Ashti Horami, minister for natural resources in the autonomous administration in the northern Kurdish region, said a key change pertained to new oil exploration contracts.

"The most significant change is that they have added a clause that says that oil expoloration contracts would be decided by the central government," Horami said at a session of the regional parlaiment.

"We do not know how they did these modifications but the changes would reduce the prerogatives of Kurdistan."

Mahmud Othman, a Kurd and a lawmaker in Iraq's embattled parliament told AFP that the Kurdish political bloc would "vote against the law if such changes are incorporated in the bill."

A number of foreign companies have already entered into contracts with the Kurdish government and the Kurds fear the new law may lead to the termination of the deals.

In May, Oil Minister Hussein Shahristani said any contract signed before the adoption of law would be cancelled.

Kurdish officials say they will honour the contracts, and also claim to have reached an agreement with Baghdad whereby it will receive 17 percent of the country's oil revenues.

The draft law was first approved by the Baghdad cabinet in February but Iraq's Shiite, Sunni and Kurdish factions later demanded certain amendments.

Last week the amended bill -- a key plank in efforts to help unite the country's warring communities -- was endorsed by Prime Minister Nuri al-Maliki's cabinet and forwarded to parliament for its first reading.

After the endorsing of the bill, the Kurdish administration warned against any major changes to the legislation.

The bill, seen by Washington as one of the key factors for ending the sectarian bloodshed in Iraq, lays down control of the country's oil wealth and how it would be distributed across the communities.

Iraq's oil reserves are largely in the Kurdish north and the Shiite south. Sunni Arabs from the central and western regions fear they could be robbed of the revenues from the crude exports.

Oil exports are Iraq's single most important source of revenue, even after more than four years of frequent insurgent attacks on oil facilities.

US officials have repeatedly urged the Iraqis to adopt a consensus law on sharing revenues and on international investment in order to head off future conflict and allow the oil sector to develop.

Iraq's proven oil reserves, estimated at 115 billion barrels, are thought to be the third-largest in the world, but since the US-led invasion production has tumbled from 3.5 million barrels per day to around two million.