Summary There are a lot of sludges produced in oil production and storage processes in Liaohe Oil Field. Usually complicated chemical processes are involved in treating the sludge effectively and such surface-treatment processes are subject to high cost and environmental challenges. Therefore, the feasibility and performance of sludge injection into steam-stimulated wells, and sludge sequestration and associated heavy-oil-recovery improvement are investigated on the basis of results of laboratory research and field operation. The sludge originally produced from the reservoir comprises mainly water, some oil components, and solid phase such as mud and fine sand, and aggregation of the injected sludge components, except water, could block the void porous space. Actually, the sludge is buried into its origin, the reservoir. As the sludge is injected into the steamed reservoir through an enlarged pore at high injection pressure, the permeability of the formation could be significantly decreased (the permeability reduction rate could be more than 98% after sludge blocking in our experiments with sandpacked tubes), and the sludge blocking performance is related to the reactions of oil and solid separated from the sludge, including adherence to the sand surface, consolidation of the sands, and filling in the void porous space. Consequently, the sludge is stored in the steamed formation, and the water in the sludge is separated and produced. At the same time, steam conformance and heating efficiency could be improved by implementing a sludge blocking process, thereby significantly improving oil production. Sludge sequestration has been applied to 45 steamed wells in Shuguang Oilfield until 2018, and all the wells have been stimulated by 7–10 cycles of CSS process. The total sludge injection of the wells is up to 133,200 tons, and more than 15,000 tons of oil and solid separated from the sludge are deposited underground. At the same time, more than 20% increase in cyclic oil production on average is obtained by the sludge-injection process.