This is how I would read it, for what it's worth.
In step 1, where it says to cook the listed ingredients, you would use your own method of choice, ie; in oil or water, or as I would, using both. You could pre-fry the onions in oil, or not, to vary the flavour to your own preference.
Having accomplished that, the rest of the process is fairly direct. The consistency of the finished base is another matter of individual preference, and additional water, or not, is to suite your own palate. I prefer a thicker sauce in my curry so I'd not add any.
I will definitely be trying this ingredient list out and I thank the OP for this rare contribution to a thread other than WFDTJ. I also support his argument in favour of not freezing. For a while now I have been scaling down my bases to more "home based" proportions for immediate use.