* Storm to hit city on 7th anniversary of Katrina
* Nearly all Gulf of Mexico oil production halted
* Storm surge causes flooding
* Hurricane-force winds extend 60 miles from storm center
By Scott Malone and Kathy Finn
NEW ORLEANS, Aug 28 (Reuters) - Hurricane Isaac surged ashore in southern Louisiana on Tuesday, packing high winds and heavy rains, and was set to hit New Orleans seven years to the day after Hurricane Katrina devastated the city.
Isaac is the first hurricane to make landfall in the United States this season. While not packing nearly the power of Katrina -- which was a Category 3 storm when it slammed the Crescent City on Aug. 29, 2005 -- Category 1 Isaac was nevertheless a powerful reminder of New Orleans' vulnerability.
The hurricane will be the first test for multibillion-dollar flood defenses built after levees failed under Katrina's storm surge and left large parts of New Orleans under water.
The National Hurricane Center warned late on Tuesday that Isaac and its 80 mph (130kph) winds were producing a dangerous storm surge and that flooding from rainfall would follow.
Isaac will also test the resolve of officials and preparedness of a city where some 1,800 died seven years ago in what was the costliest natural disaster in U.S. history.
Earlier on Tuesday, officials from Mitch Landrieu, the mayor of New Orleans, to Louisiana Governor Bobby Jindal, to U.S. President Barack Obama, scrambled to get ahead of the storm's impact, mindful of the chaos and botched relief efforts in the wake of Katrina.
Landrieu assured residents that this time around, "your city is secure," and said emergency services were ready for search and rescue missions, if needed.
"We're in the heart of this fight," Landrieu told an evening news conference. "We are in the hunker-down phase."
About 1,000 U.S. National Guard troops in military vehicles took up positions in the mostly deserted streets of New Orleans, brandishing automatic assault rifles to ward off any threat of the looting that spread after Katrina. Police cars patrolled darkened streets with blue lights flashing.
Obama urged residents to take cover and heed warnings, saying that now was "not the time to tempt fate." . He issued emergency declarations for Louisiana and Mississippi earlier this week.
PUTTING NEW SYSTEMS TO THE TEST
Isaac's arrival on the seventh anniversary of Katrina cast a spotlight on the enduring struggle of the iconic American city and its residents.
When the 2005 storm hit, the city endured days of chaos, including widespread looting and other crimes. Hundreds drowned while residents waited for days to be plucked from their rooftops by Coast Guard helicopters.
Hundreds of thousands of residents, their homes destroyed by flooding or made uninhabitable by mold, were moved temporarily to Texas and other states. Thousands along the Gulf Coast lived in government provided trailers for months or years afterwards.
After Katrina, the Army Corps of Engineers built a $14.5 billion defense system of walls, floodgates, levees and pumps designed to protect the city from a massive tidal surge like that caused by Katrina.
On Tuesday morning, army engineers closed the massive new floodgate at Lake Borgne, east of New Orleans, for the first time. It is largest storm-surge barrier in the world.
Officials have confidently predicted that the systems will stand up to the test, although residents have been wary.
Most of the city's Lower Ninth ward, scarred by memories of Katrina, was deserted on Tuesday. Residents who did not evacuate stocked up on water, food and fuel.
"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.
Residents of Louisiana's low-lying Plaquemines Parish, where some flooding was already happening on Tuesday, were anxious about their homes.
Avenal Terrance, 52, who was evacuated early on Tuesday, is hoping the levee holds. "I'm living in an old trailer, not a new one, and I just hope and pray that the storm doesn't take it," she said.
Others decided to stick it out, some heading for local bars for a spot of courage before hunkering down at home.
"I was here for Hurricane Katrina, so I feel I've seen the worst. This one won't be that bad," said Scott Young, 56.
Young said he had laid in a supply of ice and a tank of fuel for his gas grill, and added that the city seemed better prepared this time around. He said the presence of police and troops made him feel safe.
At 10 p.m. CDT (0300 GMT), the Hurricane Center said Isaac was centered about 75 miles (120 km) southeast of New Orleans with top sustained winds of 80 miles per hour (130 kph).
The storm was traveling at a relatively slow 8 mph (13 kph), which was a worry as slow-moving cyclones can bring higher rainfall. Landrieu said the city's pumping capacity could cope with about one inch of rain per hour.
EVACUATION ORDERS, STORM SURGES
Although it only reached hurricane strength 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 and heading across the warm waters of the Gulf of Mexico.
Isaac spared Tampa, Florida, where the Republican National Convention is being held, but it forced party leaders to abandon most of Monday's program, and to tone down what some might see as excess jubilation about Mitt Romney's presidential nomination at a time Gulf Coast when residents faced danger.
The impact of the storm was felt along the coasts of Louisiana, Mississippi and Alabama.
Authorities have urged thousands of residents in low-lying areas to leave, warning that Isaac 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).
"The pecan trees are rocking and rolling...The wind is knocking dead limbs off the trees," said Doris Sherman of Ocean Springs, Mississippi. "But we haven't had a lot of rain yet. It is supposed to be coming. I can feel it coming."
Rainfall accumulations, potentially totaling as much as 20 inches (50 cm) in some areas, could trigger widespread flooding.
Some 200,000 residents of southeast Louisiana had lost power as of late Tuesday.
Storm surges caused flooding in Louisiana and winds gusted to 62 miles per hour (96 kph) in New Orleans, the National Hurricane Center said in an advisory.
U.S. ENERGY OUTPUT DISRUPTED
Energy companies along the Gulf Coast refining center braced for the storm's impact by shuttering some plants and running others at reduced rates ahead of Isaac's landfall.
Oil production in the U.S. Gulf of Mexico nearly ground to a halt and ports and coastal refineries curtailed operations.
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 installations was reported, some energy experts said the sweeping disruption of oil production, refineries and key import terminals could make it more likely that the U.S. government will 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.
International benchmark Brent crude traded down slightly to $112 a barrel on Tuesday.
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