UPDATE 8-Hurricane Isaac to hit New Orleans, making landfall soon
* Landfall expected within hour
* Obama warns of "significant flooding and other damage"
* Massive new floodgate part of city's beefed-up defenses
* Nearly all Gulf of Mexico oil production halted
By Scott Malone and Kathy Finn
NEW ORLEANS, Aug 28 (Reuters) - Hurricane Isaac gathered strength as it bore down on New Orleans on Tuesday, bringing high winds and soaking rains that will pose the first major test to the city's multibillion-dollar flood protections, seven years after Katrina devastated the U.S. Gulf Coast.
Hundreds of U.S. Army National Guard troops took up strategic positions around New Orleans, preparation meant to avoid the chaos seen in the days and weeks after Katrina in August 2005.
Isaac's storm surge poses a major test of the so-called Crescent City's new flood-control systems and reinforced levees that failed in 2005, leaving parts of the city underwater. Forecasts from the U.S. National Hurricane Center showed the storm coming ashore in the Mississippi Delta late on Tuesday, possibly taking direct aim at New Orleans.
"Many parts of the state could see 24 to 38 hours of tropical storm-force winds," Louisiana Governor Bobby Jindal told a news conference. "We're going to see a lot of downed trees and power lines," he said. "We need people to stay safe."
Brandishing automatic assault rifles to ward off any threat of looting, the troops in military vehicles took up positions on mostly deserted streets. Their arrival came as driving rain and stiff winds battered the city's famous tourist district, The French Quarter, and its boarded-up storefronts. White-capped waves formed in Lake Pontchartrain.
Earlier, the Army Corps of Engineers closed for the first time the massive new floodgate on the largest storm-surge barrier in the world, at Lake Borgne, east of New Orleans.
In other preparations, oil production in the U.S. Gulf of Mexico nearly ground to a halt, and ports and coastal refineries curtailed operations as Isaac neared.
At 5 p.m. CDT (2200 GMT), the Hurricane Center said Isaac was centered about 105 miles (170 km) southeast of New Orleans with top sustained winds of 80 miles per hour (130 kph).
The storm, becoming better organized as it nears land, was traveling at a relatively slow 8 mph (13 kph). That pace is a concern for people in its path since slow-moving cyclones can bring higher rainfall totals.
Isaac was about 370 miles (595 km) wide and due to make landfall at the mouth of the Mississippi River within the hour.
Heavy rains and big storm surges were also forecast for parts of Mississippi, Alabama and the Florida Panhandle.
Isaac spared Tampa, Florida, where the Republican National Convention began on Monday. But it forced party leaders to revamp their schedule. They may have to make further revisions so as not to be seen celebrating Mitt Romney's presidential nomination while Gulf Coast residents struggle through the storm.
President Barack Obama urged Gulf Coast residents to take cover and heed warning, saying, Now was "not the time to tempt fate." He issued emergency declarations for Louisiana and Mississippi earlier this week because of Isaac.
Isaac had New Orleans in its sights as the city is still recovering from Katrina, which swept across it on Aug. 29, 2005, killing more than 1,800 people and causing billions of dollars of damage.
After Katrina, the Corps of Engineers built a $14.5 billion flood defense system of walls, floodgates, levees and pumps designed to protect the city against a massive tidal surge like the one that swamped New Orleans in Katrina's wake.
The floodgate that closed on Tuesday is 26 feet (8 meters) high and 1.8 miles (2.9 km) long. It was designed to prevent the Industrial Canal from breaching its walls, as it did in 2005, inundating the Lower Ninth Ward, Gentilly and New Orleans East neighborhoods, and St. Bernard Parish.
Most of the Lower Ninth, still scarred by the devastation of Katrina, was deserted on Tuesday. Residents who hadn't evacuated were unloading water, food and fuel from their cars and trucks to take into their homes.
"We've got all kinds of eats and treats," Arthur Anderson, 61, who was trapped in the attic of his house during Katrina before he escaped by boat.
Authorities have urged thousands of residents in low-lying areas to leave, warning that the storm could flood towns and cities in Mississippi and Alabama, as well as Louisiana, with a storm surge of up to 12 feet (3.7 meters).
Rainfall accumulations, potentially totaling as much as 20 inches (50 cm) in some areas, could also trigger widespread flooding. Customers in Louisiana's coastal parishes were already without power.
Isaac was not forecast to strengthen beyond a Category 1 hurricane, the lowest on the five-step Saffir-Simpson scale. Its top projected winds were about 80 mph (129 kph). While that would be well below the intensity of Katrina, which was a Category 3 storm, the size of Isaac's slow-moving system has forecasters predicting widespread flooding.
"It's going to take till the weekend before this gets out of the southeastern states," Hurricane Center Director Rick Knabb told reporters on a conference call Tuesday afternoon.
In the French Quarter, most businesses were closed and boarded up on Tuesday, while a handful of workers piled sandbags along doorways. Police and military vehicles were parked throughout the neighborhood.
One tourist left in the district was Craig Drees, an accountant from Russells Point, Ohio.
"It's a little eerie how quiet it is," said Drees, standing on a street corner with a few friends. "But it seems like the city is taking this very seriously and will be working to keep people safe."
U.S. ENERGY OUTPUT DISRUPTED
With more than 90 percent of offshore U.S. Gulf of Mexico oil production shut in and nearly half of natural gas output offline, energy companies along the Gulf Coast refining center braced for the storm's impact, shuttering some plants and running others at reduced rates ahead of Isaac's landfall.
Intense hurricanes such as Katrina -- which took out 4.5 million barrels per day of refining capacity at one point -- have flooded refineries, keeping them closed for extended periods and reducing fuel supplies.
The U.S. Department of Energy estimated that about 12 percent of the Gulf Coast's refining capacity had gone offline. Louisiana usually processes more than 3 million barrels per day of crude into products like gasoline.
Although no damage to offshore installation had been reported, some energy experts said the sweeping disruption of oil production, refineries and key import terminals could make it more likely the U.S. government would release oil supplies from its nearly 696-million-barrel Strategic Petroleum Reserve.
A release, which had previously been under consideration, is still on the table, White House spokesman Jay Carney told reporters on Tuesday.
Even with Isaac's disruptions to production, international benchmark Brent crude traded down slightly to $112 a barrel on Tuesday.
Isaac killed at least 23 people and caused significant flooding and damage in Haiti and the Dominican Republic before skirting the southern tip of Florida on Sunday.