Egypt is mulling whether to approve a takeover bid for Pharos Energy, a move which would for the first time see an Israeli company take a direct interest in Egyptian energy assets.
Israeli oil firm Ratio Petroleum this week agreed to acquire UK-based Pharos, which owns minority stakes in two oil concessions in Egypt's Western Desert.
The £124.3 million deal could be completed in the first half of 2027, subject to regulatory approvals.
Any deal would be controversial in Egypt, whose population is overwhelmingly opposed to normalised ties with Israel, despite a 1979 peace deal between the two countries.
Francesco Sassi, an expert in energy geopolitics and assistant professor at the University of Oslo, said there's a good chance that Cairo will approve the deal, despite the political sensitivities.
"I would not be surprised if the acquisition receives approval from the Egyptian government," he told The New Arab .
He said the deal would be a "natural step" in the two countries' growing energy relationship, even as Israel remains a hot-button issue.
Egypt has become increasingly dependent on Israeli energy in recent years and has sought to deepen ties despite the ongoing tensions over the war on Gaza.
It began importing large amounts of Israeli gas under a highly controversial multi-billion-dollar deal in 2018.
Egypt's reliance on Israeli energy has increased following a steep decline in production at its huge Zohr gas field. In December, it signed a new $35 billion deal to import 130 billion cubic metres of gas through to 2040.
The deal would see Ratio Petroleum acquire 45 percent stakes in the Fayum and North Beni Suef concessions. Both are operated by international oil and gas conglomerate IPR Energy, which owns the remaining 55 percent.
Ownership would give Ratio the opportunity to undertake exploration in the two concessions, which are projected to produce 1,200-1,450 barrels of oil per day in 2026.
The Egyptian government is required to give its approval for the sale to go ahead. It could also exercise pre-emption rights, which allow the government to acquire the assets ahead of Ratio. Ratio's role in Egypt could develop into a source of friction in the nation's politics later down the line, according to Sassi.
"This interdependence is a highly sensitive topic for Egyptian citizens, who remain deeply committed to the Palestinian cause. Moreover, Egyptian policymakers have proven on several occasions to be at odds with Israeli foreign policy in the region," he said. The New Arab has approached Egypt's oil ministry, Pharos Energy and Ratio Petroleum for comment.