A logo of Russian state oil firm Rosneft is seen at its office in St. Petersburg.

An oil reservoir caught fire and two warehouses were destroyed after shelling at the Linik oil refinery in eastern Ukraine on Friday.

The refinery is owned by the Russian state-controlled oil giant Rosneft and has been dormant for two years, the company said.

Located close to the frontline of eastern Ukraine's separatist insurgency, the region surrounding the refinery has witnessed heavy fighting.

Close to the city of Lysychansk, the refinery has production capacity of 120,000 barrels per day but has been out of action since Rosneft purchased the TNK-BP oil firm in 2012.

Eastern Ukraine has witnessed intense fighting in recent weeks, as pro-Russian rebels have sought to wrest control of cities from central government.

A Malaysian passenger plane MH17, that crashed in the region on Thursday, is thought to have been downed by a ground-to-air missile fired by pro-Russian militants.

The jet had 298 people on board, all of whom were killed in the incident.

Meanwhile electricity and water supplies across much of Luhansk city have been cut off. Shelling has damaged an electricity substation in the city, which is held by the rebels.

The European Union and the Untied States passed fresh sanctions against Russia on Wednesday over Moscow's role in the Ukraine crisis.