Sunni militants have hung their black banners on watch towers at Iraq's largest oil refinery, a witness said on Thursday, suggesting the vital facility had fallen to the insurgents holding vast territories across the country's north. A top Iraqi security official, however, said the government still holds the facility.

The Iraqi witness who drove past the Baiji refinery, some 250 kilometers (155 miles) north of Baghdad, said militants also manned checkpoints around it. He said a huge fire in one of its tankers was raging at the time.

The witness spoke on condition of anonymity because he feared reprisals.

Jihadists control '75%' of Iraq's largest oil refinery in Baiji

The security official in Baghdad said the government force protecting the refinery was still inside on Thursday and that they were in regular contact with officials in Baghdad. He said helicopter gunships were flying over the facility to stop any advance by the militants of the Islamic State of Iraq and the Levant inside the refinery.

He also said the militants took over a building just outside the refinery and were using it to fire at the government force.

The official also spoke on condition of anonymity because he was not authorized to speak to journalists.

The Beiji refinery accounts for a little more than a quarter of the country's entire refining capacity — all of which goes toward domestic consumption for things like gasoline, cooking oil and fuel for power stations. Any lengthy outage at Beiji risks long lines at the gas pump and electricity shortages, adding to the chaos already facing Iraq.

The campaign by the al-Qaida-inspired Islamic State militants has raised the spectre of the sectarian warfare that nearly tore the country apart in 2006 and 2007, with the popular mobilization to fight the insurgents taking an increasingly sectarian slant, particularly after Iraq's top Shiite cleric made a call to arms on Friday.

The Islamic State has vowed to march to Baghdad and the Shiite holy cities of Karbala and Najaf, home to some of the sect's most revered shrines, in the worst threat to Iraq's stability since US troops left in late 2011. The militants also have tried to capture Samarra, a city north of Baghdad and home to another major Shiite shrine.