bubbles injected into the lower end of the pipe, rise through the pipe and counter-currently contact the suspended oil droplets, thereby promoting the separation of the droplets from the waste water. The oil droplets coalesce and form a separate oil layer on top of the waste water which is readily withdrawn while clarified waste water is discharged from the lower end of the pipe. If employed to separate oil from a waste water stream on an offshore rig, the vertical pipe is submerged adjacent to the rig.