SUMMARY

      This summary highlights information contained elsewhere in this prospectus. Unless we otherwise specify, all information and data in this prospectus about our business and fleet refer to the business and fleet that will be contributed to us as of the closing of this offering. You should read the entire prospectus carefully, including the historical and pro forma financial statements and the notes to those financial statements. The information presented in this prospectus assumes (a) an initial public offering price of $20.00 per unit and (b) unless otherwise noted, that the underwriters’ over-allotment option is not exercised. You should read “Risk Factors” for information about important factors that you should consider before buying the common units.

      All references in this prospectus to “our,” “we,” “us” and “the Partnership” refer to Teekay Offshore Partners L.P. and its subsidiaries, including Teekay Offshore Operating L.P. (or OPCO). All references in this prospectus to “OPCO” when used in a historical context refer to OPCO’s predecessor companies and their subsidiaries, and when used in the present tense or prospectively refer to OPCO and its subsidiaries, collectively, or to OPCO individually, as the context may require. Please read Note 1 to the audited combined consolidated financial statements of Teekay Offshore Partners Predecessor included elsewhere in this prospectus for a description of OPCO’s predecessor companies. Upon the completion of this offering, Teekay Offshore Partners L.P. will own a 25.99% limited partner interest in OPCO as well as the 0.01% general partner interest in OPCO through its ownership of OPCO’s general partner, Teekay Offshore Operating GP L.L.C. References in this prospectus to “Teekay Shipping Corporation” refer, depending upon the context, to Teekay Shipping Corporation and/or any one or more of its subsidiaries. References in this prospectus to “our general partner” refer to Teekay Offshore GP L.L.C. References to “Petrojarl ASA” refer to Petrojarl ASA, which was renamed Teekay Petrojarl ASA on December 1, 2006. We include a glossary of some of the terms used in this prospectus in Appendix B. Unless otherwise indicated, all references to “dollars” and “$” in this prospectus are to, and amounts are presented in, U.S. Dollars.

Teekay Offshore Partners L.P.

      We are an international provider of marine transportation and storage services to the offshore oil industry. We were formed in August 2006 by Teekay Shipping Corporation (NYSE: TK), a leading provider of marine services to the global oil and natural gas industries, to further develop its operations in the offshore market. We plan to leverage the expertise, relationships and reputation of Teekay Shipping Corporation and our controlled affiliates to pursue growth opportunities in this market. Upon the closing of this offering, Teekay Shipping Corporation will own a 65.0% interest in us, including a 2.0% general partner interest through our general partner, which Teekay Shipping Corporation owns and controls.

      Upon the closing of this offering, we will own a 26.0% interest in Teekay Offshore Operating L.P. (or OPCO ), which owns and operates the world’s largest fleet of shuttle tankers, in addition to floating storage and offtake (or FSO ) units and double-hull conventional oil tankers. We will control OPCO through our ownership of its general partner, and Teekay Shipping Corporation will own the remaining 74.0% interest in OPCO.

      In addition to OPCO’s activities, we intend to expand our marine transportation and storage services to include floating production, storage and offloading (or FPSO ) units, which produce and process oil offshore in addition to providing storage and offtake.

      OPCO’s fleet currently consists of:

        A shuttle tanker is a specialized ship designed to transport crude oil and condensates from offshore oil field installations to onshore terminals and refineries. Shuttle tankers are equipped with sophisticated loading and positioning systems that allow the vessels to load cargo safely and reliably

from oil field installations, even in harsh weather conditions. Demand for shuttle tanker services is projected to grow significantly due to expected growth in worldwide offshore crude oil production, particularly in deep water and remote areas. According to Douglas-Westwood Ltd., worldwide oil transported via shuttle tankers is expected to increase from approximately 3.3 million barrels per day in 2006 to approximately 4.5 million barrels per day in 2015.

      In June 2006, Teekay Shipping Corporation entered into an agreement with Petrojarl ASA to form a joint venture company called Teekay Petrojarl Offshore through which the joint venture partners have agreed to exclusively pursue new opportunities involving FPSO and FSO units. Petrojarl ASA is one of the largest independent FPSO operators and deployed the first FPSO in the North Sea in 1986. Pursuant to an omnibus agreement we will enter into upon the closing of this offering, Teekay Shipping Corporation will offer to us its interest in certain future FPSO and FSO projects under the joint venture agreement. On October 18, 2006, Teekay Shipping Corporation completed a tender offer for the outstanding shares of Petrojarl ASA, resulting in Teekay Shipping Corporation owning a majority of, and having the ability to control, Petrojarl. Demand for FPSO units is projected to grow significantly due to expected growth in worldwide crude oil production, particularly in deep waters and remote areas. According to IMA, over the next five years the world FPSO fleet will increase from 111 units to between 198 and 209 units.

      Under the omnibus agreement, Teekay Shipping Corporation also will be obligated to offer to us prior to the end of the second quarter of 2008 the opportunity to acquire two shuttle tankers and one FSO unit currently undergoing conversion from conventional oil tankers or being upgraded. The two shuttle tankers will operate under 13-year bareboat charters and the FSO unit will operate under a 7-year time charter. Teekay Shipping Corporation will also be obligated to offer to us under the omnibus agreement certain other shuttle tankers, FSO units and FPSO units it may acquire in the future.

      Teekay Shipping Corporation formed OPCO in September 2006 and has subsequently transferred to it a majority of OPCO’s operating assets. These transactions and additional transactions relating to OPCO that will occur prior to or at the closing of this offering and described in this prospectus will affect OPCO’s results compared to the historical results of its predecessors. The most significant of these changes are described in this prospectus under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Items You Should Consider When Evaluating Our Historical Financial Performance and Assessing Our Future Prospects.”

Business Opportunities

      We believe the following industry dynamics create a favorable environment to expand our business:

      We can provide no assurance, however, that the industry dynamics described above will continue or that we will be able to expand our business.

Competitive Strengths

      We believe that we are well positioned to execute our business strategies successfully because of the following competitive strengths:

Business Strategies

      Our primary business objective is to increase distributions per unit by executing the following strategies:

Risk Factors

      An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. Those risks are described under the caption “Risk Factors” immediately following this summary beginning on page 18.

The Transactions

      We were recently formed as a Marshall Islands limited partnership to hold an interest in OPCO and its subsidiaries, which own and operate a fleet of shuttle tankers, FSO units and conventional oil tankers, and to hold interests in other entities through which we may expand our business.

      Prior to the closing of this offering, Teekay Shipping Corporation and OPCO have entered, or will enter, into transactions by which, among other things, OPCO will acquire its fleet of 36 shuttle tankers, four FSO units and nine Aframax-class conventional tankers. In addition, in October 2006 OPCO amended an existing credit facility to provide for borrowings of up to $455 million and entered into a new $940 million revolving credit facility. Prior to the closing, OPCO will pay a dividend to Teekay Shipping Corporation in an amount sufficient to decrease OPCO’s cash balance to $90.0 million, which dividend would have been $154.1 million as of June 30, 2006 and which we anticipate will be approximately $160 million based on our estimated cash balance at the closing of this offering. For a description of these transactions, please read Notes 1 and 3 to our pro forma consolidated financial statements included elsewhere in this prospectus.

      At or prior to the closing of this offering, the following transactions will occur to transfer to us a 26.0% interest in OPCO and effect the public offering of our common units:

      In addition, at or prior to the closing of this offering:

      For further details on our agreements with Teekay Shipping Corporation and OPCO’s credit facilities, please read “Certain Relationships and Related Party Transactions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities.”

      We are a holding entity and will conduct our operations and business through controlled affiliates, as is common with publicly traded limited partnerships, to maximize operational flexibility. Initially, we will conduct all of our operations through OPCO and its subsidiaries. We intend to conduct additional operations in the future through wholly owned subsidiaries.

      The following diagram depicts our organizational structure after giving effect to the transactions described above:

Management of Teekay Offshore Partners L.P.

      Our general partner, Teekay Offshore GP L.L.C., a Marshall Islands limited liability company, will manage our operations and activities. The Chief Executive Officer and Chief Financial Officer and three of the directors of Teekay Offshore GP L.L.C. also serve as executive officers or directors of Teekay Shipping Corporation and of the general partner of Teekay LNG Partners L.P. (NYSE: TGP). For more information about these individuals, please read “Management — Directors and Executive Officers of Teekay Offshore GP L.L.C.”

      Our wholly owned subsidiary, Teekay Offshore Operating GP L.L.C., the general partner of OPCO, will manage OPCO’s operations and activities. The board of directors of our general partner has the authority to appoint and elect the directors of Teekay Offshore Operating GP L.L.C., who in turn appoint the officers of Teekay Offshore Operating GP L.L.C. Certain directors and officers of our general partner also serve as directors or executive officers of OPCO’s general partner. The partnership agreement of OPCO will provide that certain actions relating to OPCO must be approved by the board of directors of our general partner on our behalf. These actions will include, among other things, establishing maintenance capital and other cash reserves and the determination of the amount of quarterly distributions by OPCO to its partners, including us. Please read “Certain Relationships and Related Party Transactions — OPCO Partnership Agreement and Teekay Offshore Operating GP L.L.C. Limited Liability Company Agreement.”

      Unlike shareholders in a publicly traded corporation, our unitholders will not be entitled to elect our general partner or its directors.

      Our general partner will not receive any management fee or other compensation in connection with its management of our business, but it will be entitled to be reimbursed for all direct and indirect expenses incurred on our behalf. Our general partner will also be entitled to distributions on its general partner interest and, if specified requirements are met, on its incentive distribution rights. Please read “Certain Relationships and Related Party Transactions” and “Management — Reimbursement of Expenses of Our General Partner.”

      We, OPCO and operating subsidiaries of OPCO will enter into various services agreements with certain subsidiaries of Teekay Shipping Corporation pursuant to which those subsidiaries will provide to us and OPCO all of our and OPCO’s administrative services and to OPCO’s operating subsidiaries substantially all of their strategic consulting, advisory, ship management, technical and/or administrative services. Please read “Certain Relationships and Related Party Transactions — Advisory and Administrative Services Agreements.”

Principal Executive Offices and Internet Address; SEC Filing Requirements

      Our principal executive offices are located at Bayside House, Bayside Executive Park, West Bay Street and Blake Road, Nassau, Commonwealth of The Bahamas, and our phone number is (242) 502-8820. Our website is located at http://www.teekayoffshore.com. We expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website, including Teekay Shipping Corporation’s website, is not incorporated by reference into this prospectus and does not constitute a part of this prospectus. Please see “Where You Can Find More Information” for an explanation of our reporting requirements as a foreign private issuer.

Summary of Conflicts of Interest and Fiduciary Duties

      Teekay Offshore GP L.L.C., our general partner, has a legal duty to manage us in a manner beneficial to our unitholders. This legal duty is commonly referred to as a “fiduciary” duty. However, because Teekay Offshore GP L.L.C. is owned by Teekay Shipping Corporation, the officers and directors of Teekay Offshore GP L.L.C. also have fiduciary duties to manage the business of Teekay Offshore GP L.L.C. in a manner beneficial to Teekay Shipping Corporation. In addition:

Please read “Management” and “Certain Relationships and Related Party Transactions.”

      The general partner of OPCO has a fiduciary duty to manage OPCO in a manner beneficial to us, as the general partner’s owner, and to OPCO’s limited partners, including us and Teekay Shipping Corporation. Our general partner’s board of directors will appoint the directors of OPCO’s general partner. The board of directors of our general partner, which includes some of the directors and executive officers of Teekay Shipping Corporation, may resolve any conflict between the interests of us and our unitholders and Teekay Shipping Corporation and its affiliates, and has broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not be in the best interest of us or our unitholders.

      As a result of these relationships, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and Teekay Shipping Corporation and its other affiliates, including our general partner and OPCO, on the other hand. For a more detailed description of the conflicts of interest and fiduciary duties of our general partner, please read “Conflicts of Interest and Fiduciary Duties.”

      In addition, our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be held under Marshall Islands law. For example, our partnership agreement limits the liability and reduces the fiduciary duties of our general partner to our unitholders. Our partnership agreement also restricts the remedies available to unitholders. By purchasing a common unit, you are agreeing to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner, all as set forth in the partnership agreement. Please read “Conflicts of Interest and Fiduciary Duties” for a description of the fiduciary duties that would otherwise be imposed on our general partner under Marshall Islands law, the material modifications of those duties contained in our partnership agreement and certain legal rights and remedies available to our unitholders under Marshall Islands law.

      For a description of other relationships we have with our affiliates, please read “Certain Relationships and Related Party Transactions.”

Summary Historical and Pro Forma Financial and Operating Data

      The following table presents, in each case for the periods and as at the dates indicated, summary:

      The summary historical financial and operating data has been prepared on the following basis:

      The unaudited pro forma financial data of Teekay Offshore Partners L.P. presented for the year ended December 31, 2005 and as at and for the six months ended June 30, 2006 are derived from our unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The pro forma income statement data for the year ended December 31, 2005 and for the six months ended June 30, 2006 assumes this offering and related transactions occurred on January 1, 2005. The pro forma balance sheet data assumes this offering and related transactions occurred on June 30, 2006. A more complete explanation of the pro forma data can be found in our unaudited pro forma consolidated financial statements.

      Net voyage revenues ( i.e. voyage revenues less voyage expenses) for Teekay Offshore Partners Predecessor for 2005, the six months ended June 30, 2005 and the six months ended June 30, 2006 were $733.0 million, $367.9 million and $338.4 million, respectively. The decrease in net voyage revenues from the first half of 2005 to the first half of 2006 was primarily due to:

      Net income for Teekay Offshore Partners Predecessor for 2005 and the six months ended June 30, 2005 was $84.7 million and $69.2 million, respectively. Teekay Offshore Partners Predecessor incurred a loss of $16.8 million for the six months ended June 30, 2006. The change from net income to a net loss from the first half of 2005 to the first half of 2006 was primarily due to:

      Although results for the third quarter ended September 30, 2006 are not yet available, we expect higher net income than for the second quarter ended June 30, 2006, primarily due to higher revenues from our shuttle tanker segment and a small gain from the sale of an older shuttle tanker. Higher revenues expected in our shuttle tanker segment in the third quarter are primarily due to higher utilization of the shuttle tanker fleet as a result of the completion during the second quarter of seasonal maintenance of certain North Sea offshore oil facilities. In addition, time charter rates on certain shuttle tankers increased as a result of recent contract renewals at higher rates. We are not aware of any material events that occurred in the third quarter that we believe will have an adverse impact on the third quarter financial results or that change our forecast for the year ending December 31, 2007.

      The following table includes two financial measures, net voyage revenues and EBITDA, which we use in our business and are not calculated or presented in accordance with GAAP. We explain these measures and reconcile them to their most directly comparable financial measures calculated and presented in accordance with GAAP in “— Non-GAAP Financial Measures” below.

      The following table should be read together with, and is qualified in its entirety by reference to, the historical combined consolidated and unaudited pro forma consolidated financial statements and the accompanying notes included elsewhere in this prospectus. The table should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      This discussion presents:

      Net Voyage Revenues. Consistent with general practice in the shipping industry, we use net voyage revenues (defined as voyage revenues less voyage expenses) as a measure of equating revenues generated from voyage charters to revenues generated from time charters, which assists us in making operating decisions about the deployment of vessels and their performance. Under time charters and bareboat charters the charterer typically pays the voyage expenses, whereas under voyage charter contracts and contracts of affreightment the shipowner typically pays the voyage expenses. Some voyage expenses are fixed, and the remainder can be estimated. If OPCO, as the shipowner, pays the voyage expenses, it typically passes the approximate amount of these expenses on to its customers by charging higher rates under the contract or billing the expenses to them. As a result, although voyage revenues from different types of contracts may vary, the net revenues after subtracting voyage expenses, which we refer to as net voyage revenues, are comparable across the different types of contracts. We principally use net voyage revenues, a non-GAAP financial measure, because it provides more meaningful information to us than voyage revenues, the most directly comparable GAAP financial measure. Net voyage revenues are also widely used by investors and analysts in the shipping industry for comparing financial performance between companies in the shipping industry to industry averages.

      The following table reconciles net voyage revenues with voyage revenues:

      EBITDA. Earnings before interest, taxes, depreciation and amortization is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, as discussed below:

      EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Therefore, EBITDA as presented below may not be comparable to similarly titled measures of other companies.