* Bill weakens but is still a Category 2 hurricane

* Could threaten east Canada oil, gas facilities

* Bermudians warned to expect 'dangerous battering waves' (Updates location of storm, adds details)

By Ruth O'Kelly-Lynch

HAMILTON, Aug 21 (Reuters) - Bermuda advised its residents on Friday to stay off the streets to avoid rain, battering surf and flooding as Hurricane Bill, weakened but still a powerful storm, followed a path between the island and the U.S. East Coast.

The core of the large hurricane was expected to stay over the open Atlantic as it passes west of Bermuda early on Saturday and east of Cape Cod in Massachusetts early on Sunday, before starting to skirt eastern Canada later on Sunday.

Bill could threaten some oil and natural gas platforms and refineries in eastern Canada.

Officials from the Canadian Hurricane Centre said they expect the storm to pass along Nova Scotia's eastern shore on Sunday and hit southeastern areas of Newfoundland and Labrador on Sunday night or early Monday morning. [ID:nN2166253]

The U.S. National Hurricane Center said Bill, the first hurricane of the 2009 Atlantic season, had become a little less organized and its maximum sustained winds had dropped slightly to near 105 mph (165 kph).

It was a Category 2 storm on the five-step Saffir-Simpson scale of hurricane intensity and its strength was expected to fluctuate in the next day or two.

Shops and businesses closed early in Bermuda to allow people in the 20 square mile (53 sq km) British territory, which is a center for the global insurance industry, to go home and prepare for Bill's passing 230 miles (370 km) to the west.

The Bermuda weather service said Bill's storm tide would raise water levels by as much as 3 feet (1 metre) above ground level along the coast, and cause "large and dangerous battering waves".

At 11 p.m. EDT (0300 GMT), the hurricane's center was about 180 miles (295 km) west-southwest of Bermuda.

'STAY CLOSE TO HOME'

Bermudian authorities warned the island's 68,000 inhabitants to stay alert.

"Stay off the roads, stay off the beaches and stay close to home -- please think safety first," Acting Home Affairs Minister Walter Roban urged.

U.S. Secretary of State Hillary Clinton and her husband, former President Bill Clinton, wrapped up a brief private vacation in Bermuda and left the island ahead of the storm on Thursday, the State Department said.

The Miami-based NHC said there was only a 25 percent chance of Bill's tropical storm force winds reaching the extreme southeast of the New England coast in the United States.

It said said large swells generated by the hurricane were already hitting Bermuda and are beginning arrive along the U.S. East Coast. "These swells will spread northward over the weekend ... causing extremely dangerous surf and life-threatening rip currents," the center said.

The U.S. forecasters were also keeping watch on a small disturbance off the Atlantic coast of Africa, 525 miles (840 km) southwest of the Cape Verde Islands.

Any development would be slow and there was less than a 30 percent chance it would grow into a tropical cyclone in the next two days, they said. (Additional reporting by Scott DiSavino in New York, Pascal Fletcher in Miami, Scott Haggett in Calgary and Sue Pleming in Washington; writing by Pascal Fletcher and Jane Sutton; editing by Mohammad Zargham and Chris Wilson)

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