Israel announced Tuesday that it was sending an envoy to Cairo to find a solution after Egyptian firms were ordered to pay $1.76 billion to compensate for a gas supply cut.

Egypt's petroleum ministry has said it will appeal the judgement reached through international arbitration after Cairo annulled its contract with Israel in 2012 following a spate of bomb attacks targeting the pipeline in the Sinai Peninsula.

Israeli Prime Minister Benjamin Netanyahu said he had agreed with the Egyptian government "to send a special envoy to Cairo for discussions on a solution to the challenge that has emerged".

"I think we will find a solution because it is in both countries' strategic interests," Netanyahu, who is also economy minister, said in remarks at a meeting of a parliamentary commission aired on public radio.

Israel had previously relied on Egypt for roughly 40 percent of its gas needs.

In recent years Israel has been working to exploit major gas discoveries off its coast in the Mediterranean.

Its hopes of supplying natural gas to Egypt have been thrown into doubt by Friday's order by the International Chamber of Commerce to compensate the state-owned Israel Electricity Corporation.

The Egyptian petroleum ministry said after the judgement that it had ordered state-owned energy companies EGPC and EGAS to freeze talks on possible imports of Israeli gas until the appeal is resolved.