Do the children of the paternal aunt inherit from the estate of the deceased father who has only two daughters and no male agnate?

The children of a sister are not heirs, neither by prescribed share nor by residuary right. They are considered uterine kin (dhawu al-arham), who do not inherit if there are اصحاب الفروض (sharers, other than the spouses) or 'asabah (agnatic heirs) present. If there are no heirs other than the questioner and her sister, and no 'asabah, then two-thirds of the inheritance is for you both by prescribed share, and the remaining one-third is returned to you, so you divide the inheritance equally. Issues concerning inheritances must be brought before the Sharia courts to verify the absence of other heirs, wills, or debts that take precedence over the rights of the heirs.