* Storm is no longer expected to become a hurricane

* Karen halts half of oil output in U.S. Gulf

By Kathy Finn

NEW ORLEANS, Oct 4 (Reuters) - Authorities issued mandatory evacuation orders for low-lying areas south of New Orleans on Friday as a weakened Tropical Storm Karen closed in on the Louisiana coast after disrupting U.S. energy output in the Gulf of Mexico.

Karen's top winds dropped to 45 mph (75 kph), down from 65 mph (105 kph) a day earlier, although National Hurricane Center forecasters in Miami said the storm was expected to strengthen slightly on Saturday but remain a tropical storm.

Oil output in the U.S. Gulf of Mexico had been cut in half as oil and gas firms shut platforms and evacuated some workers in preparation for the storm. The Gulf accounts for about 19 percent of U.S. oil production and 6 percent of natural gas output.

The mayor of Grand Isle, Louisiana, clamped a mandatory evacuation on the popular vacation and fishing destination on a barrier island south of New Orleans. Evacuations were also ordered in Lafourche Parish in the south, and residents in much of Plaquemines Parish, southeast of New Orleans, were told to be out of their homes before nightfall.

The Sand Dollar Motel and Marina on Grand Isle was a frenzy of activity on Friday as boaters scrambled to get their vessels to higher ground and marina employees secured the premises.

"It's already pouring here and the wind is real strong," said marina owner Susan Gaspard, who added that squalls had been hitting all morning.

Karen's projected path shifted slightly westward and it was expected to move ashore over Louisiana on Saturday night and into Mississippi and then Alabama on Sunday.

By late Friday afternoon, the storm was centered about 235 miles (375 km) south-southwest of the mouth of the Mississippi River. It was moving north-northwest but was forecast to turn to the northeast as it crossed the coast.

At the Port of New Orleans, cargo operations continued normally, but the harbor pilots who guide ships through the mouth of the Mississippi had ceased operations.

"No ships are coming in or out the mouth of the river," said port spokesman Matt Gresham.

Carnival Cruise Line officials announced that two ships that had been due to arrive in New Orleans over the weekend, the Carnival Elation and Carnival Conquest, could be delayed until Monday. Guests onboard were being kept apprised and the ships were sailing at a safe and comfortable distance from the storm, the company said.

'GOOD SQUALL'

The governors of Louisiana, Mississippi, Florida and Alabama declared states of emergency to speed storm preparations and the Federal Emergency Management Agency recalled some furloughed workers to assist.