Document:

<PAGE>

                                                                    EXHIBIT 10.3

                            TEEKAY LNG PARTNERS L.P.

                          2005 LONG-TERM INCENTIVE PLAN

SECTION 1. PURPOSE OF THE PLAN.

      The Teekay LNG Partners L.P. 2005 Long-Term Incentive Plan (the "Plan") is
intended to promote the interests of Teekay LNG Partners L.P., a Marshall
Islands limited partnership (the "Partnership"), by providing incentive awards
to employees, consultants, and directors of Teekay GP L.L.C., a Marshall Islands
limited liability company (the "Company"), and its Affiliates who perform
services for the Partnership or its subsidiaries. The Plan is also contemplated
to enhance the ability of the Company and its Affiliates to attract and retain
the services of individuals who are essential for the growth and profitability
of the Partnership and to encourage them to devote their best efforts to
advancing the business of the Partnership and its subsidiaries.

SECTION 2. DEFINITIONS.

      As used in the Plan, the following terms shall have the meanings set forth
below:

      "ACQUISITION PRICE" means the higher of (a) the highest reported sales
price, regular way, of a Unit in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which the Units are listed
or on Nasdaq during the 60-day period prior to and including the date of a
Change of Control or (b) if the Change of Control is the result of a tender or
exchange offer or a negotiated acquisition of Units, the highest price per Unit
paid in such tender or exchange offer or acquisition. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other noncash consideration, the value of such securities
or other noncash consideration shall be determined by the Board in its sole
discretion.

      "AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.

      "AWARD" means an Option, Restricted Unit, Phantom Unit, Unit Appreciation
Right, cash-based award or other incentive payable in cash or in Units as may be

<PAGE>

designated by the Committee from time to time, and shall include any tandem DERs
granted with respect to a Phantom Unit.

      "AWARD AGREEMENT" means the written agreement by which an Award shall be
evidenced.

      "BOARD" means the Board of Directors of the Company.

      "CAUSE" unless otherwise defined in the instrument evidencing the Award or
in a written employment, services or other agreement between the Participant and
the Company or its Affiliate, means dishonesty, fraud, serious misconduct,
unauthorized use or disclosure of confidential information or trade secrets, or
conduct prohibited by criminal law (except minor violations), in each case as
determined by the Committee, whose determination shall be conclusive and
binding.

      "CHANGE OF CONTROL" means, and shall be deemed to have occurred upon the
consummation of one or more of the following events: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of Teekay, the
Partnership, or the Company to any Person and/or its Affiliates, other than to
Teekay, the Partnership, the Company and/or any of their Affiliates; or (ii) the
consolidation, reorganization, merger or other transaction pursuant to which
more than 50% of the voting power of the outstanding equity interests in Teekay,
the Partnership, or the Company cease to be owned by the Persons who own such
interests as of the effective date of the initial public offering of Units.

      "COMMITTEE" means the Corporate Governance Committee of the Board or such
other committee of the Board appointed by the Board to administer the Plan,
which shall be composed of two or more directors, each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3(b)(3) promulgated under
the Exchange Act, or any successor rule.

      "CONSULTANT" means an individual who performs services for the Partnership
or its subsidiaries and is not an Employee or a Director.

      "DER" means a contingent right, granted in tandem with a specific Phantom
Unit, to receive an amount in cash equal to, and at the same time as, the cash
distributions made by the Partnership with respect to a Unit during the period
such Phantom Unit is outstanding.

      "DIRECTOR" means a member of the Board who is not an Employee.

                                      -2-
<PAGE>

      "DISABILITY" unless otherwise defined by the Committee or in the
instrument evidencing the Award or in a written employment, services or other
agreement between the Participant and the Company or its Affiliate, means a
mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to be unable to perform his or
her material duties for the Company or its Affiliate and to be engaged in any
substantial gainful activity, in each case as determined by the Committee, whose
determination shall be conclusive and binding.

      "EMPLOYEE" means any employee of the Company or an Affiliate who performs
services for the Partnership or its subsidiaries.

      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      "FAIR MARKET VALUE" means the closing sales price of a Unit on the date of
determination (or if there is no trading in the Units on such date, on the next
preceding date on which there was trading) as reported in The Wall Street
Journal (or other reporting service approved by the Committee). In the event
Units are not publicly traded at the time a determination of Fair Market Value
is required to be made hereunder, the determination of Fair Market Value shall
be made in good faith by the Committee.

      "GOOD REASON" unless otherwise defined by the Committee or in the
instrument evidencing the Award or in a written employment, services or other
agreement between the Participant and the Company or its Affiliate, means the
Participant's voluntary resignation following any of the following events or
conditions and the failure of the Successor Company to cure such event or
condition within 30 days after receipt of written notice from the Participant:
(a) a change in the Participant's position which materially reduces the
Participant's level of responsibility; (b) a reduction in the Participant's
level of compensation (including base salary, fringe benefits or participation
in any corporate performance based bonus or incentive programs) by more than
15%; or (c) a relocation of the Participant's place of employment by more than
50 miles; provided and only if such change, reduction or relocation is effected
without the Participant's consent.

      "OPTION" means an option to purchase Units granted under the Plan.

      "PARTICIPANT" means any Employee, Consultant or Director granted an Award
under the Plan.

      "PARTNERSHIP AGREEMENT" means the First Amended and Restated Agreement of
Limited Partnership of Teekay LNG Partners L.P., as it may be amended or amended
and restated from time to time.

                                      -3-
<PAGE>

      "PERSON" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

      "PHANTOM UNIT" means a phantom (notional) Unit granted under the Plan
which upon vesting entitles the Participant to receive a Unit or an amount of
cash equal to the Fair Market Value of a Unit, as determined by the Committee in
its discretion.

      "RESTRICTED PERIOD" means the period established by the Committee with
respect to an Award during which the Award remains subject to forfeiture and is
either not exercisable by or payable to the Participant, as the case may be.

      "RESTRICTED UNIT" means a Unit granted under the Plan that is subject to a
Restricted Period.

      "RETIREMENT" unless otherwise defined in the instrument evidencing the
Award or in a written employment, services or other agreement between the
Participant and the Company or its Affiliate, means "Retirement" as defined for
purposes of the Plan by the Committee or, if not so defined, means Termination
of Service on or after the date the Participant reaches the Company's normal
retirement age.

      "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.

      "SEC" means the Securities and Exchange Commission, or any successor
thereto.

      "SUCCESSOR COMPANY" means the surviving company or the successor company,
as applicable, in connection with a Change of Control.

      "TEEKAY" means Teekay Shipping Corporation, a Republic of The Marshall
Islands corporation.

      "TERMINATION OF SERVICE" means a termination of employment or service
relationship with the Company or its Affiliates for any reason, whether
voluntary or involuntary, including by reason of death, Disability or
Retirement. Any question as to whether and when there has been a Termination of
Service for the purposes of an Award and the cause of such Termination of
Service shall be determined by the Committee, whose determination shall be
conclusive and binding. Transfer of a Participant's employment or service
relationship between the Company and any Affiliate shall not be considered a
Termination of Service for purposes of an Award.

                                      -4-
<PAGE>

Unless the Committee determines otherwise, a Termination of Service shall be
deemed to occur if the Participant's employment or service relationship is with
an entity that has ceased to be an Affiliate.

      "UDR" means a distribution made by the Partnership with respect to a
Restricted Unit.

      "UNIT" means a Common Unit of the Partnership.

      "UNIT APPRECIATION RIGHT" means an Award that, upon exercise, entitles the
holder to receive the excess of the Fair Market Value of a Unit on the exercise
date over the base price established for such Unit Appreciation Right. Such
excess may be paid in cash and/or in Units, as determined by the Committee in
its discretion.

SECTION 3. ADMINISTRATION.

      The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
of the Committee who are present at any meeting thereof at which a quorum is
present, or acts unanimously approved by the members of the Committee in
writing, shall be the acts of the Committee. Subject to the following and any
applicable law, the Committee, in its sole discretion, may delegate any or all
of its powers and duties under the Plan, including the power to grant Awards
under the Plan, to the Chief Executive Officer of the Company, subject to such
limitations on such delegated powers and duties as the Committee may impose, if
any. Upon any such delegation all references in the Plan to the "Committee",
other than in Section 8, shall be deemed to include the Chief Executive Officer;
provided, however, that such delegation shall not limit the Chief Executive
Officer's right to receive Awards under the Plan. Notwithstanding the foregoing,
the Chief Executive Officer may not grant Awards to, or take any action with
respect to any Award previously granted to, himself or herself or to any other
person who would be subject to Rule 16b-3 or who is a member of the Board.
Subject to the terms of the Plan and applicable law, and in addition to other
express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to a Participant; (iii)
determine the number of Units to be covered by Awards; (iv) determine the terms
and conditions of any Award; (v) determine whether, to what extent, and under
what circumstances Awards may be settled, exercised, canceled, or forfeited;
(vi) interpret and administer the Plan and any instrument or agreement relating
to an Award made under the Plan; (vii) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (viii) make any other determination
and take any other action that the Committee deems

                                      -5-
<PAGE>

necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive, and binding upon all Persons, including the
Company, the Partnership, any Affiliate of the Company or the Partnership, any
Participant, and any beneficiary of any Award.

SECTION 4. UNITS.

      (a) Limits on Units Deliverable. Subject to adjustment as provided in
Section 4(c), the number of Units available for delivery under the Plan is
1,000,000. There shall not be any limitation on the number of Awards that may be
granted and paid in cash. If any Award is forfeited or otherwise terminates or
is canceled without the delivery of Units, then the Units covered by such Award,
to the extent of such forfeiture, termination, or cancellation, shall again be
Units with respect to which Awards may be granted.

      (b) Sources of Units Deliverable Under Awards. Any Units delivered
pursuant to an Award shall consist, in whole or in part, of Units acquired in
the open market, from any Affiliate, the Partnership or any other Person, or any
combination of the foregoing.

      (c) Adjustments. In the event that the Committee determines that any
distribution (whether in the form of cash, Units, other securities, or other
property), recapitalization, split, reverse split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of Units
or other securities of the Partnership, issuance of warrants or other rights to
purchase Units or other securities of the Partnership, or other similar
transaction or event affects the Units such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Units (or other securities or property) with
respect to which Awards may be granted, (ii) the number and type of Units (or
other securities or property) subject to outstanding Awards, and (iii) the grant
or exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided,
that the number of Units subject to any Award shall always be a whole number.

SECTION 5. ELIGIBILITY.

      Any Employee, Consultant or Director shall be eligible to be designated a
Participant and receive an Award under the Plan.

                                      -6-
<PAGE>

SECTION 6. AWARDS.

      (a) Options. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom Options shall be granted, the
number of Units to be covered by each Option, the purchase price therefor and
the conditions and limitations applicable to the exercise of the Option,
including the following terms and conditions and such additional terms and
conditions, as the Committee shall determine, that are not inconsistent with the
provisions of the Plan.

            (i) Exercise Price. The exercise price per Unit purchasable under an
      Option shall be determined by the Committee at the time the Option is
      granted and may be equal to or more than the Fair Market Value of a Unit
      as of the date of grant.

            (ii) Time and Method of Exercise. The Committee shall determine the
      Restricted Period, i.e., the time or times at which an Option may be
      exercised in whole or in part, which may include, without limitation,
      accelerated vesting upon the achievement of specified performance goals,
      and the method or methods by which payment of the exercise price with
      respect thereto may be made or deemed to have been made, which may
      include, without limitation, (1) cash, (2) check acceptable to the
      Company, (3) to the extent permitted by law, a "broker-assisted cashless
      exercise" through procedures approved by the Company, (4) tendering Units
      owned by the Participant for at least six months (or any shorter period
      necessary to avoid a charge for financial reporting purposes), other
      securities or other property, or (5) any combination thereof, having a
      Fair Market Value on the exercise date equal to the relevant exercise
      price.

            (iii) Termination of Service. The Committee shall establish and set
      forth in each instrument that evidences an Option whether the Option shall
      continue to be exercisable, and the terms and conditions of such exercise,
      after a Termination of Service, any of which provisions may be waived or
      modified by the Committee at any time. If not so established in the
      instrument evidencing the Option, the Option shall be exercisable
      according to the following terms and conditions, which may be waived or
      modified by the Committee at any time:

                  (A) Any portion of an Option that is not vested and
            exercisable on the date of a Participant's Termination of Service
            shall expire on such date.

                                      -7-
<PAGE>

                  (B) Any portion of an Option that is vested and exercisable on
            the date of a Participant's Termination of Service shall expire on
            the earliest to occur of

                        (1) if the Participant's Termination of Service occurs
                  for reasons other than Cause, Retirement, Disability or death,
                  the date that is three months after such Termination of
                  Service;

                        (2) if the Participant's Termination of Service occurs
                  by reason of Retirement or Disability, the five-year
                  anniversary of such Termination of Service;

                        (3) if the Participant's Termination of Service occurs
                  by reason of death, the two-year anniversary of such
                  Termination of Service; and

                        (4) the last day of the maximum term of the Option (the
                  "Option Expiration Date").

                  Notwithstanding the foregoing, if a Participant dies after his
            or her Termination of Service but while an Option is otherwise
            exercisable, the portion of the Option that is vested and
            exercisable on the date of such Termination of Service shall expire
            upon the earlier to occur of (y) the Option Expiration Date and (z)
            the two-year anniversary of the date of death, unless the Committee
            determines otherwise.

                  Also notwithstanding the foregoing, in case a Participant's
            Termination of Service occurs for Cause, all Options granted to the
            Participant shall automatically expire upon first notification to
            the Participant of such termination, unless the Committee determines
            otherwise. If a Participant's employment or service relationship
            with the Company is suspended pending an investigation of whether
            the Participant shall be terminated for Cause, all the Participant's
            rights under any Option shall likewise be suspended during the
            period of investigation. If any facts that would constitute
            termination for Cause are discovered after a Participant's
            Termination of Service, any Option then held by the Participant may
            be immediately terminated by the Committee, in its sole discretion.

                  (C) A Participant's change in status from an employee to a
            consultant, advisor or independent contractor or a change in status
            from a consultant, advisor or independent contractor to an employee
            shall not

                                      -8-
<PAGE>

            be considered a Termination of Service for purposes of this Section
            6(a)(iii).

      (b) Restricted Units and Phantom Units. The Committee shall have the
authority to determine the Employees, Consultants and Directors to whom
Restricted Units or Phantom Units shall be granted, the number of Restricted
Units or Phantom Units to be granted to each such Participant, the duration of
the Restricted Period, the conditions under which the Restricted Units or
Phantom Units may become vested or forfeited, which may include, without
limitation, the accelerated vesting upon the achievement of specified
performance goals, and such other terms and conditions as the Committee may
establish with respect to such Awards, including whether DERs are granted with
respect to the Phantom Units and whether UDRs are attached to the Restricted
Units.

            (i) DERs. To the extent provided by the Committee, in its
      discretion, a grant of Phantom Units may include a tandem DER grant, which
      may provide that such DERs shall be paid directly to the Participant, be
      credited to a bookkeeping account (with or without interest in the
      discretion of the Committee) subject to the same vesting restrictions as
      the tandem Phantom Unit Award, or be subject to such other provisions or
      restrictions as determined by the Committee in its discretion.

            (ii) UDRs. To the extent provided by the Committee, in its
      discretion, a grant of Restricted Units may provide that distributions
      made by the Partnership with respect to the Restricted Units shall be
      subject to the same forfeiture and other restrictions as the Restricted
      Unit and, if restricted, such distributions shall be held, without
      interest, until the Restricted Unit vests or is forfeited with the UDR
      being paid or forfeited at the same time, as the case may be. Absent such
      a restriction on the UDRs in the grant agreement, UDRs shall be paid to
      the holder of the Restricted Unit without restriction.

            (iii) Lapse of Restrictions.

                  (A) Phantom Units. Unless a different payment time is
            specified in the Award Agreement, upon or as soon as reasonably
            practical following the vesting of each Phantom Unit, subject to the
            provisions of Section 9(b), the Participant shall be entitled to
            receive from the Company one Unit or cash equal to the Fair Market
            Value of a Unit, as determined by the Committee in its discretion.

                  (B) Restricted Units. Upon or as soon as reasonably practical
            following the vesting of each Restricted Unit, subject to the
            provisions of Section 9(b), the Participant shall be entitled to
            have the restrictions

                                      -9-
<PAGE>

            removed from his or her Unit certificate or book entry so that the
            Participant then holds an unrestricted Unit.

      (c) Unit Appreciation Rights. The Committee shall have the authority to
determine the Employees, Consultants and Directors to whom Unit Appreciation
Rights shall be granted, the number of Units to be covered by each grant, the
base price thereof and the conditions and limitations applicable to the exercise
of the Unit Appreciation Right, including the following terms and conditions and
such additional terms and conditions, as the Committee shall determine, that are
not inconsistent with the provisions of the Plan.

            (i) Base Price. The base price per Unit Appreciation Right shall be
      determined by the Committee at the time the Unit Appreciation Right is
      granted and may be equal to or more than the Fair Market Value of a Unit
      as of the date of grant.

            (ii) Time of Exercise. The Committee shall determine the Restricted
      Period, i.e., the time or times at which a Unit Appreciation Right may be
      exercised in whole or in part, which may include, without limitation,
      accelerated vesting upon the achievement of specified performance goals.

      (d) Other Unit or Cash-Based Awards. Subject to the terms of the Plan and
such other terms and conditions as the Committee deems appropriate, the
Committee may grant other incentives payable in cash or in Units under the Plan.

      (e) General.

            (i) Awards May Be Granted Separately or Together. Awards may, in the
      discretion of the Committee, be granted either alone or in addition to, in
      tandem with, or in substitution for any other Award granted under the Plan
      or any award granted under any other plan of the Company or any Affiliate.
      Awards granted in addition to or in tandem with other Awards or awards
      granted under any other plan of the Company or any Affiliate may be
      granted either at the same time as or at a different time from the grant
      of such other Awards or awards.

            (ii) Limits on Transfer of Awards.

                  (A) Except as provided in (C) below or as provided in the
            Award Agreement, each Option and Unit Appreciation Right shall be
            exercisable only by the Participant during the Participant's
            lifetime, or by the person to whom the Participant's rights shall
            pass by will or by the applicable laws of descent and distribution.

                                      -10-
<PAGE>

                  (B) Except as provided in (C) below, no Award and no right
            under any such Award may be assigned, alienated, pledged, attached,
            sold or otherwise transferred or encumbered by a Participant
            otherwise than by will or by the applicable laws of descent and
            distribution.

                  (C) To the extent specifically provided by the Committee with
            respect to an Option or Unit Appreciation Right grant, an Option or
            Unit Appreciation Right may be transferred by a Participant without
            consideration to immediate family members or related family trusts,
            limited partnerships or similar entities or on such terms and
            conditions as the Committee may from time to time establish.

            (iii) Term of Awards. The term of each Award shall be for such
      period as may be determined by the Committee.

            (iv) Unit Certificates/Book Entry. All certificates for Units or
      other securities of the Partnership delivered under the Plan pursuant to
      any Award or the exercise thereof shall be subject to such stop transfer
      orders and other restrictions as the Committee may deem advisable under
      the Plan or the rules, regulations, and other requirements of the SEC, any
      stock exchange upon which such Units or other securities are then listed,
      and any applicable federal or state laws, and the Committee may cause a
      legend or legends to be put on any such certificates to make appropriate
      reference to such restrictions. In lieu of delivering certificates for
      Units, the Committee may, in its sole discretion, effect the issuance of
      Units under the Plan in book entry.

            (v) Consideration for Grants. Awards may be granted for such
      consideration, including services, as the Committee determines.

            (vi) Delivery of Units or other Securities and Payment by
      Participant of Consideration. Notwithstanding anything in the Plan or any
      grant agreement to the contrary, delivery of Units pursuant to the
      exercise or vesting of an Award may be deferred for any period during
      which, in the good faith determination of the Committee, the Company is
      not reasonably able to obtain Units to deliver pursuant to such Award
      without violating the rules or regulations of any applicable law or
      securities exchange.

            No Units or other securities shall be delivered pursuant to any
      Award until payment in full of any amount required to be paid pursuant to
      the Plan or the applicable Award Agreement (including, without limitation,
      any exercise price or tax withholding) is received by the Company.

                                      -11-
<PAGE>

SECTION 7. CHANGE OF CONTROL

      (a) Effect of a Change of Control. Notwithstanding any other provision of
the Plan to the contrary, unless the Committee shall determine otherwise at the
time of grant with respect to a particular Award, in the event of a Change of
Control:

            (i) All outstanding Awards shall become fully and immediately vested
      and exercisable, and all applicable deferral and restriction limitations
      shall lapse immediately prior to the Change of Control, unless such Awards
      are converted, assumed, or replaced by the Successor Company.
      Notwithstanding the foregoing, with respect to Options or Unit
      Appreciation Rights, the Committee, in its sole discretion, may instead
      provide that a Participant's outstanding Options and Unit Appreciation
      Rights shall terminate upon consummation of such Change of Control and
      that each such Participant shall receive, in exchange therefor, a cash
      payment equal to the amount (if any) by which (a) the Acquisition Price
      multiplied by the number of Units subject to such outstanding Options or
      Unit Appreciation Rights (whether or not then exercisable) exceeds (b) the
      aggregate exercise price for such Options or Unit Appreciation Rights.

            (ii) For the purposes of this Section 7(a), an Award shall be
      considered converted, assumed or replaced by the Successor Company if
      following the Change of Control the option or right confers the right to
      purchase or receive, for each Unit subject to the Award immediately prior
      to the Change of Control, the consideration (whether units, cash, or other
      securities or property) received in the Change of Control by holders of
      Units for each Unit held on the effective date of the Change of Control
      (and if holders were offered a choice of consideration, the type of
      consideration chosen by the holders of a majority of the outstanding
      Units); provided, however, that if such consideration received in the
      Change of Control is not solely equity of the Successor Company, the
      Committee may, with the consent of the Successor Company, provide for the
      consideration to be received upon the exercise of the Option or the
      vesting of the right, for each Unit subject thereto, to be solely equity
      of the Successor Company substantially equal in fair market value to the
      per Unit consideration received by holders of Units in the Change of
      Control. The determination of such substantial equality of value of
      consideration shall be made by the Committee and its determination shall
      be conclusive and binding.

      (b) Change of Control Cash-Out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change of Control (the "Exercise
Period"), if the Committee shall so determine at, or at any time after, the time
of grant, a Participant holding an Option or Unit Appreciation Right shall have
the right,

                                      -12-
<PAGE>

whether or not the Option or Unit Appreciation Right is fully exercisable and in
lieu of the payment of the purchase price for the Units being purchased under
the Option, and by giving notice to the Company, to elect to surrender all or
part of the Option or Unit Appreciation Right to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Acquisition Price per Unit on the date of such election shall exceed the
exercise price per Unit under the Option or Unit Appreciation Right multiplied
by the number of Units granted under the Option or Unit Appreciation Right as to
which the right granted under this Section 7(b) shall have been exercised.

      (c) Acceleration and Exercise Following a Change of Control. If following
a Change of Control, a Participant's employment is subsequently terminated
without Cause or for Good Reason within 24 months of the Change of Control, any
such Awards that remain unvested shall become fully and immediately vested and
exercisable upon the date of the Participant's termination, all applicable
deferral and restriction limitations shall lapse, and an Award that is an Option
or a Unit Appreciation Right shall remain exercisable until the later of the
date five years after the date of such termination and the date the Award would
have expired by its terms if the Participant's employment had not been
terminated.

SECTION 8. AMENDMENT AND TERMINATION.

      Except to the extent prohibited by applicable law:

      (a) Amendments to the Plan. Except as required by the rules of the
principal securities exchange on which the Units are traded, the Board or the
Committee may amend, alter, suspend, discontinue, or terminate the Plan in any
manner, including increasing the number of Units available for Awards under the
Plan, without the consent of any partner, Participant, other holder or
beneficiary of an Award, or other Person.

      (b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted, provided no
change, other than pursuant to Section 8(c), in any Award shall materially
reduce the benefit to Participant without the consent of such Participant.

      (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in Section 4(c) of the Plan) affecting the Partnership or the
financial statements of the Partnership, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to

                                      -13-
<PAGE>

prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or such Award.

SECTION 9. GENERAL PROVISIONS.

      (a) No Rights to Award. No Person shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment of
Participants. The terms and conditions of Awards need not be the same with
respect to each recipient.

      (b) Tax Withholding. The Company or any Affiliate is authorized to
withhold from any Award, from any payment due or transfer made under any Award
or from any compensation or other amount owing to a Participant the amount (in
cash, Units, other securities, Units that would otherwise be issued pursuant to
such Award or other property) of any applicable taxes payable in respect of the
grant of an Award, its exercise, the lapse of restrictions thereon, or any
payment or transfer under an Award or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy its
withholding obligations for the payment of such taxes.

      (c) No Right to Employment or Services. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, to continue as a Consultant, or to remain on the
Board, as applicable. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment or terminate a consulting relationship,
free from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan, any Award Agreement or other agreement.

      (d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the Republic of the Marshall Islands without regard to its
conflict of laws principles.

      (e) Severability. If any provision of the Plan or any award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, person or award and the remainder of the Plan and any
such Award shall remain in full force and effect.

                                      -14-
<PAGE>

      (f) Other Laws. The Committee may refuse to issue or transfer any Units or
other consideration under an Award if, in its sole discretion, it determines
that the issuance or transfer of such Units or such other consideration might
violate any applicable law or regulation, the rules of the principal securities
exchange on which the Units are then traded, or entitle the Partnership or an
Affiliate to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.

      (g) No Trust or Fund Created. Neither the Plan nor any award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any participating Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any participating Affiliate pursuant to
an Award, such right shall be no greater than the right of any general unsecured
creditor of the Company or any participating Affiliate.

      (h) No Fractional Units. No fractional Units shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Units or whether such fractional Units or any rights thereto
shall be canceled, terminated, or otherwise eliminated.

      (i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

      (j) Facility Payment. Any amounts payable hereunder to any person under
legal disability or who, in the judgment of the Committee, is unable to properly
manage his financial affairs, may be paid to the legal representative of such
person, or may be applied for the benefit of such person in any manner which the
Committee may select, and the Company and its Affiliates shall be relieved of
any further liability for payment of such amounts.

      (k) Participation by Affiliates. In making Awards to Consultants and
Employees employed by an entity other than by the Company, the Committee shall
be acting on behalf of the Affiliate, and to the extent the Partnership has an
obligation to reimburse the Company for compensation paid to Consultants and
Employees for services rendered for the benefit of the Partnership, such
payments or reimbursement payments may be made by the Partnership directly to
the Affiliate, and, if made to the Company, shall be received by the Company as
agent for the Affiliate.

                                      -15-
<PAGE>

      (1) Gender and Number. Words in the masculine gender shall include the
feminine gender, the plural shall include the singular and the singular shall
include the plural.

SECTION 10. TERM OF THE PLAN.

      The Plan shall be effective on the date of its approval by the Board and
shall continue until the earlier of (a) the date terminated by the Board and (b)
the date Units are no longer available for the payment of Awards under the Plan.
However, unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award granted prior to such termination, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under such Award,
shall extend beyond such termination date.

                                      -16-<PAGE>

                                                                    EXHIBIT 10.4

================================================================================

                                OMNIBUS AGREEMENT

                                      AMONG

                           TEEKAY SHIPPING CORPORATION

                                TEEKAY GP L.L.C.

                           TEEKAY LNG OPERATING L.L.C.

                                       AND

                            TEEKAY LNG PARTNERS L.P.

================================================================================

<PAGE>

                                OMNIBUS AGREEMENT

      THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the
Closing Date (as defined herein), among Teekay Shipping Corporation, a Marshall
Islands corporation ("Teekay"), Teekay GP L.L.C., a Marshall Islands limited
liability company (including any permitted successors and assigns under the MLP
Agreement (as defined herein), the "General Partner"), for itself and on behalf
of the MLP in its capacity as general partner, Teekay LNG Operating L.L.C., a
Marshall Islands limited liability company (the "OLLC"), and Teekay LNG Partners
L.P., a Marshall Islands limited partnership (the "MLP").

                                R E C I T A L S:

      1. The Parties desire by their execution of this Agreement to evidence
their understanding with respect to (a) those business opportunities that the
Teekay Entities (as defined herein) will not pursue during the term of this
Agreement and (b) the procedures whereby such business opportunities are to be
offered to the Partnership Group (as defined herein) and accepted or declined.

      2. The Parties desire by their execution of this Agreement to evidence
their understanding with respect to (a) those business opportunities that the
Partnership Group will not pursue during the term of this Agreement and (b) the
procedures whereby such business opportunities are to be offered to Teekay and
accepted or declined.

      3. The Parties desire by their execution of this Agreement to evidence
their understanding, as more fully set forth in Article V, with respect to (a)
Teekay's right of first offer relating to certain Crude Oil Assets (as defined
herein) and (b) the MLP's right of first offer relating to certain LNG Assets
(as defined herein).

      4. The Parties desire by their execution of this Agreement to evidence
their understanding, as more fully set forth in Article VI, with respect to
certain indemnification obligations of Teekay.

      In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

            1.1 DEFINITIONS.

      As used in this Agreement, the following terms shall have the respective
meanings set forth below:

      "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or

                           TEEKAY LNG PARTNERS, L.P.
                                OMNIBUS AGREEMENT

<PAGE>

indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.

      "Agreement" means this Omnibus Agreement, as it may be amended, modified,
or supplemented from time to time in accordance with Section 7.6 hereof.

      "Acquiring Party" has the meaning given such term in Section 4.1(a).

      "Break-up Costs" means the aggregate amount of any and all additional
taxes and other similar costs to (a) the Teekay Entities that would be required
to transfer LNG Assets to a Partnership Group Member pursuant to Section 2.2(a),
separately from the assets acquired by the Teekay Entities in a larger
transaction, or (b) the Partnership Group that would be required to transfer
Crude Oil Assets to a Teekay Entity pursuant to Section 3.2(b), separately from
the assets acquired by the Partnership Group in a larger transaction.

      "Change of Control" means, with respect to any Person (the "Applicable
Person"), any of the following events: (a) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the Applicable Person's assets to any other Person, unless
immediately following such sale, lease, exchange or other transfer such assets
are owned, directly or indirectly, by the Applicable Person; (b) the
consolidation or merger of the Applicable Person with or into another Person
pursuant to a transaction in which the outstanding Voting Securities of the
Applicable Person are changed into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Securities of the Applicable Person are changed into or exchanged for Voting
Securities of the surviving Person or its parent and (ii) the holders of the
Voting Securities of the Applicable Person immediately prior to such transaction
own, directly or indirectly, not less than a majority of the outstanding Voting
Securities of the surviving Person or its parent immediately after such
transaction; and (c) a "person" or "group" (within the meaning of Sections 13(d)
or 14(d)(2) of the Exchange Act) other than Teekay, with respect to the General
Partner, being or becoming the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of more than 50% of all of the then outstanding
Voting Securities of the Applicable Person, except in a merger or consolidation
which would not constitute a Change of Control under clause (b) above.

      "Closing Date" means the date of the closing of the initial public
offering of common units representing limited partner interests in the MLP.

      "Conflicts Committee" means the Conflicts Committee of the Board of
Directors of the General Partner.

      "Contribution Agreement" means that certain Contribution, Conveyance and
Assumption Agreement, dated as of the Closing Date, among Teekay, the General
Partner, the MLP, the OLLC and Teekay Shipping Spain, S.L., together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.

      "Contribution Assets" has the meaning given such term in Section 6.1.

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -2-
<PAGE>

      "control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.

      "Covered Environmental Losses" means all environmental and toxic tort
Losses suffered or incurred by the Partnership Group by reason of or arising out
of:

      (i) any violation or correction of violation of Environmental Laws; or

      (ii) any event or condition associated with ownership or operation by the
Teekay Entities of the Contribution Assets (including, without limitation, the
presence of Hazardous Substances on, under, about or migrating to or from the
Contribution Assets or the disposal or release of Hazardous Substances generated
by operation of the Contribution Assets), including, without limitation, (A) the
cost and expense of any investigation, assessment, evaluation, monitoring,
containment, cleanup, repair, restoration, remediation or other corrective
action required or necessary under Environmental Laws and (B) the cost and
expense for any environmental or toxic tort pre-trial, trial or appellate legal
or litigation support work;

but only to the extent that such violation complained of under clause (i), or
such events or conditions included in clause (ii), occurred before the Closing
Date and were unknown by the MLP and its management at the time of the Closing
Date; and, provided that, in no event shall Losses to the extent arising from a
change in any Environmental Law after the Closing Date be deemed "Covered
Environmental Losses."

      "Crude Oil Assets" means crude oil tankers.

      "Crude Oil Restricted Business" has the meaning given such term in Section
3.1.

      "Environmental Laws" means all federal, state, foreign and local laws,
statutes, rules, regulations, orders, judgments and ordinances relating to
protection of health and safety and the environment, including, without
limitation, the United States federal Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Oil Pollution Act of 1990, the Hazardous Materials
Transportation Act, the Marine Mammal Protection Act, the Endangered Species
Act, the National Environmental Policy Act, and other environmental conservation
and protection laws, each as amended through the Closing Date.

      "Event of Loss" means any of the following events: (a) the actual or
constructive total loss of a Suezmax Asset or the agreed or compromised total
loss of a Suezmax Asset; (b) the destruction of a Suezmax Asset; (c) the damage
to a Suezmax Asset to an extent, determined in good faith by the General Partner
within 90 days after the occurrence of such damage, as shall make repair thereof
uneconomical or shall render such Suezmax Asset permanently unfit for normal use
(other than obsolescence); or (d) the condemnation, confiscation, requisition,
seizure, forfeiture other taking of title to or use of a Suezmax Asset that
shall not be revoked within six

                           TEEKAY LNG PARTNERS, L.P.
                                OMNIBUS AGREEMENT

                                      -3-
<PAGE>

months. An Event of Loss shall be deemed to have occurred: (i) in the event of
the destruction or other actual total loss of a Suezmax Asset, on the date of
such loss; (ii) in the event of a constructive, agreed or compromised total loss
of a Suezmax Asset, on the date of determination of such total loss pursuant to
the relevant insurance policy; (iii) in the case of any event referred to in
clause (c) above, upon such determination by the General Partner; or (iv) in the
case of any event referred in clause (d) above, on the date six months after the
occurrence of such event.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Existing Bid LNG Assets" has the meaning given such term in Section
2.2(b).

      "First Offer Negotiation Period" has the meaning given such term in
Section 5.2.

      "Fully-Built-Up Cost"" means, with respect to an LNG Asset to be acquired
or leased (pursuant to a capitalized lease obligation) by a Partnership Group
Member, the aggregate amount of all expenditures incurred (or to be incurred
prior to delivery to the Partnership Group Member) to acquire or construct and
bring such LNG Asset to the condition and location necessary for its intended
use by the Partnership Group Member.

      "General Partner" is defined in the introduction to this Agreement.

      "Hazardous Substances" means (a) substances which contain substances
defined in or regulated under applicable Environmental Laws; (b) petroleum and
petroleum products, including crude oil and any fractions thereof; (c) natural
gas, synthetic gas and any mixtures thereof; (d) any substances with respect to
which a federal, state, foreign or local agency requires environmental
investigation, monitoring, reporting or remediation; (e) any hazardous waste or
solid waste, within the meaning of any Environmental Law; (f) any solid,
hazardous, dangerous or toxic chemical, material, waste or substance, within the
meaning of and regulated by any Environmental Law; (g) any radioactive material;
and (h) any asbestos-containing materials that represent a health hazard.

      "LNG" means liquefied natural gas.

      "LNG Assets" means LNG carriers.

      "LNG Restricted Business" has the meaning given such term in Section 2.1.

      "Losses" means losses, damages, liabilities, claims, demands, causes of
action, judgments, settlements, fines, penalties, costs and expenses (including,
without limitation, court costs and reasonable attorneys' and experts' fees) of
any and every kind or character; provided, however, that such term shall not
include any special, indirect, incidental or consequential damages.

      "MLP" is defined in the introduction to this Agreement.

                           TEEKAY LNG PARTNERS, L.P.
                                OMNIBUS AGREEMENT

                                      -4-
<PAGE>

      "MLP Agreement" means the First Amended and Restated Agreement of Limited
Partnership of the MLP, dated as of the Closing Date, as such agreement is in
effect on the Closing Date, to which reference is hereby made for all purposes
of this Agreement. No amendment or modification to the MLP Agreement subsequent
to the Closing Date shall be given effect for purposes of this Agreement unless
consented to by each of the Parties to this Agreement.

      "Offer" has the meaning given such term in Section 4.1.

      "Offered Assets" has the meaning given such term in Section 4.1.

      "Offeree" has the meaning given such term in Section 4.1.

      "Offer Period" has the meaning given such term in Section 4.1.

      "OLLC" is defined in the introduction to this Agreement.

      "Parties" means the parties to this Agreement and their successors and
permitted assigns.

      "Partnership Entities" means the General Partner, the MLP, the OLLC and
any Person controlled by any such entity.

      "Partnership Group" means the MLP, the OLLC and any Person controlled by
any such entity.

      "Partnership Group Member" means any Person in the Partnership Group.

      "Person" means an individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or any other
entity.

      "Potential Transferee" has the meaning given such term in Section 5.2.

      "Re-Charter" means the chartering of an LNG Asset or a Crude Oil Asset
pursuant to a time charter contract with a term of at least three (3) years in
the event that its existing charter expires or is terminated early (including,
without limitation, the chartering of any Replacement Suezmax Asset but only if
the charter party for the Replacement Suezmax Asset is not the same charter
party (or an Affiliate of such charter party) as for the replaced Suezmax
Asset).

      "Replacement Suezmax Assets" means any Suezmax tankers that replace any
Suezmax Assets upon (a) an Event of Loss or (b) the replacement of a
time-charter arrangement existing as of the date of this Agreement where the
original Suezmax Asset which was subject to such time charter has been sold or
transferred due to the exercise by the charter party of its right under the time
charter to cause such sale or transfer.

      "Restricted Business" means, as applicable, the LNG Restricted Business or
the Crude Oil Restricted Business.

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -5-
<PAGE>

      "Sale Assets" has the meaning given such term in Section 5.2.

      "Suezmax Assets" means the Suezmax tankers included in the Contribution
Assets and any Replacement Suezmax Assets relating to such original Suezmax
tankers.

      "Teekay Entities" means Teekay and any Person controlled, directly or
indirectly, by Teekay other than the Partnership Entities.

      "Transfer" means any transfer, assignment, sale or other disposition of
any LNG Assets by a Teekay Entity or of any Crude Oil Assets by a Partnership
Group Member; provided, however, that such term shall not include: (a)
transfers, assignments, sales or other dispositions from a Teekay Entity to
another Teekay Entity or from a Partnership Group Member to another Partnership
Group Member; (b) transfers, assignments, sales or other dispositions pursuant
to the terms of any related charter or other agreement with a charter party; (c)
transfer, assigns, sales or other dispositions pursuant to Article II or III of
this Agreement; or (d) grants of security interests in or mortgages or liens on
such LNG Assets or Crude Oil Assets in favor of a bona fide third-party lender
(but not the foreclosing of any such security interest, mortgage or lien).

      "Transfer Notice" has the meaning given such term in Section 5.2.

      "Transferring Party" has the meaning given such term in Section 5.2.

      "Voting Securities" means securities of any class of Person entitling the
holders thereof to vote in the election of members of the board of directors or
other similar governing body of the Person.

                                   ARTICLE II
                      LNG RESTRICTED BUSINESS OPPORTUNITIES

      2.1   LNG RESTRICTED BUSINESSES. Subject to Section 7.4 and except as
permitted by Section 2.2, each of the Teekay Entities shall be prohibited from
engaging in or acquiring or investing in any business (each an "LNG Restricted
Business") that owns, operates or charters LNG Assets.

      2.2   PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 2.1
to the contrary, the Teekay Entities may engage in the following activities
under any of the following circumstances:

         (a) the ownership and/or operation of any LNG Assets that they acquire
after the date of this Agreement if:

            (i) such LNG Assets are acquired in a transaction in which the fair
      market value of such LNG Assets represents less than a majority of the
      fair market value (as determined in good faith by the board of directors
      of Teekay) of the total assets or business acquired; and

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -6-
<PAGE>

            (ii) the Teekay Entity has offered the General Partner the
      opportunity for any of the Partnership Group Members to purchase such LNG
      Assets in accordance with the procedures set forth in Section 4.1 and the
      General Partner, with the approval of the Conflicts Committee, has elected
      not to cause any Partnership Group Member to purchase such LNG Subject
      Assets;

         (b) the ownership and/or operation of LNG Assets that (i) are subject
to an offer by a Teekay Entity as described in Section 2.2(a) or (ii) subject to
Section 4.1, relate to a tender, bid or award for a proposed LNG project that a
Teekay Entity has submitted or received prior to the Closing Date (such LNG
Assets in clause (ii) being referred to herein as "Existing Bid LNG Assets"), in
each case pending the applicable offer of such LNG Assets to the General Partner
and the General Partner's determination pursuant to Section 4.1 whether to
purchase the LNG Assets and, if the General Partner's Conflicts Committee
determines to cause a Partnership Group Member to purchase such LNG Assets,
pending the closing of such purchase;

         (c) the provision by Teekay Entities of ship management services
relating to an LNG Restricted Business;

         (d) the acquisition of up to a 9.9% equity ownership, voting or profit
participation interest in any publicly traded Person that engages in an LNG
Restricted Business;

         (e) the ownership and/or operation by a Teekay Entity of any LNG Assets
with respect to which the General Partner has advised Teekay that the General
Partner has elected, with the approval of the Conflicts Committee, not to cause
a Partnership Group Member to acquire (or seek to acquire) ; or

         (f) the ownership and/or operation by Teekay Entities of the three LNG
carriers subject to the Stock Purchase Agreement dated as of ___________, 2005,
between Teekay and the MLP if the MLP fails to perform its obligations to
purchase (or to cause other Partnership Group Members to purchase) such LNG
carriers under such agreement.

                                  ARTICLE III
                   CRUDE OIL RESTRICTED BUSINESS OPPORTUNITIES

      3.1   CRUDE OIL RESTRICTED BUSINESSES. Subject to Section 7.4 and except
as permitted by Section 3.2, each Partnership Group Member shall be prohibited
from engaging in or acquiring or investing in any business (each a "Crude Oil
Restricted Business") that owns, operates or charters Crude Oil Assets.

      3.2   PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 3.1
to the contrary, the Partnership Group Members may engage in the following
activities under any of the following circumstances:

         (a) the ownership and/or operation of any of the Suezmax Assets,
including any Replacement Suezmax Assets;

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -7-
<PAGE>

         (b) the ownership and/or operation of any Crude Oil Assets that it
acquires after the date of this Agreement if:

            (i) such Crude Oil Assets are acquired in a transaction in which the
      fair market value of such Crude Oil Assets represents less than a majority
      of the fair market value (as determined in good faith by the General
      Partner's Conflicts Committee) of the total assets or business acquired;
      and

            (ii) the Partnership Group Member has offered Teekay the opportunity
      for Teekay or any other Teekay Entity to purchase such Crude Oil Assets in
      accordance with the procedures set forth in Section 4.1 and Teekay has
      elected not to purchase and not to cause another Teekay Entity to purchase
      such Crude Oil Assets;

         (c) the ownership and/or operation of Crude Oil Assets that are subject
to an offer by a Partnership Group Member as described in Section 3.2(b) pending
Teekay's determination whether to purchase the Crude Oil Assets and, if Teekay
determines to cause a Teekay Entity to purchase such Crude Oil Assets , pending
the closing of such purchase;

         (d) the acquisition of up to a 9.9% equity ownership, voting or profit
participation interest in any publicly traded Person that engages in a Crude Oil
Restricted Business; or

         (e) the ownership and/or operation by a Partnership Group Member of any
Crude Oil Assets with respect to which Teekay has previously advised the General
Partner that Teekay has elected not to cause a Teekay Entity to acquire (or seek
to acquire).

                                   ARTICLE IV
                        BUSINESS OPPORTUNITIES PROCEDURES

      4.1   PROCEDURES. In the event that (a) a Partnership Group Member
acquires Crude Oil Assets as part of a larger transaction in accordance with
Section 3.2(b), (b) a Teekay Entity acquires LNG Assets as part of a larger
transaction in accordance with Section 2.2(a), or (c) a Teekay Entity is awarded
a contract for the transportation requirements for all or any portion of any
proposed LNG project for which a Teekay Entity has tendered or submitted a bid
prior to the Closing Date, then (i) not later than 30 days after the
consummation of the acquisition (in the case of clause (a) or (b) above) or (ii)
not later than 180 days before the scheduled delivery date of the relevant
Existing Bid LNG Asset (in the case of clause (c) above), such acquiring Party
(the "Acquiring Party") shall notify (A) Teekay, in the case of an acquisition
by a Partnership Group Member of Crude Oil Assets or (B) the General Partner, in
the case of an acquisition by a Teekay Entity of LNG Assets or proposed
acquisition of Existing Bid LNG Assets of such acquisition (or proposed
acquisition) and offer such party to be notified (each an "Offeree") the
opportunity for the Offeree (or, in the case of Teekay or the General Partner,
any other Teekay Entity or Partnership Group Member, as applicable) to purchase
such Crude Oil Assets, LNG Assets or Existing Bid LNG Assets, as applicable (the
"Offered Assets"), for (I) their fair market value (plus any Break-up Costs), in
the case of clause (a) or (b) above) or (II) their Fully-Built-Up Cost, in the
case of clause (c) above, in each case on commercially reasonable terms in

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -8-
<PAGE>

accordance with this Section (the "Offer"). The Offer shall set forth the
Acquiring Party's proposed terms relating to the purchase of the Offered Assets
by the Offeree (or, in the case of Teekay or the General Partner, any other
Teekay Entity or Partnership Group Member, as applicable), including any
liabilities to be assumed by a Partnership Group Member as part of the Offer,
the amount of which liabilities shall be credited against the applicable
Fully-Built-Up Cost. The Acquiring Party will deliver to the Offeree all
information prepared by or on behalf of or in the possession of such Acquiring
Party relating to the Offered Assets and reasonably requested by the Offeree. As
soon as practicable, but in any event, within 90 days after receipt of such
notification, the Offeree shall notify the Acquiring Party in writing that
either:

         (a) the Offeree has elected not to purchase (or not to cause any of its
permitted Affiliates to purchase) such Offered Assets, in which event the
Acquiring Party and its Affiliates shall, subject to the other terms of this
Agreement, be forever free to continue to own and operate such Offered Assets;
or

         (b) the Offeree has elected to purchase (or to cause any of its
permitted Affiliates to purchase) such Offered Assets, in which event the
following procedures shall be followed:

            (i) After the receipt of the Offer by the Offeree, the Acquiring
      Party and the Offeree shall negotiate in good faith, the fair market value
      (and any Break-up Costs) or the Fully-Built-Up Cost, as applicable, of the
      Offered Assets that are subject to the Offer and the other terms of the
      Offer on which the Offered Assets will be sold to the Offeree, which terms
      may include, in the discretion of the Offeree, the payment of a "success
      fee" or "incentive fee" to be paid pursuant to Section 7.14. If the
      Acquiring Party and the Offeree agree on the fair market value (and any
      Break-up Costs) or the Fully-Built-Up Cost, as applicable, of the Offered
      Assets that are subject to the Offer and the other terms of the Offer
      during the 30-day period (the "Offer Period") after receipt by the
      Acquiring Party of the Offeree's election to purchase (or cause any
      permitted Affiliate of the Offeree to purchase) the Offered Assets, the
      Offeree shall purchase (or cause any of its permitted Affiliates to
      purchase) the Offered Assets on such terms as soon as commercially
      practicable after such agreement has been reached.

            (ii) If the Acquiring Party and the Offeree are unable to agree on
      the fair market value (and any Break-up Costs) or the Fully-Built-Up Cost,
      as applicable, of the Offered Assets that are subject to the Offer or the
      other terms of the Offer during the Offer Period, the Acquiring Party and
      the Offeree will engage an independent ship broker and/or an independent
      investment banking firm prior to the end of the Offer Period to determine
      the fair market value (and any Break-up Costs) or the Fully-Built-Up Cost,
      as applicable, of the Offered Assets and/or the other terms on which the
      Acquiring Party and the Offeree are unable to agree. In determining the
      fair market value or the Fully-Built-Up Cost of the Offered Assets and
      other terms on which the Offered Assets are to be sold, the ship broker or
      investment banking firm, as applicable, will have access to the proposed
      sale and purchase values and terms for the Offer submitted by the
      Acquiring Party and the Offeree, respectively. Such ship broker or
      investment banking

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -9-
<PAGE>

      firm will determine the fair market value (and any Break-up Costs) or
      Fully-Built-Up Cost of the Offered Assets and/or the other terms on which
      the Acquiring Party and the Offeree are unable to agree within 30 days of
      its engagement and furnish the Acquiring Party and the Offeree its
      determination. The fees and expenses of the ship broker or investment
      banking firm, as applicable, will be divided equally between the Acquiring
      Party and the Offeree. Upon receipt of such determination, the Offeree
      will have the option, but not the obligation, to:

                  (A) to purchase the Offered Assets for the fair market value
            or Fully-Built-Up Cost, as applicable, and on the other terms
            determined by the investment banking firm, as soon as commercially
            practicable after determinations have been made; or

                  (B) elect not to purchase such Offered Assets, in which event
            the Acquiring Party and its Affiliates shall, subject to the other
            terms of this Agreement, be forever free to continue to own and
            operate such Offered Assets.

      4.2   SCOPE OF PROHIBITION. If any Party or its Affiliates engages in the
ownership or operation of a Restricted Business pursuant to any of the
exceptions described in Section 2.2 or 3.2, as applicable, the Party and its
Affiliates may not subsequently expand that portion of their business other than
pursuant to the exceptions contained in such Section 2.2 or 3.2. Except as
otherwise provided in this Agreement and the MLP Agreement, each Party and its
Affiliates shall be free to engage in any business activity whatsoever,
including those that may be in direct competition with the Teekay Entities or
the Partnership Group.

      4.3   ENFORCEMENT. Each Party agrees and acknowledges that the other
Parties do not have an adequate remedy at law for the breach by any such Party
of its covenants and agreements set forth in this Article IV, and that any
breach by any such Party of its covenants and agreements set forth in this
Article IV would result in irreparable injury to such other Parties. Each Party
further agrees and acknowledges that any other Party may, in addition to the
other remedies which may be available to such other Party, file a suit in equity
to enjoin such Party from such breach, and consent to the issuance of injunctive
relief to enforce the provisions of Article IV of this Agreement.

                                   ARTICLE V
                              RIGHTS OF FIRST OFFER

      5.1   RIGHTS OF FIRST OFFER.

            (a) The Partnership Group hereby grants Teekay a right of first
offer on any proposed Transfer or Re-Charter by any Partnership Group Member of
any Crude Oil Assets owned or acquired by any Partnership Group Member. The
Teekay Entities hereby grant the MLP a right of first offer on any proposed
Transfer or Re-Charter of any LNG Assets owned or acquired by any Teekay Entity.

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -10-
<PAGE>

            (b) The Parties acknowledge that all potential Transfers or
Re-Charters of Crude Oil Assets or LNG Subject Assets pursuant to this Article V
are subject to obtaining any and all written consents of governmental
authorities and other non-affiliated third parties and to the terms of all
existing agreements in respect of such Crude Oil Assets or LNG Subject Assets,
as applicable.

      5.2   PROCEDURES FOR RIGHTS OF FIRST OFFER. In the event that a
Partnership Group Member or a Teekay Entity (as applicable, the "Transferring
Party") proposes to Transfer or Re-Charter any Crude Oil Assets or LNG Subject
Assets, as applicable (the "Sale Assets"), prior to engaging in any negotiation
for such Transfer or Re-Charter with any non-affiliated third party or otherwise
offering to Transfer or Re-Charter the Sale Assets to any non-affiliated third
party, such Transferring Party shall give Teekay or the MLP, as applicable (the
"Potential Transferee"), written notice setting forth all material terms and
conditions (including, without limitation, the purchase price (in the event of a
Transfer) or the terms of the charter agreement (in the event of a Re-Charter)
and a description of the Sale Asset(s) on which such Transferring Party desires
to Transfer or Re-Charter the Sale Assets (the "Transfer Notice"). The material
terms set forth in the Transfer Notice shall have been approved, in any case
where a Partnership Group Member is the Transferring Party, by the Conflicts
Committee of the General Partner. The Transferring Party then shall be obligated
to negotiate in good faith for a 30-day period following the delivery by the
Transferring Party of the Transfer Notice (the "First Offer Negotiation Period")
to reach an agreement for the Transfer or Re-Charter of such Sale Assets to the
Potential Transferee or any of its Affiliates. If no such agreement with respect
to the Sale Assets is reached during the First Offer Negotiation Period, and the
Transferring Party has not Transferred or Re-Chartered, or agreed in writing to
Transfer or Re-Charter, such Sale Assets to a third party within 180 days after
the end of the First Offer Negotiation Period on terms generally no less
favorable to the Transferring Party than those include in the Transfer Notice,
then the Transferring Party shall not thereafter Transfer or Re-Charter any of
the Sale Assets without first offering such assets to the applicable Potential
Transferee in the manner provided above.

                                   ARTICLE VI
                                INDEMNIFICATION

      6.1   TEEKAY INDEMNIFICATION. Subject to the provisions of Section 6.2 and
Section 6.3, Teekay shall indemnify, defend and hold harmless the Partnership
Group from and against: (a) any Covered Environmental Losses relating to the
assets contributed by the Teekay Entities to the Partnership Group prior to or
on the Closing Date (the "Contribution Assets") to the extent that Teekay is
notified by the General Partner of any such Covered Environmental Losses within
three (3) years after the Closing Date; (b) Losses to the Partnership Group
arising from the failure of the Partnership Group, immediately after the Closing
Date, to be the owner of such valid leasehold interests or fee ownership
interests in and to the Contribution Assets as are necessary to enable the
Partnership Entities to own and operate the Contribution Assets in substantially
the same manner that the Contribution Assets were owned and operated by the
Teekay Entities immediately prior to the Closing Date, to the extent that Teekay
is notified by the General Partner of such Losses within one (1) year after the
Closing Date; (c) Losses to the Partnership Group arising from the failure of
the Partnership Entities to have on the Closing Date

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -11-
<PAGE>

any consent or governmental permit necessary to allow the Partnership Entities
to own or operate the Contribution Assets in substantially the same manner that
the Contribution Assets were owned and operated by the Teekay Entities
immediately prior to the Closing Date, to the extent that Teekay is notified by
the General Partner of such Losses within one (1) year after the Closing Date;
and (d) all federal, state, foreign and local income tax liabilities
attributable to the operation of the Contribution Assets prior to the Closing
Date, including any such income tax liabilities of the Teekay Entities that may
result from the consummation of the formation transactions for the Partnership
Group and the General Partner, to the extent that Teekay is notified by the
General Partner of such liabilities prior to the date 60 days after the
expiration of any applicable statute of limitations, but excluding any federal,
state, foreign and local income taxes reserved on the books of the Partnership
Group on the Closing Date.

      6.2   LIMITATION REGARDING INDEMNIFICATION.

            (a) The aggregate liability of Teekay under Section 6.1(a) above
shall not exceed $10 million. Furthermore, no claim may be made against Teekay
for indemnification pursuant to Section 6.1(a) unless the aggregate dollar
amount of all claims for indemnification pursuant to such section shall exceed
$500,000, in which case Teekay shall be liable for claims for indemnification
only to the extent such aggregate amount exceeds $500,000.

            (b) The aggregate liability of Teekay under Sections 6.1(b) and
6.1(c) above shall not exceed $5 million. Furthermore, no claim may be made
against Teekay for indemnification pursuant to Sections 6.1(b) or 6.1(c) unless
the aggregate dollar amount of all claims for indemnification pursuant to such
sections shall exceed $250,000, in which case Teekay shall be liable for claims
for indemnification only to the extent such aggregate amount exceeds $250,000.

      6.3   INDEMNIFICATION PROCEDURES.

            (a) The members of the Partnership Group agree that within a
reasonable period of time after they become aware of facts giving rise to a
claim for indemnification pursuant to Section 6.1, they will provide notice
thereof in writing to Teekay specifying the nature of and specific basis for
such claim.

            (b) Teekay shall have the right to control all aspects of the
defense of (and any counterclaims with respect to) any claims brought against
the Partnership Group that are covered by the indemnification set forth in
Section 6.1, including, without limitation, the selection of counsel,
determination of whether to appeal any decision of any court and the settling of
any such matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent (which consent shall not be
unreasonably withheld) of the Partnership Group unless it includes a full
release of the Partnership Group from such matter or issues, as the case may be.

            (c) The members of the Partnership Group agree to cooperate fully
with Teekay with respect to all aspects of the defense of any claims covered by
the indemnification set forth in Section 6.1, including, without limitation, the
prompt furnishing to Teekay of any

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -12-
<PAGE>

correspondence or other notice relating thereto that the Partnership Group may
receive, permitting the names of the members of the Partnership Group to be
utilized in connection with such defense, the making available to Teekay of any
files, records or other information of the Partnership Group that Teekay
considers relevant to such defense and the making available to Teekay of any
employees of the Partnership Group; provided, however, that in connection
therewith Teekay agrees to use reasonable efforts to minimize the impact thereof
on the operations of the Partnership Group and further agrees to maintain the
confidentiality of all files, records and other information furnished by a
member of the Partnership Group pursuant to this Section 6.3. In no event shall
the obligation of the Partnership Group to cooperate with Teekay as set forth in
the immediately preceding sentence be construed as imposing upon the Partnership
Group an obligation to hire and pay for counsel in connection with the defense
of any claims covered by the indemnification set forth in this Article VI;
provided, however, that the members of the Partnership Group may, at their own
option, cost and expense, hire and pay for counsel in connection with any such
defense. Teekay agrees to keep any such counsel hired by the Partnership Group
reasonably informed as to the status of any such defense, but Teekay shall have
the right to retain sole control over such defense.

            (d) In determining the amount of any Loss for which any of the
members of the Partnership Group is entitled to indemnification under this
Agreement, (i) the gross amount of the indemnification will be reduced by (A)
any insurance proceeds realized by the Partnership Group, and such correlative
insurance benefit shall be net of any incremental insurance premium that becomes
due and payable by the Partnership Group as a result of such claim, and (B) all
amounts recovered by the Partnership Group under contractual indemnities from
third Persons and (ii) there shall be no grossing up of the amount of the Loss
to account for any tax on the indemnification proceeds. The Partnership hereby
agrees to use commercially reasonable efforts to realize any applicable
insurance proceeds or amounts recoverable under such contractual indemnities.

                                  ARTICLE VII
                                  MISCELLANEOUS

      7.1   CHOICE OF LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
subject to and governed by the laws of ________________, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another jurisdiction. Each party
hereby submits to the jurisdiction of the _____________ courts located in
____________ and to venue ____ in __________.

      7.2   NOTICE. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the mail, addressed to the Person to be notified,
postpaid, and registered or certified with return receipt requested or by
delivering such notice in person or by private-courier, prepaid, or by
telecopier to such party. Notice given by personal delivery or mail shall be
effective upon actual receipt. Couriered notices shall be deemed delivered on
the date the courier represents that delivery will occur. Notice given by
telecopier shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the recipient's next
business day after

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -13-
<PAGE>

receipt if not received during the recipient's normal business hours. All
notices to be sent to a party pursuant to this Agreement shall be sent to or
made at the address set forth below such party's signature to this Agreement, or
at such other address as such party may stipulate to the other parties in the
manner provided in this Section .

      7.3   ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties relating to the matters contained herein, superseding all prior
contracts or agreements, whether oral or written, relating to the matters
contained herein.

      7.4   TERMINATION. The provisions of Articles II, III, IV and V of this
Agreement (but not less than all of such Articles) may be terminated by (a)
Teekay upon notice to the other Parties upon a Change of Control of Teekay and
(b) the General Partner upon notice to the other parties to this Agreement upon
a Change of Control of the General Partner.

      7.5   WAIVER; EFFECT OF WAIVER OR CONSENT. Any party hereto may (a) extend
the time for the performance of any obligation or other act of any other party
hereto or (b) waive compliance with any agreement or condition contained herein.
Except as otherwise specifically provided herein, any such extension or waiver
shall be valid only if set forth in a written instrument duly executed by the
party or parties to be bound thereby; provided, however, that the MLP and the
OLLC may not, without the prior approval of the Conflicts Committee, agree to
any waiver of this Agreement that, in the reasonable discretion of the General
Partner, will adversely affect the holders of Common Units. No waiver or
consent, express or implied, by any party of or to any breach or default by any
Person in the performance by such Person of its obligations hereunder shall be
deemed or construed to be a waiver or consent of or to any other breach or
default in the performance by such Person of the same or any other obligations
of such Person hereunder. Failure on the part of a party to complain of any act
of any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such party of its rights
hereunder until the applicable statute of limitations period has run.

      7.6   AMENDMENT OR MODIFICATION. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto;
provided, however, that the MLP and the OLLC may not, without the prior approval
of the Conflicts Committee, agree to any amendment or modification of this
Agreement that, in the reasonable discretion of the General Partner, will
adversely affect the holders of Common Units of the MLP.

      7.7   ASSIGNMENT. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.

      7.8   COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.

      7.9   SEVERABILITY. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -14-
<PAGE>

Agreement and the application of such provision to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.

      7.10  GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context requires,
the gender of all words used in this Agreement shall include the masculine,
feminine and neuter, and the number of all words shall include the singular and
plural. All references to Article numbers and Section numbers refer to Articles
and Sections of this Agreement.

      7.11  FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

      7.12  WITHHOLDING OR GRANTING OF CONSENT. Each party may, with respect to
any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.

      7.13  LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party to this Agreement shall be required to take
any act, or fail to take any act, under this Agreement if the effect thereof
would be to cause such party to be in violation of any applicable law, statute,
rule or regulation.

      7.14  INCENTIVE FEES. Nothing in this Agreement shall prohibit the MLP
from paying to Teekay or any other Teekay Entity certain incentive fees that are
approved by the Conflicts Committee, in its sole discretion, and which relate to
LNG projects provided to the MLP by Teekay or other Teekay Entities.

      7.15  NEGOTIATION OF RIGHTS OF TEEKAY, LIMITED PARTNERS, ASSIGNEES, AND
THIRD PARTIES. The provisions of this Agreement are enforceable solely by the
parties to this Agreement, and no shareholder of Teekay and no limited partner,
member, assignee or other Person of the MLP or the OLLC shall have the right,
separate and apart from Teekay, the MLP or the OLLC, to enforce any provision of
this Agreement or to compel any party to this Agreement to comply with the terms
of this Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                           TEEKAY LNG PARTNERS, L.P.
                               OMNIBUS AGREEMENT

                                      -15-
<PAGE>

      IN WITNESS WHEREOF, the Parties have executed this Agreement on, and
effective as of, the Closing Date.

                                 TEEKAY SHIPPING CORPORATION

                                 By: ________________________________________
                                     Name:
                                     Title:

                                 Address for Notice:

                                 [ ]
                                 Phone: [ ]
                                 Fax: [  ]
                                 Attention: [ ]

                                 TEEKAY GP L.L.C.

                                 By: ________________________________________
                                     Name:
                                     Title:

                                 Address for Notice:

                                 [ ]
                                 Phone: [ ]
                                 Fax:  [ ]
                                 Attention: [ ]

                            TEEKAY LNG PARTNERS, L.P.
                                OMNIBUS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                              TEEKAY LNG OPERATING L.L.C.

                              By: Teekay LNG Partners L.P.,
                                  its sole member

                                  By: Teekay GP L.L.C.,
                                      its general partner

                                  By: ____________________________________
                                      Name:
                                      Title:

                              Address for Notice:

                              [ ]
                              Phone: [ ]
                              Fax: [ ]
                              Attention: [ ]

                              TEEKAY LNG PARTNERS L.P.

                              By:    Teekay GP L.L.C., its general partner

                                     By: ___________________________________
                                         Name:
                                         Title:

                              Address for Notice:

                              [ ]
                              Phone: [ ]
                              Fax: [ ]
                              Attention: [ ]

                            TEEKAY LNG PARTNERS, L.P.
                                OMNIBUS AGREEMENT
                                 SIGNATURE PAGE

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}]]