The disposal of oily sludge (OS) and depletion of crude oil reservoirs has become a global problem for the petroleum industries. The rising cost of bituminous materials is also attributed to the depletion of crude oil reservoirs. Incorporating OS in the production of bitumen can reduce waste generation, thereby ensuring sustainability in petroleum industries. This study carried out a series of physicochemical, rheological and morphological tests to examine the suitability of OS as a bitumen modifier. OS and binders were subjected to Fourier transform infrared spectroscopy (FTIR) and atomic force microscopy (AFM) to characterize their morphological and chemical configuration. Using a dynamic shear rheometer (DSR) and response surface methodology (RSM), the performance characteristics of binders were analyzed and modeled. FTIR showed the identical functional groups responsible for the compatibility of OS and bitumen. Fit statistics and diagnostic graphs showed the significance and adequacy of the quadratic model for rutting and fatigue factors. Response surface plots showed that OS improved the fatigue resistance of bitumen. The OS up to 8 addition improves fatigue resistance while keeping the performance grade (PG) identical to that of base bitumen. © 2023 The Authors