SPT

Skaugen PetroTrans (SPT) is the world’s foremost full service lightering company, providing ship-to-ship transfer of crude oil, mainly in the Gulf of Mexico. Operated as a 50/50 joint venture between I.M Skaugen and Teekay Shipping Corporation, SPT handles around over one million barrels of oil a day - equating to approximately 10 per cent of US sea-borne oil imports.

SPT generated an EBITDA of USD-0.6 million in 2006 vs. USD5 million in 2005.

Full service lightering volumes were reduced to match our capacity, which was reduced due to the high cost of tankers. Support services - such as use of our personnel to oversee lightering operations and use of our lightering equipment - increased markedly through the summer period.

In July SPT purchased a UK based lightering support company, SPT Marine Services (previously Melbourne Marine Services). We have long been keen to develop our industry-leading lightering operations outside our traditional territories and this acquisition allows us to expand our services into Europe, Russia and West African markets.

SPT also undertook a historic "first" for the industry during the year - and reinforced our efforts to advance technological and commercial innovations in the industry. In August we successfully performed the first ever, commercial ship-to-ship transfer of LNG. SPT is also working closely with industry partner Excelerate Energy to build our mutual competence and expertise in this field.

The forecast for the growth of LNG consumption over the next decade, particularly in the US , means lightering should become an important part of the LNG logistics chain. Our early credentials put us at the forefront of this emerging industry.

Furthermore, we will be taking delivery of six new Aframax tankers, starting in 2Q07 through early 2008, on a 10-year fixed bareboat charter agreement with a five year option to prolong the bareboat charter to supplement a core time charter fleet of about eight vessels. They will be delivered to us at an agreed rate which is now very favorable - meaning we can more effectively manage our costs and make our business more competitive.

We believe that our expansion into new services and markets, combined with the new additions to our fleet, puts us in a good position to develop our financial and operational activities going forward.