Austrian energy company OMV said it signed an agreement with Russia's Gazprom to move forward with the Austrian section of the South Stream gas pipeline.

OMV Chairman Gerhard Roiss met in Moscow with his Gazprom counterpart, Alexei Miller, to discuss implementation of a gas pipeline the Russian company said will offer the European energy sector an alternative source of natural gas.

"The need for construction and the benefits of South Stream Project for Europe are patent," Miller said in a statement.

The memorandum of understanding between OMV and Gazprom relates to the construction of the pipeline through Austrian territory with a terminal point set for Baumgarten. OMV said all permits will be ready by the end of 2015 and full commissioning of the Austria section is scheduled for 2018.

"This is an important step to significantly increase Austria's security of gas supply and will further strengthen Baumgarten's role as key hub for gas in Central and Eastern Europe," Roiss said.

Ukraine hosts the bulk of Russia's gas bound for Europe and ongoing geopolitical tensions in the region have added a layer of risk to European energy security. European leaders have said they're reluctant to embrace South Stream because it would secure Russia's tight control over the region's gas.