Libya has become a major transit hub for terrorists, an African Union leader warned on Tuesday on the sidelines of a regional security meeting in neighbouring Algeria.

"I have many reports which say Libya has become a major transit hub for the main terrorist groups travelling from one country to another," said Francisco Caetano Jose Madeira, the AU's special representative in charge of counter-terrorism.

"We have information according to which some terrorists active in Mali consider Libya as a refuge and a place to reorganise," Madeira told journalists, describing that as something "extremely dangerous."

The vulnerable security situation in Libya and the porousness of its vast desert borders nearly three years after the conflict that toppled veteran dictator Moamer Kadhafi, was a key concern at the two-day meeting in Algeria's second city of Oran.

"The question of Libya is on everyone's mind," the European Union's representative for the Sahel region, Michel Reveyrand de Menthon said.

He described Libya as "one of the keys" to stabilising the Sahel, a huge swathe of land south of the Sahara that extends the breadth of Africa from the Atlantic to the Indian Oceans.

The EU has offered to cooperate with Libya on tightening border security but Western sources say the lack of organisation in the country since Kadhafi's overthrow currently makes such a project "very difficult."

The European bloc sees development of the region as one solution to fighting the problem of porous borders, but more immediate problems remain.

"Very few Sahel countries have the means to really protect their borders," the AU's Madeira said.

In Mali, the security situation remains highly uncertain, despite the UN Security Council agreeing on Tuesday to a peacekeeping force and a recent agreement allowing for the army to move into key areas of the north so that presidential elections can be held in July.

Speaking at the start of the Oran meeting on Monday, Algerian presidential adviser for security Mohamed Kamel Rezag Barra called on the international community to give its "full support" to the UN mission in Mali, which shares a long border with Algeria.

There is little information on the fate of Islamist militants who took over the north of Mali last year before being driven out in a French-led military intervention launched in January.

"It's hard to know exactly what is going on. The threat is always there but it is difficult to identify," said one Western diplomat.