As reported by The Wall Street Journal, economic sanctions are crimping Tehran’s oil industry — but they haven’t broken it.  As the article notes:

“…A recent U.S. congressional research report called the Iranian oil and gas sector’s vulnerability to sanctions “debatable.” Iranian officials say they have been coping. Surging oil prices have helped. The U.S. Energy Information Administration estimates Iran brought in some $54 billion in oil-export revenue in the first six months of this year. That compares with an estimated $57 billion for all of 2007.

“…National Iranian Oil Co. plans to spend about $16 billion investing in oil and natural-gas projects this year, according to Akbar Torkan, Iran’s deputy oil minister for planning. (The Iranian calendar begins in March.) That’s up from an average of about $12 billion each year for the past three years, he said. “We are using our domestic capacity instead of foreign funds, which today are not so available for us,” Mr. Torkan said.

…The measures have caused considerable pain for Iranian businesses. In the oil patch, sanctions have made it harder for private contractors to finance big projects and find suppliers, sending oil-field costs higher. Najaf Pezeshkian, an adviser at the Iranian Offshore Engineering & Construction Co., an oil-services firm in Tehran, estimates that sanctions have increased the company’s costs by as much as 30%.

The sanctions effectively ban American companies from doing business in Iran. European oil giants BP PLC, Royal Dutch Shell PLC and Total SA have said political considerations rule out new plans to invest in Iran’s petroleum sector for the time being. Shell and Total say they remain in talks about getting involved in projects down the line.

Iran’s oil-sector problems go beyond sanctions. Many technocrats left the country after the Iranian revolution of 1979, and infrastructure took a beating in the Iran-Iraq war of the 1980s. Iranian fields, some of the Middle East’s oldest, suffer from high natural-decline rates that require new drilling and investment to maintain current output.

Mr. Torkan, the Iranian oil official, said Iran can produce up to 4.3 million barrels a day and expects to boost output capacity to 4.7 million barrels a day over the next two years. Independent estimates put current, actual production at or just under four million barrels a day. Iran was pumping as much as six million barrels a day before the revolution. Analysts say that without access to new oil-recovery technologies, the country will have difficulty reaching its production targets.

“Iran’s problem is that it can’t get a hold of those techniques that can get it much higher production,” said Samuel Ciszuk, a London energy analyst.

To close the gap, Iran has signed several deals with big, non-Western nations that are providing additional capital and know-how, including a $2 billion deal with China last year to develop a oil field….”