(Repeats, adds missing word "oil" to headline and first bullet point)
* U.S. shale oil output to double, Hess says
* Bakken costs rising on weather, floods
* Libyan oil production to return only slowly
* U.S. refineries to suffer as crude spread shrinks
STAMFORD, Conn,, Sept 27 (Reuters) - Companies that waged big bets on the U.S. shale oil bonanza will see output double in the coming few years, but the costs to tap the fields are rising, Hess Corp (HES.N) Chief Executive John Hess said on Tuesday.
Oil output from shale prospects in unconventional sources from North Dakota to Texas could reach 1.5 million to 2 million barrels-per-day (bpd) in the coming five to seven years, twice as much as the 700,000 bpd currently produced in these places, Hess told an IHS Herold energy conference.
"This is a game changer. It is lower risk with more returns. It's great to have on your portfolio, especially being based in the (United States)" he said.
Hess is the largest gas producer and the third-largest oil producer in North Dakota, with over 40,000 barrels of oil equivalent per day.
Nonetheless, Hess said, regulations will pose the greatest risk to the exploding growth in output.
The federal government is currently evaluating new regulations on chemicals used in hydraulic fracturing-- the technology that spawned the shale revolution--although industry representatives argue state governments are best equipped to oversee their operations.
Rising costs for fracking and other drilling also present more risks to shale drilling in North Dakota and Texas, he said, since harsh winter weather and record spring flooding have forced the company to spend $7 to $10 million on each well in the region, the CEO added.
Industry experts had previously pegged Bakken well costs at $6 million per well.
Hess also said he was sceptical that oil production in Libya would return to levels seen before the fighting that dislodged Muammar Gaddafi.
Hess, whose company produced 22,000 bpd of crude in Libya, or 8 percent of its total output, said the uncertain security in the country made it unlikely that foreign companies would rush to put people back at facilities there.
Earlier on Tuesday, Libya's port authority chief told Reuters the first Libyan crude cargo to be shipped in months sailed from the eastern port of Marsa el Hariga on Sept. 25 bound for Italy.
Hess also warned the price advantage that many of the land-locked U.S. refineries have enjoyed will disappear in the next two to three years as prices for WTI crude oil move back toward the international benchmark prices.
"In the long term, I think the refining industry has some serious economic challenges," he said.
The U.S. benchmark WTI crude is currently priced about $22.50 per barrel below the Brent crude price, largely due to rising output of supplies in the Bakken and shipments from Canada that have created a glut of oil at storage facilities in Oklahoma.
Hess said that a poor refining outlook appeared to be the reason behind some integrated companies' decision to split off their refining arms from their oil and gas producing businesses.
Marathon Oil Corp (MRO.N) split off its refining and marketing operations into Marathon Petroleum Corp (MPC.N) in June, and ConocoPhillips (COP.N) has said it planned to separate into two businesses next year.
Hess currently has a joint venture in the St. Croix refinery in the Virgin Islands and operates a gasoline producing refinery in New Jersey.
The company has been steadily shifting its focus away from refining for years, he said, and currently directs less than 2 percent of its spending to that business. (By Selam Gebrekidan and Matt Daily)