Kurdish authorities have signed more than a dozen contracts with foreign companies amid objections by Oil Ministry officials in Baghdad, who consider the deals illegal.
During the Thursday parliamentary session, Shiite lawmaker Waiel Abdul-Lateef described the unilateral Kurdish moves as a "dangerous issue" that could pave the way for other Iraqi provinces to sign contracts without the knowledge of the central government.
"Provincial officials now can sign oil contracts and nobody can stop them," he said.
Abdul-Lateef complained that the central government in Baghdad has no control on Kurdistan region, which has enjoyed broad autonomy since 1991.
"According to what is going on, it seems that those people do not belong to Iraq," he said of the Kurds.
The debate in parliament reflected a wider discussion about the extent of powers provincial or regional governments should have after local elections are held for the country's 18 provinces. That vote, for which no date has been set, will pave the way for the possible creation of self-rule regions similar to the 16-year-old Kurdish region in northern Iraq.
Calls by a major Shiite party to create a similar entity in nine provinces south of Baghdad have intensified the debate, with many in Iraq fearing their country appears well on its way to a break-up along sectarian and ethnic lines.
A constitution adopted in a nationwide vote two years ago provides for a federal system of government, but Prime Minister Nouri al-Maliki, a member of Iraq's Shiite majority, has recently said he was in favor of limited provincial powers and a strong central government.
Kurdish lawmaker Saad Barazanji argued that the Kurdistan oil contracts are constitutional, accusing the oil minister, Hussain al-Shahristani, of failing to carry out his duties to stop the smuggling of Iraqi oil.
"Such initiatives by Kurdistan government should be encouraged - not fought. Such contracts serve the interests of Iraq," he said.
Another Kurdish lawmaker, Mahmoud Othman, called for negotiations between the Kurdish and Baghdad officials in order to solve the oil dispute.
Jabir Habib, a Shiite lawmaker, said that all oil exports should be managed through the central government and the Kurds should be no exception: "The oil minister is right in his stance."
The Iraqi Cabinet approved a draft bill last February to regulate the country's oil industry and forwarded it to parliament. But parliament, citing legal technicalities, kicked it back to the Cabinet. The measure has been bogged down in negotiations ever since.
Last August, the Kurds enacted their own oil law to regulate the oil sector in the region, further angering the central government in Baghdad.
Most of Iraq's oil lies in the Shiite-controlled south and the Kurdish north.