Preheat the oven to 180ºC conventional or 160ºC fan forced. Grease or line two baking tray with baking paper.
Beat the butter, vanilla essence, sugar and egg yolk in a small bowl with an electric mixer on low speed for 4 minutes until smooth. Add in sifted flour, water and chocolate chips, then mix with a wooden spoon to make a soft dough.
Roll teaspoonfuls of mixture into balls or divide dough into required number of biscuits. Place balls approx. 5 cm apart on prepared trays.
Bake for 15 minutes or until lightly browned. Leave on the tray for 5 minutes then place on a wire rack to cool.