© Дмитрий Юрченко / YouTube
Around 300 square meters of warehouses are reportedly on fire, a local official said, adding that over 3.5 tons of ammunition were being stored on site.
"Shell fragments are bursting near the scene [of explosion] right in the town, a shop building has been hit. Unfortunately, there is information that one of the shop employees has been killed," deputy head of the Lugansk regional administration, Yury Klimenko, told Ukraine's 112 UA channel. There is no information on any further casualties, the official added.
The area is located in Kiev-controlled territories.
The exploding shells made it more difficult to deal with the blaze, Klimenko said, adding that an emergency operations center had been established.
At the same time, Ukraine's presidential representative in the eastern Donbass region, Aleksandr Motuzyanik, told the channel "locals were not in danger," and denied reports of casualties, saying that no one had been hurt. He added that Kiev military officials were working at the scene.
Comment: It's an ammunition warehouse that's on fire: of course the locals are in danger!
"It is very scary!" a woman living in Svatovo, Tatyana Verbitskaya told RT by phone. "I am inside the house, and my home has very thick walls, but the blast wave still hurts my ears," she said, adding that she was afraid that there would be casualties among those living closer to the warehouses.
"Roofs are blown off and windows shattered there," the woman said, wondering how the Kiev military got a permission to build ammunition storage facilities "so close to residential areas."
Videos have emerged online, showing a massive fire and bright red and orange glow, with blasts echoing from far away.
Mobile communication was not working in the area, and power outages were reported in nearby villages, 112 UA reported locals as saying.
Locals have been hiding in basements. "People are so scared ... when we were going into the basement, it could be seen that the fire was within the city territory," 112 UA's correspondent reported.
Comment: How anyone thought that building an ammunition warehouse that close to a residential area was a good idea is a complete mystery, although the government of Ukraine has shown that it doesn't always have the best interests of its people at heart.