Egypt's electricity and fuel minister Hassan Yunis said on Monday the natural gas being exported to Israel under a controversial deal that was scrapped last week would be used domestically.
"The gas that used to be exported to Israel will be directed to Egyptian electricity plants, as we have more right to it," he told reporters.
Egypt's state-owned gas firm EGAS said it scrapped the 2005 gas export deal with Israel on Thursday because the Israeli-Egyptian consortium that imported the gas had not fulfilled the contract's conditions.
The gas contract with Israel, which signed a peace treaty with Egypt in 1979, was the largest trade deal between the two former foes and has always been controversial in the Arab world's most populous country.
Israel downplayed the political significance of the contract's cancellation on Monday, calling it a "commercial dispute" with no impact on diplomatic relations with Egypt.
"We don't see this cutoff of the gas as something that is born out of political developments," Prime Minister Benjamin Netanyahu told a meeting of heads of the Israel Bonds fundraising organisation on Monday.
"It's actually a business dispute between the Israeli company and the Egyptian company," Netanyahu's office quoted him as saying.
But Israeli Finance Minister Yuval Steinitz said in a statement that he was "very concerned" over the "economic aspects" of the cancelled deal.
Israel generates 40 percent of its electricity using natural gas, with Egypt providing 43 percent of its gas supplies, in accordance with the deal agreed under ex-president Hosni Mubarak that was sharply criticised by many Egyptians.
A pipeline in the Sinai Peninsula, used to supply Egyptian gas to Israel and Jordan, has been attacked 14 times since the uprising that toppled Mubarak in February 2011. It was last attacked on April 9.
Egypt has been gripped by security-related problems since the revolt.