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                               AMENDMENT NO. 1 TO
                  REDUCING REVOLVING CREDIT FACILITY AGREEMENT
                               DATED JUNE 5, 1995
                                      AMONG
                             CERTAIN SUBSIDIARIES OF
                          TEEKAY SHIPPING CORPORATION,
                              DEN NORSKE BANK ASA,
                        CHRISTIANIA BANK OG KREDITKASSE,
                     acting through its New York branch, and
                     NEDERLANDSE SCHEEPSHYPOTHEEKBANK N.V.,
                                as Co-Arrangers,
                                       and
                            THE LENDERS THEREIN NAMED

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                                 October 7, 1996


<PAGE>1
                               AMENDMENT NO. 1 TO

                  REDUCING REVOLVING CREDIT FACILITY AGREEMENT
                  --------------------------------------------

     THIS AMENDMENT NO. 1 TO REDUCING  REVOLVING  CREDIT  FACILITY  AGREEMENT is
made the 7th day of October, 1996, and is by and among:

(1)  Those certain  Liberian  corporations  and Bahamian  companies whose names,
     jurisdictions  of incorporation  and registered  addresses are set forth in
     Schedule 1 hereto and which are  signatories  hereto,  as joint and several
     borrowers, (together, the "Borrowers", each a "Borrower");

(2)  Den  norske  Bank ASA  ("DnB"),  Christiania  Bank og  Kreditkasse,  acting
     through its New York branch ("CBK"),  and Nederlandse  Scheepshypotheekbank
     N.V. ("Nedship"),  as co-arrangers  (together,  the "Co-Arrangers",  each a
     "Co-Arranger");

(3)  DnB,  CBK,  Nedship,  Deutsche  Schiffsbank  AG,  DNI Inter  Asset Bank and
     Finance Company Viking (together, the "Lenders", each a "Lender"); and

(4)  DnB, as agent (the "Agent") and security  trustee (the "Security  Trustee")
     for the Lenders.


                               W I T N E S S E T H

WHEREAS:

A.   Pursuant to that certain  reducing credit facility  agreement dated June 6,
     1995 (the "Credit Agreement") between the Borrowers, the Co-Arrangers,  the
     Agent and the Security Trustee, the Lenders made available to the Borrowers
     a reducing revolving credit facility (the "Credit Facility") in the maximum
     principal amount of  US$243,000,000  of which  US$204,000,000  is presently
     available.

B.   The Borrowers  have arranged to refinance  part of the Credit  Facility and
     have requested that the Agent,  on behalf of the Lenders,  release  certain
     Borrowers from their obligations under the Credit Agreement in exchange for
     the permanent reduction of the Credit Facility;

C.   The  Borrowers  have  requested  and the  Lenders  have agreed to amend the
     Credit Agreement pursuant to the terms hereof.

     NOW  THEREFORE,  on  consideration  of the premises and such other good and
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged by the parties, it is hereby agreed as follows:

<PAGE>2

     1.  DEFINITIONS.  Unless  otherwise  defined herein,  words and expressions
defined in the Credit Agreement shall bear the same meanings when used herein.

     2.  REPRESENTATIONS AND WARRANTIES.  Each of the Borrowers hereby reaffirms
each and every  representation  and warranty made by it in the Credit  Agreement
(updated mutatis mutandis).

     3. PERFORMANCE OF COVENANTS. Each of the Borrowers hereby reaffirms that it
has duly performed and observed the covenants and  undertakings set forth in the
Credit  Agreement on its part to be performed,  and covenants and  undertakes to
continue to duly perform and observe such covenants and  undertakings so long as
the Credit Agreement, as amended hereby, shall remain in effect.

     4. REDUCTION IN CREDIT FACILITY.  The Borrowers hereby agree to a reduction
in amounts  available  under the Credit  Facility to $148,000,000 as of the date
hereof and to pro rata  reductions of the  Commitments  on the  Reduction  Dates
pursuant to Section 5.5 of the Credit Facility.

     5. RELEASE OF  BORROWERS.  In exchange for the  permanent  reduction of the
Credit Facility,  the Lenders hereby agree to release VSSI Tokyo Inc. ("Tokyo"),
VSSI Sun Inc.  ("Sun"),  VSSI  Marine Inc.  ("Marine")  and VSSI  Carriers  Inc.
("Carriers")  from their obligations under the Credit Agreement and the security
interest in the collateral  granted to it under or in connection with the Credit
Agreement and under or in connection with the following documents:

          (1)  that certain  Assignment of Earnings  dated June 6, 1995 by Tokyo
               in favor of the Agent;

          (2)  that certain Assignment of Insurances dated June 6, 1995 by Tokyo
               in favor of the Agent;

          (3)  that certain  Assignment of Earnings dated June 6, 1995 by Sun in
               favor of the Agent;

          (4)  that certain  Assignment of Insurances  dated June 6, 1995 by Sun
               in favor of the Agent;

          (5)  that  certain  Assignment  of  Earnings  dated  June  6,  1995 by
               Carriers in favor of the Agent;

          (6)  that  certain  Assignment  of  Insurances  dated  June 6, 1995 by
               Carriers in favor of the Agent;

          (7)  that certain  Assignment of Earnings dated June 6, 1995 by Marine
               in favor of the Agent;

          (8)  that  certain  Assignment  of  Insurances  dated  June 6, 1995 by
               Marine in favor of the Agent; and

          (9)  solely with  respect to the shares of Tokyo,  Sun,  Carriers  and
               Marine,  that certain Pledge  Agreement dated June 6, 1995 by the
               Guarantor in favor of the Agent.

     In addition,  the Lenders hereby authorize the Agent to execute and deliver
releases of  mortgages  with respect to each of the  Mortgages  over the Vessels
owned by Tokyo,  Sun,  Marine and  Carriers  and to record such  releases in the
Office of the  Deputy  Commissioner  of  Maritime  Affairs  of the  Republic  of
Liberia.

     6.  ASSIGNMENTS  BY THE  BORROWER.  By its  execution  and delivery of this
Amendment,  each of the  Borrowers  and the  Guarantor,  by its consent  hereto,
hereby consent and agree that (a) the  Assignments  (other than the  Assignments
listed in Section 5) and the Pledge (to the extent that it has not been released
hereby)  shall  remain  in full  force and  effect  and (b) to the  extent  such
Assignments and Pledge have not been specifically amended in connection with the
transactions contemplated hereby, all references in such documents to the Credit
Agreement shall be deemed to refer to the Credit Agreement as amended hereby.

     7.  GOVERNING  LAW.  This  Amendment  shall be governed by and construed in
accordance  with the laws of the State of New York,  excepting the choice of law
rules of said State.

     8. COUNTERPARTS.  This Amendment may be executed in as many counterparts as
may be deemed  necessary or convenient,  and by the different  parties hereto on
separate counterparts each of which, when so executed,  shall be deemed to be an
original  but all  such  counterparts  shall  constitute  but  one and the  same
agreement.

     9. HEADINGS; AMENDMENT. In this Amendment, Clause headings are inserted for
convenience of reference only and shall be ignored in the interpretation of this
Amendment.  This  agreement  cannot be amended  other than by written  agreement
signed by the parties hereto.



<PAGE>3


     IN WITNESS whereof the parties hereto have caused this Amendment to be duly
executed by their duly authorized  representatives  as of the day and year first
above written.

CHIBA SPIRIT INC.                                        PALM MONARCH INC.
By   /s/ Esther E. Gibson                                By /s/Esther E. Gibson
     --------------------                                   -------------------
     Esther E. Gibson                                          Esther E. Gibson
     Secretary                                                 Secretary

VSSI SUN INC.                                            VSSI DRAKE INC.
By   /s/ Esther E. Gibson                                By /s/Esther E. Gibson
     --------------------                                   -------------------
     Esther E. Gibson                                          Esther E. Gibson
     Secretary                                                 Secretary

VSSI GEMINI INC.                                         VSSI TOKYO INC.
By   /s/ Esther E. Gibson                                By /s/Esther E. Gibson
     --------------------                                   -------------------
      Esther E. Gibson                                         Esther E. Gibson
      Secretary                                                Secretary
                                                               

VSSI CARRIERS INC.                                       VSSI MARINE INC.
By   /s/ Esther E. Gibson                               By /s/Esther E. Gibson 
     --------------------                                   -------------------
      Esther E. Gibson                                         Esther E. Gibson
      Secretary                                                Secretary

MENDANA SPIRIT INC.                                      TASMAN SPIRIT INC.
By   /s/ Esther E. Gibson                               By /s/Esther E. Gibson 
     --------------------                                   -------------------
      Esther E. Gibson                                         Esther E. Gibson
      Secretary                                                Secretary

MUSASHI SPIRIT INC.                                      VANCOUVER SPIRIT INC.
By   /s/ Esther E. Gibson                               By /s/Esther E. Gibson 
     --------------------                                   -------------------
      Esther E. Gibson                                         Esther E. Gibson
      Secretary                                                Secretary

VSSI CONDOR INC.                                         ELCANO SPIRIT INC.
By   /s/ Esther E. Gibson                               By /s/Esther E. Gibson 
     --------------------                                   -------------------
      Esther E. Gibson                                         Esther E. Gibson
      Secretary                                                Secretary




<PAGE>4



DEN  NORSKE  BANK  ASA,  as  Agent,   Security  Trustee,   CHRISTIANIA  BANK  OG
KREDITKASSE,  acting  through its  Co-Arranger  and Lender New York  branch,  as
Co-Arranger and Lender

By /s/ Trond H. Scheie                           By /s/ Hans Chr. Kjelsrud
   -------------------                              ----------------------
  Name:Trond H. Scheie                             Name:Hans Chr. Kjelsrud
  Title: General Manager                           Title: Vice President

NEDERLANDSE SCHEEPSHYPOTHEEKBANK N.V.,           By /s/ Justin F. McCarty, III
as Co-Arranger and Lender                           --------------------------
                                                   Name:Justin F. McCarty, III
                                                   Title:Vice President
By /s/ Susan H. MacCurmac 
   ----------------------                         DEUTSCHE SCHIFFSBANK AG,
  Name: Susan H. MacCurmac                        as Lender               
  Title: Attorney-in-fact                         

DNI INTER ASSET BANK,                            By /s/ Dr. Schiering   
as Lender                                           ----------------------   
                                                   Name: Dr. Schiering
                                                   Title: Sr. General Manager

                                                 By /s/ Zimmermann
                                                    ----------------------   
                                                   Name: Zimmermann
                                                   Title: Manager
                                                 
By /s/ Bert W.A.M. Mulders
   -----------------------                         FINANCE COMPANY VIKING,
  Name: Bert W.A.M. Mulders                        as Lender
  Title: Vice President

                                                 By /s/ S. Angell-Hansen
                                                    ----------------------
                                                   Name:S. Angell-Hansen     
                                                   Title: Ass. Vice President

                                                 By /s/ D. Grimaitre
                                                    ----------------------
                                                   Name: D. Grimaitre      
                                                   Title: Authorized Signatory
                                                 
<PAGE>5



                              CONSENT AND AGREEMENT
                              ---------------------

     The undersigned,  referred to in the foregoing  Amendment No. 1 to Reducing
Revolving  Credit  Facility  Agreement as the  "Guarantor",  hereby consents and
agrees to said  Amendment and to the documents  contemplated  thereby and to the
provisions  contained  therein  relating  to  conditions  to  be  fulfilled  and
obligations to be performed by the undersigned pursuant to or in connection with
said  Agreement  and  reaffirms the  representations,  warranties  and covenants
relating to the undersigned contained in said Agreement.


                                                     TEEKAY SHIPPING CORPORATION



                                                     By /s/ Esther E. Gibson
                                                        --------------------
                                                          Esther E. Gibson
                                                          Secretary


<PAGE>6


                                   SCHEDULE 1
                                   ----------

                                  The Borrowers
                                  -------------

Name                    Jurisdiction of Incorporation     Registered Address
----                    -----------------------------     ------------------
Chiba Spirit Inc.        Commonwealth of the Bahamas      Tradewinds Building
                                                          Bay Street
                                                          P.O. Box SS 6293
                                                          Nassau, The Bahamas

VSSI Sun Inc.            The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Gemini Inc.         The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Carriers Inc.       The Republic of Liberi           80 Broad Street
                                                          Monrovia, Liberia

Mendana Spirit Inc.      The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

Musashi Spirit Inc.      The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Condor Inc.         The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

Palm Monarch Inc.        The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Drake Inc.          The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Tokyo Inc.          The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

VSSI Marine Inc.         The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

Tasman Spirit Inc.       The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

Vancouver Spirit Inc.    The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia

Elcano Spirit Inc.       The Republic of Liberia          80 Broad Street
                                                          Monrovia, Liberia