roker,
I believe ( from your post) that the separator you use is operating on a timing basis allowed for the oil to coalesce and then to separate over some weir or other mechanical means (I could be wrong). Obviously, if you manage to coalesce the oil in an early stage and maintan the separation (%) without re-mixing oil in the flow (which I doubt you can manage in an increased flow), you might increase the flow by the percentage of time saved with quicker coalescing process. However, with increased flow (fluid velocity), the entrained oil droplets in the sour water might increase, thus making the upstream coalescer useless.
Also, if some coalescing plate device can be fitted to your horizontal separator, in the receiving chamber, the benefit will be faster coalescing, hence possibility of increasing the flow.
Tell us your configuration, there could be some hope..
cheers,
gr2vessels