Sunni rebels led by the Islamic State of Iraq and the Levant have taken control of an important oil refinery and have offered Iraqi troops safe passage if they give up their weapons and leave, according to Al Jazeera sources.
Sources in Salaheddin said on Tuesday that Sunni rebels had captured the province's Baiji refinery, near the town of Tikrit.
The reports were rejected by the foreign minister, Hoshyar Zebari, who told Al Jazeera on Tuesday that Iraqi special forces soldiers were in control.
However, sources said that ISIL rebels had offered 460 Iraqi troops still near the refinery safe passage to Erbil if they gave up their weapons. The ISIL would then hand the facility to local Sunni leaders, the sources said.
Baiji refinery is Iraq's largest and produces a third of Iraq's oil output. It has been the scene of a week of fighting between Iraqi forces and Sunni fighters. The government would lose a large slice of the country's oil revenue if the refinery was lost.
The claim comes as US efforts to rally Iraq's leaders into a new unity government appeared to suffer a setback, with the president of the semi-autonomous Kurdish region stating that the country was "facing a new reality" and that the Kurds were "seeking a solution for the crisis that we have witnessed"
Masoud Barzani's comments came after a meeting in Erbil with John Kerry, a day after the US secretary of state met Shia prime minister in Baghdad, Nouri al-Maliki.
Barzani told CNN on Monday: "The time is here for the Kurdistan people to determine their future and the decision of the people is what we are going to uphold."
Kerry had promised "intense and sustained" aid to help Iraq combat the Sunni rebellion during a visit to Baghdad.
However, he said Iraq must "find a leadership that was prepared to be inclusive and share power".
US immunity agreed
The US has promised to send 300 military advisers to help train government forces. On Monday, the US government announced the advisers - mostly special forces - would be granted immunity from prosecution in Iraq.
A White House spokesman said the soldiers were "dealing with an emergency situation - that's the first part - and there is an urgent need for these advisers to be able to do their work on the ground in Iraq".
The US pulled its troops out of Iraq in December 2011 after it failed to gain immunity for a planned residual force of several thousands soldiers.
The US spent an estimated $8 billion on training the Iraq army between 2003 and 2012, according to the US army magazine, the Army Times.