Abstract: The process separates oil and water from a sludge mixture by directing the sludge mixture into a rapidly rotating friction dryer having a cylindrical chamber with a smooth inner surface and a rotating rotor having rotor arms extending into closely spaced relation to the inner surface of the chamber. The rotor is rapidly rotated to form an annular bed of the sludge material while moving the material particles in the mixture axially and tangentially and while frictionally generating heat between the rotor arms and the sludge material sufficient to evaporate the water in the sludge material to steam. At the same time, the oil in the mixture is heated by the steam and evaporated at a temperature below the normal atmospheric boiling point of the oil. Thereafter, the separated evaporated oil and the steam are removed from the chamber.