The two main Kurdish factions in control of northern Iraq are on collision course over how to approach the controversial oil draft law.

The differences surfaced in a session of the 111-member Kurdish Parliament, during which deputies of the Patriotic Union of Kurdistan [PUK] - the faction led by Iraqi President Jalal Talabani - walked out of the assembly in protest. Legislators of the Kurdistan Democratic Party [KDP] of President Massoud Barzani, the current leader of the Kurdish region, want to approve the draft oil law, but PUK party leaders and MPs fear that Kurdish Parliamentary approval of the law, while is still under debate by the central government, could strain relations with Baghdad.

Amid mounting criticism in Baghdad of some of its terms, no date has been set for Iraqi Parliamentary debate in on the draft.

KDP officials say the legislation should be passed so that the bill as it is presently written would govern, rather than a bill containing amendments to the draft law approved by the Iraqi Parliament. But experts warn that major contradictions between the two versions would certainly plunge the country into a constitutional crisis.

[Editor's Note: The Kurds prefer the present wording of the draft law, which among other things allows regional authorities rather than the central government to negotiate their own deals with oil companies, and gives local officials more leeway in determining what to do with the profits. These are the precise issues that have kept the central government from being able to pass the draft law.]

The row comes after the Iraqi Parliament approved another draft law which permits foreign companies to construct refineries in the country.

The Kurds have already defied the central government by letting foreign firms explore for oil and build small-scale refineries in their semi-independent region.

Oil has become a sensitive and divisive issue in Iraq, as the country's various ethnic and sectarian groups vie to have a say in the collection and distribution of royalties as well as exploration.

Iraq has massive oil wealth, in the neighborhood of 115 billion barrels of proven reserves. The country's most prolific oil fields are situation in the south where more than 60 percent of the reserves are located.

Additional massive oil resources have been found near the disputed city of Kirkuk, which the Kurds would like to add to their enclave.

Meanwhile, the central part of the country where Sunnis dominate is among the country's poorest in terms of oil reserves. It is the Sunnis that now form the backbone of the anti-U.S. resistance in Iraq.