Oily sludge is recognized as hazardous waste. To reduce the potential danger and harmful factors of oily sludge, it is very important to analyze its environmental risk. In this paper, the characterization of oily sludge from Shengli Oilfield in China was tested experimentally, including the composition content, particle size, microscopic morphology, heavy metal content, organic composition, inorganic composition, and thermogravimetric analysis, which were used to analyze environmental risks. The results show that the oil content of oily sludge is as high as 10.3%, which will cause serious pollution. It is calculated that China can recover 772.5 million liters of oil and reduce 553.9 million kg of carbon emissions compared with incineration in one year, if the oily sludge can be managed effectively. The content of heavy metals such as Ba, Zn, Cr, As, Ni, Se, Be, and Hg in oily sludge exceeds the standard. It will restrain the self-healing ability of soil, pollute groundwater, and endanger animals and plants. The organic matter of oily sludge is concentrated in C11 to C29. It contains a large amount of benzene series and polycyclic benzene hydrocarbons, which can lead to cancer in the human body. Inorganic substances in oily sludge are mixed with some additives, which can not only reduce the toxicity of heavy metals, but also be used as building materials. The median particle size D50 of oily sludge is 0.91 μm, and it spreads all over the narrow pores. Generally, it needs to be treated under high temperature conditions, which will cause secondary pollution to the environment. The research content of this paper provides a theoretical reference for the management of oily sludge.