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Pour the oil into a large wok or and set over medium heat until shimmering hot.
Add the peanuts and stir and cook until golden brown, 4 to 6 minutes. Toss them continuously so they cook evenly without burning.
Scoop up the peanuts with a slotted spoon and transfer to a paper-towel lined plate to cool. Remove any burnt peanuts, they will taste bitter.
When the peanuts are cool enough to handle, grind them in a small food processor or pulverize them with a mortar and pestle until they have the texture of coarse sand.
Mix the water together with the lime leaves, tamarind, sugar and salt in a medium saucepan. Bring to a boil over medium-high heat, then adjust the heat until it is bubbling gently. Simmer for about 5 minutes, breaking up the tamarind pulp.
Remove the lime leaves and any chunks of tamarind pulp with a slotted spoon.
Add the ground peanuts and bring to a boil over medium-high heat. Adjust the heat and simmer gently until thick and creamy like gravy, 8 to 10 minutes, stirring often so the sauce doesn't stick to the bottom of the pot.
Remove from the heat and stir in the sambal oelek and Thai chilies (if using).
Taste and adjust the seasonings as needed, making sure the acidity of the tamarind or lime sings through.
Serve the peanut sauce with vegetables or as a dipping sauce for grilled kebabs.