The official initially said the terminal had also been attacked.The attackers used explosives against the pipeline in the town of Lihfen in the Sheikh Zuwayed area of the Sinai peninsula near the Gaza Strip, the official said.
The army has taken precautionary measures to stop the fire from spreading, the official added.Rescue services were putting out the fire, local official Gaber al-Araby told Egyptian television.
"We still don't have details of how it happened," he added.Israeli public radio quoted an Egyptian official as saying the attack was carried out at dawn, using a small amount of explosives which caused only minor damage.
The fire lasted three hours and was under control, while gas supplies to Israel and Jordan were cut, the official said.It was not immediately clear if the attack was linked to deadly protests against President Hosni Mubarak, now in their 12th day.
An armed Bedouin group in June threatened to attack the pipeline, security officials said, leading Egyptian authorities to beef up security around the pipeline and terminal.
Police relations with the region's former nomads are often tense, with the Bedouin complaining of routine harassment and discrimination.
Activists accuse the police of exploiting concerns about the pipeline to crack down on the community.
Human rights groups have criticised Egyptian policy towards the Bedouin, who were subjected to harsh police treatment after a series of bombings in Sinai resorts between 2004 and 2006, which killed dozens of Egyptians and foreign tourists.
Egypt supplies about 40 per cent of Israel's natural gas, and in December, four Israeli firms signed 20-year contracts worth up to USD 10 billion (7.4 billion euros) to import Egyptian gas.
The attack came after Israel expressed concern that its natural gas supplies from Egypt could be threatened by the uprising against the government.
"We again realise that the Middle East is not a stable region. We must act to ensure our energy security without relying on others," a spokesman for National Infrastructure Minister Uzi Landau said on Tuesday.
Israel is concerned that a new regime in Cairo might not respect the peace treaty the two governments signed three decades ago -- and with it, the crucial energy supplies.