The steam assisted gravity drainage (SAGD) pilot test in the LiaoHe oilfield of China is the first SAGD project conducted in China in the deeper bitumen reservoir (650 - 800 m), using a combination of vertical injectors and horizontal producers. Temperature observation wells play an important role in the understanding of the pilot performance and optimization of the operation process. This paper will present the objectives, principles, interpretation and application of the temperature observation wells in the pilot area. A number of production problems were identified and solutions were sought to improve the SAGD performance through the use of temperature and other data obtained from the observation wells.