The Du 84 block of the Shu-1 area in the Liaohe Oil Field is located in Panjin City, Liaoning Province, China. The production formation, contains extra heavy oil with a depth of 530-640 m. The reservoir is characterized in thick pay, with high permeability and a very active aquifer. The dead oil viscosity is 230,000 mPa.s at 50 degrees C. Although the Cyclic Steam Stimulation (CSS) process using vertical wells has been applied successfully in producing oil from the reservoir, the anticipated ultimate oil recovery is less than 29% of the original oil in place (OOIP). To enhance oil recovery beyond that of the CSS, physical and numerical modelling studies were carried out. The Steam Assisted Gravity Drainage (SAGD) process using a combination of vertical and horizontal wells was proposed as a follow-up process to CSS. An additional 27% recovery is anticipated with the proposed follow-up process. This would give a total recovery of 56%. A pilot with four horizontal producers was implemented in the field. CSS was used initially in the horizontal wells for establishing the communication with the surrounding vertical wells. The pilot was then converted successfully to SAGD operations with horizontal wells as continuous injectors. A total of 44,500 m(3) of oil has been produced over the 12 months of SAGD operations between June 2005 and June 2006. The field implementation process and pilot performance, as well as the challenges with this project, are presented in this paper.