--------------------------------------------------------------------------------


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended September 30, 2002

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to


                        Commission File Number 001-10311

                         KANEB PIPE LINE PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                              75-2287571
(State or other jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

                          2435 North Central Expressway
                             Richardson, Texas 75080
          (Address of principal executive offices, including zip code)

                                 (972) 699-4062
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         Yes    X                                             No
              -----                                              ------

Number of Units of the Registrant outstanding at November 8, 2002:  25,100,090

--------------------------------------------------------------------------------

<PAGE>
KANEB PIPE LINE PARTNERS, L.P.  AND SUBSIDIARIES


FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
--------------------------------------------------------------------------------
                                                                        Page No.
                           Part I. Financial Information

Item 1.    Financial Statements (Unaudited)

           Consolidated Statements of Income - Three and Nine Months
              Ended September 30, 2002 and 2001                            1

           Condensed Consolidated Balance Sheets - September 30, 2002
              and December 31, 2001                                        2

           Condensed Consolidated Statements of Cash Flows - Nine
              Months Ended September 30, 2002 and 2001                     3

           Notes to Consolidated Financial Statements                      4

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations                  13

Item 3.    Quantitative and Qualitative Disclosure About Market Risk      20

Item 4.    Controls and Procedures                                        20


                           Part II.  Other Information

Item 1.    Legal Proceedings                                              20

Item 6.    Exhibits and Reports on Form 8-K                               21



<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands -- Except Per Unit Amounts)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                             Three Months Ended             Nine Months Ended
                                                               September 30,                  September 30,
                                                       -----------------------------  -----------------------------
                                                            2002           2001            2002           2001
                                                       --------------  -------------  -------------  --------------
<S>                                                    <C>             <C>            <C>            <C>
Revenues:
    Services                                           $       75,184  $      53,403  $     207,946  $      154,424
    Products                                                   28,120           -            63,702           -
                                                       --------------  -------------  -------------  --------------
       Total revenues                                         103,304         53,403        271,648         154,424
                                                       --------------  -------------  -------------  --------------
Costs and expenses:
    Cost of products sold                                      26,501           -            59,433           -
    Operating costs                                            34,082         23,396         91,845          67,333
     Depreciation and amortization                             10,302          5,624         27,408          17,326
     General and administrative                                 4,549          2,307         14,111           7,483
                                                       --------------  -------------  -------------  --------------
       Total costs and expenses                                75,434         31,327        192,797          92,142
                                                       --------------  -------------  -------------  --------------

Operating income                                               27,870         22,076         78,851          62,282

Interest and other income                                         233            122            414           4,218
Interest expense                                               (7,202)        (3,380)       (20,132)        (12,144)
                                                       --------------  -------------  -------------  --------------
Income before minority interest, income
    taxes and extraordinary item                               20,901         18,818         59,133          54,356
Minority interest                                                (195)          (185)          (562)           (537)
Income tax provision                                           (1,410)          (295)        (2,981)           (602)
                                                       --------------  -------------  -------------  --------------
Income before extraordinary item                               19,296         18,338         55,590          53,217
Extraordinary item - loss on debt
    extinguishment, net of minority
    interest and income taxes                                   -               -            (2,090)         (5,757)
                                                       --------------  -------------  -------------  --------------
       Net income                                              19,296         18,338         53,500          47,460

General partner's interest in net income                       (1,414)          (924)        (4,112)         (1,868)
                                                       --------------  -------------  -------------  --------------
Limited partners' interest in net income               $       17,882  $      17,414  $      49,388  $       45,592
                                                       ==============  =============  =============  ==============

Allocation of net income per unit:
    Before extraordinary item                          $         .77   $         .86  $        2.31  $        2.54
    Extraordinary item                                          -               -              (.09)          (.29)
                                                       --------------  -------------  -------------  -------------
                                                       $         .77   $         .86  $        2.22  $        2.25
                                                       =============   =============  =============  =============
Weighted average number of limited
   partnership units outstanding                               23,100         20,285         22,237          20,285
                                                       ==============  =============  =============  ==============

</TABLE>


                 See notes to consolidated financial statements.
                                        1

<PAGE>


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            September 30,             December 31,
                                                                                2002                     2001
                                                                           -------------            ---------------
                                                                             (Unaudited)
         ASSETS
<S>                                                                        <C>                       <C>
Current assets:
     Cash and cash equivalents                                             $      27,399             $        7,903
     Accounts receivable                                                          36,884                     24,005
     Prepaid expenses and other                                                   10,441                      2,721
                                                                           -------------             --------------
         Total current assets                                                     74,724                     34,629
                                                                           -------------             --------------

Property and equipment                                                         1,028,375                    639,084
Less accumulated depreciation                                                    184,904                    157,810
                                                                           -------------             --------------
     Net property and equipment                                                  843,471                    481,274
                                                                           -------------             --------------

Investment in affiliates                                                          23,343                     22,252

Excess of cost over fair value of net assets of
    acquired businesses and other assets                                          12,294                     10,216
                                                                           -------------              -------------
                                                                           $     953,832             $      548,371
                                                                           =============             ==============

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Accounts payable                                                       $      17,415             $        6,541
    Accrued expenses                                                              44,265                     19,101
    Accrued distributions payable                                                 19,840                     16,263
    Payable to general partner                                                     4,711                      4,701
                                                                           -------------             --------------
         Total current liabilities                                                86,231                     46,606
                                                                           -------------             --------------

Long-term debt                                                                   518,353                    262,624

Other liabilities and deferred taxes                                              28,367                     18,614

Minority interest                                                                    960                      1,010

Commitments and contingencies

Partners' capital                                                                319,921                    219,517
                                                                           -------------             --------------
                                                                           $     953,832             $      548,371
                                                                           =============             ==============

</TABLE>

                 See notes to consolidated financial statements.
                                        2

<PAGE>


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                           ----------------------------------------
                                                                                2002                      2001
                                                                           -------------             --------------
<S>                                                                        <C>                       <C>
Operating activities:
   Net income                                                              $      53,500             $       47,460
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                              27,408                     17,326
       Minority interest                                                             562                        537
       Equity in earnings of affiliates, net of distributions                     (1,331)                       581
       Deferred income taxes                                                       2,323                        602
       Extraordinary item                                                          2,090                      5,757
       Changes in working capital components                                     (13,710)                     8,060
                                                                           -------------             --------------
         Net cash provided by operating activities                                70,842                     80,323
                                                                           -------------             --------------

Investing activities:
   Acquisitions, net of cash acquired                                           (225,406)                  (106,810)
   Capital expenditures                                                          (21,929)                    (9,589)
   Proceeds from sale of assets                                                     -                         2,807
   Other, net                                                                       (529)                      (646)
                                                                           -------------             --------------
         Net cash used in investing activities                                  (247,864)                  (114,238)
                                                                           -------------             --------------

Financing activities:
   Issuance of debt                                                              496,087                    257,500
   Payment of debt                                                              (353,759)                  (171,082)
   Distributions, including minority interest                                    (54,600)                   (45,893)
   Net proceeds from issuance of limited
     partnership units                                                           108,790                      -
                                                                           -------------             --------------
         Net cash provided by financing activities                               196,518                     40,525
                                                                           -------------             --------------

Increase in cash and cash equivalents                                             19,496                      6,610
Cash and cash equivalents at beginning of period                                   7,903                      4,758
                                                                           -------------             --------------
Cash and cash equivalents at end of period                                 $      27,399             $       11,368
                                                                           =============             ==============

Supplemental cash flow information:
   Cash paid for interest                                                  $      20,143             $       11,229
                                                                           =============             ==============
   Non-cash investing and financing activities -
     Issuance of units for acquisition of terminals                        $        -                $       56,488
                                                                           =============             ==============


</TABLE>

                 See notes to consolidated financial statements.
                                        3


<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES

     The unaudited  condensed  consolidated  financial  statements of Kaneb Pipe
     Line Partners,  L.P. and its subsidiaries (the "Partnership") for the three
     and nine  month  periods  ended  September  30,  2002 and  2001,  have been
     prepared in accordance with accounting principles generally accepted in the
     United States of America.  Significant  accounting policies followed by the
     Partnership  are  disclosed  in the  notes  to the  consolidated  financial
     statements included in the Partnership's Annual Report on Form 10-K for the
     year  ended  December  31,  2001.  In  the  opinion  of  the  Partnership's
     management,  the accompanying  condensed  consolidated financial statements
     contain the adjustments, consisting of normal recurring accruals, necessary
     to present fairly the  consolidated  financial  position of the Partnership
     and  its   consolidated   subsidiaries   at  September  30,  2002  and  the
     consolidated  results of their  operations  and cash flows for the  periods
     ended September 30, 2002 and 2001. Operating results for the three and nine
     months  ended  September  30, 2002 are not  necessarily  indicative  of the
     results that may be expected for the year ending December 31, 2002.


2.   ACQUISITIONS AND FINANCINGS

     In January of 2001,  the  Partnership  used  proceeds from its $275 million
     revolving  credit  agreement  to repay in full its $128 million of mortgage
     notes. Under the provisions of the mortgage notes, the Partnership incurred
     a $6.5  million  prepayment  penalty  which,  net of minority  interest and
     income  taxes,  was  recognized  as an  extraordinary  expense in the first
     quarter of 2001.

     In January of 2001, the  Partnership,  through a  wholly-owned  subsidiary,
     acquired  Shore  Terminals  LLC  ("Shore")  for  $107  million  in cash and
     1,975,090  Partnership  units  (valued  at  $56.5  million  on the  date of
     agreement  and its  announcement).  Financing  for the cash  portion of the
     purchase  price was  supplied  under  the  Partnership's  revolving  credit
     agreement.  The  acquisition was accounted for using the purchase method of
     accounting.

     In January of 2002, the Partnership  issued 1,250,000  limited  Partnership
     units in a public  offering  at $41.65 per unit,  generating  approximately
     $49.7 million in net proceeds.  The proceeds were used to reduce the amount
     of  indebtedness  outstanding  under  the  Partnership's  revolving  credit
     agreement.

     In February of 2002, Kaneb Pipe Line Operating Partnership,  L.P. ("KPOP"),
     an operating  subsidiary of the  Partnership,  issued $250 million of 7.75%
     senior  unsecured  notes due February 15, 2012.  The net proceeds  from the
     public  offering,  $248.2  million,  were used to repay  the  Partnership's
     revolving  credit agreement and to partially fund the acquisition of all of
     the  liquids   terminaling   subsidiaries  of  Statia  Terminals  Group  NV
     ("Statia").

     On February 28, 2002, the  Partnership  acquired  Statia for  approximately
     $178  million  in  cash  (net  of  acquired  cash).   The  acquired  Statia
     subsidiaries had approximately $107 million in outstanding debt,  including
     $101 million of 11.75% notes due in November  2003. The cash portion of the
     purchase price was funded by the  Partnership's  revolving credit agreement
     and proceeds from KPOP's  February 2002 public debt offering.  Assuming the
     acquisition occurred on January 1, 2001, unaudited pro forma revenues,  net
     income  and net  income per unit  would  have been  $296.3  million,  $52.6
     million and $2.16,  respectively,  for the nine months ended  September 30,
     2002.  Unaudited  pro forma  revenues,  net  income and net income per unit
     would have been $104.5 million,  $17.8 million and $0.79,  respectively for
     the three months ended September 30, 2001 and $309.6 million, $49.0 million
     and $2.19, respectively, for the nine months ended September 30, 2001.

     In connection  with the  acquisition of Statia,  the  Partnership is in the
     process  of  finalizing  and  implementing  a plan  to  integrate  Statia's
     businesses  with the  Partnership's  existing  operations.  The plan,  when
     finalized,  is expected  to provide for the  severance  and  relocation  of
     certain  administrative  and  operating  employees  and  activities.  Costs
     associated  with  implementation,  which  will  be  recorded  in the  final
     allocation of the Statia purchase price,  will include  employee  severance
     benefits,  relocation  costs and lease  costs.  The plan is  expected to be
     finalized and implemented by December 31, 2002. At September 30, 2002, $4.6
     million was accrued for such costs.

     In April of 2002, the Partnership  redeemed all of Statia's 11.75% notes at
     102.938% of the principal amount, plus accrued interest. The redemption was
     funded by the Partnership's revolving credit facility. Under the provisions
     of the 11.75% notes,  the  Partnership  incurred a $3.0 million  prepayment
     penalty, of which $2.0 million, net of minority interest, was recognized as
     an extraordinary expense in the second quarter of 2002.

     In May of 2002, the Partnership issued 1,565,000 limited  Partnership units
     in  a  public   offering  at  a  price  of  $39.60  per  unit,   generating
     approximately  $59.1  million in net  proceeds.  A portion of the  offering
     proceeds  were  used to  fund  KPOP's  September  2002  acquisition  of the
     Australia and New Zealand terminals.

     On September 18, 2002, KPOP acquired eight bulk liquid storage terminals in
     Australia and New Zealand from Burns Philp & Co. Ltd. for approximately $44
     million in cash,  subject to  adjustment  based on a closing  date  balance
     sheet.

     On November 1, 2002,  KPOP acquired an  approximately  2,000 mile anhydrous
     ammonia pipeline system from Koch Pipeline  Company,  L.P. for $140 million
     in cash, subject to normal  post-closing  adjustments.  The acquisition was
     financed by bank debt maturing in May of 2003.

     In November of 2002, the Partnership  issued 2,000,000 limited  Partnership
     units in a public  offering  at $33.36 per unit,  generating  approximately
     $63.7  million in net proceeds.  The offering  proceeds were used to reduce
     bank borrowings for the Koch pipeline acquisition.

3.   COMPREHENSIVE INCOME

     Comprehensive income for the three and nine months ended September 30, 2002
     and 2001 is as follows:

<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Net income                                      $    19,296     $    18,338        $    53,500     $    47,460
     Foreign currency translation
        adjustment                                           314             678                941            (180)
     Unrealized loss on interest rate
        hedging transaction (note 7)                      (5,198)           -                (5,198)           -
                                                     -----------     -----------        -----------     -----------
     Comprehensive income                            $    14,412     $    19,016        $    49,243     $    47,280
                                                     ===========     ===========        ===========     ===========
</TABLE>

     Accumulated other comprehensive income (loss) aggregated ($6.1) million and
     ($1.8) million at September 30, 2002 and December 31, 2001, respectively.


4.   CASH DISTRIBUTIONS

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in its  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance  less  all  of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable  record date. Cash  distributions of $0.79 per unit with respect
     to the  first and  second  quarters  of 2002 were paid on May 15,  2002 and
     August 14, 2002,  respectively.  A cash distribution of $0.79 per unit with
     respect to the third quarter of 2002 will be paid on November 14, 2002.


5.   COMMITMENTS AND CONTINGENCIES

     The operations of the Partnership  are subject to Federal,  state and local
     laws and  regulations  in the United States and various  foreign  locations
     relating  to  protection  of  the  environment.  Although  the  Partnership
     believes  its  operations  are  in  general   compliance   with  applicable
     environmental  regulations,  risks of additional  costs and liabilities are
     inherent in pipeline and terminal operations, and there can be no assurance
     that  significant  costs  and  liabilities  will  not  be  incurred  by the
     Partnership.  Moreover,  it is possible  that other  developments,  such as
     increasingly  stringent  environmental  laws,  regulations  and enforcement
     policies  thereunder,  and  claims  for  damages  to  property  or  persons
     resulting  from  the  operations  of  the  Partnership,   could  result  in
     substantial costs and liabilities to the Partnership.

     Certain subsidiaries of the Partnership were sued in a Texas state court in
     1997 by Grace  Energy  Corporation  ("Grace"),  the  entity  from which the
     Partnership   acquired   ST  Services   in  1993.   The  lawsuit   involves
     environmental  response and remediation costs allegedly  resulting from jet
     fuel  leaks in the  early  1970's  from a  pipeline.  The  pipeline,  which
     connected a former Grace terminal with Otis Air Force Base in Massachusetts
     (the "Otis pipeline" or the "pipeline"),  ceased operations in 1973 and was
     abandoned  before  1978,  when  the  connecting  terminal  was  sold  to an
     unrelated  entity.  Grace  alleged  that  subsidiaries  of the  Partnership
     acquired the abandoned pipeline,  as part of the acquisition of ST Services
     in 1993 and assumed  responsibility  for  environmental  damages  allegedly
     caused by the jet fuel  leaks.  Grace  sought a ruling from the Texas court
     that these subsidiaries are responsible for all liabilities,  including all
     present and future  remediation  expenses,  associated with these leaks and
     that Grace has no  obligation  to indemnify  these  subsidiaries  for these
     expenses. In the lawsuit, Grace also sought indemnification for expenses of
     approximately  $3.5  million  that it incurred  since 1996 for response and
     remediation  required  by the  State of  Massachusetts  and for  additional
     expenses that it expects to incur in the future. The consistent position of
     the  Partnership's  subsidiaries  has been  that they did not  acquire  the
     abandoned  pipeline  as  part  of the  1993 ST  Services  transaction,  and
     therefore did not assume any  responsibility  for the environmental  damage
     nor any liability to Grace for the pipeline.

     At the end of the trial,  the jury  returned a verdict  including  findings
     that (1) Grace had breached a provision of the 1993  acquisition  agreement
     by  failing  to  disclose  matters  related  to the  pipeline,  and (2) the
     pipeline was  abandoned  before 1978 -- 15 years  before the  Partnership's
     subsidiaries  acquired ST Services.  On August 30, 2000,  the Judge entered
     final judgment in the case that Grace take nothing from the subsidiaries on
     its  claims   seeking   recovery  of   remediation   costs.   Although  the
     Partnership's  subsidiaries  have not incurred  any expenses in  connection
     with  the  remediation,   the  court  also  ruled,  in  effect,   that  the
     subsidiaries  would not be  entitled to  indemnification  from Grace if any
     such expenses were incurred in the future.  Moreover, the Judge let stand a
     prior summary  judgment  ruling that the pipeline was an asset  acquired by
     the Partnership's  subsidiaries as part of the 1993 ST Services transaction
     and that any  liabilities  associated  with the pipeline  would have become
     liabilities of the  subsidiaries.  Based on that ruling,  the Massachusetts
     Department of  Environmental  Protection  and Samson  Hydrocarbons  Company
     (successor  to  Grace  Petroleum  Company)  wrote  letters  to ST  Services
     alleging its responsibility for the remediation,  and ST Services responded
     denying  any  liability  in  connection  with this  matter.  The Judge also
     awarded  attorney  fees to  Grace  of more  than  $1.5  million.  Both  the
     Partnership's  subsidiaries and Grace have appealed the trial court's final
     judgment  to the Texas  Court of  Appeals  in Dallas.  In  particular,  the
     subsidiaries  have filed an appeal of the  judgment  finding  that the Otis
     pipeline and any liabilities  associated with the pipeline were transferred
     to them as well as the award of attorney fees to Grace.

     On April 2, 2001,  Grace filed a petition in  bankruptcy,  which created an
     automatic stay against  actions  against Grace.  This automatic stay covers
     the appeal of the Dallas  litigation,  and the Texas  Court of Appeals  has
     issued an order  staying  all  proceedings  of the  appeal  because  of the
     bankruptcy.  Once that stay is lifted, the Partnership's  subsidiaries that
     are  party to the  lawsuit  intend to resume  vigorous  prosecution  of the
     appeal.

     The Otis Air Force Base is a part of the Massachusetts Military Reservation
     ("MMR Site"),  which has been declared a Superfund Site pursuant to CERCLA.
     The MMR Site contains nine groundwater  contamination  plumes, two of which
     are allegedly  associated  with the Otis pipeline,  and various other waste
     management  areas  of  concern,  such  as  landfills.   The  United  States
     Department  of Defense and the United  States  Coast  Guard,  pursuant to a
     Federal  Facilities  Agreement,  have  been  responding  to the  Government
     remediation demand for most of the contamination  problems at the MMR Site.
     Grace and others have also received and responded to formal  inquiries from
     the United States Government in connection with the  environmental  damages
     allegedly resulting from the jet fuel leaks. The Partnership's subsidiaries
     voluntarily  responded  to an  invitation  from the  Government  to provide
     information  indicating  that they do not own the  pipeline.  In connection
     with  a  court-ordered   mediation  between  Grace  and  the  Partnership's
     subsidiaries,  the Government advised the parties in April 1999 that it has
     identified  two spill areas that it believes to be related to the  pipeline
     that is the subject of the Grace suit.  The Government at that time advised
     the parties that it believed it had  incurred  costs of  approximately  $34
     million,  and  expected in the future to incur costs of  approximately  $55
     million,  for  remediation  of one of the spill areas.  This amount was not
     intended to be a final  accounting of costs or to include all categories of
     costs.  The  Government  also advised the parties that it could not at that
     time allocate its costs attributable to the second spill area.

     By letter  dated July 26, 2001,  the United  States  Department  of Justice
     ("DOJ")   advised  ST  Services  that  the   Government   intends  to  seek
     reimbursement  from ST Services under the  Massachusetts  Oil and Hazardous
     Material Release  Prevention and Response Act and the Declaratory  Judgment
     Act for the  Government's  response costs at the two spill areas  discussed
     above.  The DOJ relied in part on the Texas state court judgment,  which in
     the DOJ's view, held that ST Services was the current owner of the pipeline
     and  the  successor-in-interest  of  the  prior  owner  and  operator.  The
     Government  advised ST  Services  that it believes  it has  incurred  costs
     exceeding  $40  million,  and expects to incur  future  costs  exceeding an
     additional  $22  million,  for  remediation  of the two  spill  areas.  The
     Partnership  believes that its subsidiaries have substantial  defenses.  ST
     Services  responded  to the  DOJ  on  September  6,  2001,  contesting  the
     Government's  positions and declining to reimburse any response costs.  The
     DOJ has not filed a lawsuit  against ST Services  seeking cost recovery for
     its environmental  investigation and response costs.  Representatives of ST
     Services have met with  representatives  of the Government on two occasions
     since September 6, 2001 to discuss the Government's  claims and to exchange
     information related to such claims. Additional exchanges of information are
     expected  to occur in the future  and  additional  meetings  may be held to
     discuss possible resolution of the Government's claims without litigation.

     On April 7, 2000, a fuel oil pipeline in Maryland owned by Potomac Electric
     Power  Company  ("PEPCO")  ruptured.  Work  performed  with  regard  to the
     pipeline  was  conducted by a  partnership  of which ST Services is general
     partner. PEPCO has reported that it has incurred total cleanup costs of $70
     million to $75 million.  PEPCO probably will continue to incur some cleanup
     related costs for the foreseeable future,  primarily in connection with EPA
     requirements  for monitoring  the condition of some of the impacted  areas.
     Since May 2000, ST Services has provisionally  contributed a minority share
     of the cleanup  expense,  which has been funded by ST  Services'  insurance
     carriers.  ST  Services  and  PEPCO  have  not,  however,  reached  a final
     agreement  regarding ST  Services'  proportionate  responsibility  for this
     cleanup  effort,  if any,  and cannot  predict  the  amount,  if any,  that
     ultimately  may be determined to be ST Services'  share of the  remediation
     expense,  but it believes that such amount will be covered by insurance and
     therefore will not materially adversely affect the Partnership's  financial
     condition.

     As a result of the rupture,  purported  class  actions  were filed  against
     PEPCO and ST  Services  in federal  and state court in Maryland by property
     and business owners alleging  damages in unspecified  amounts under various
     theories, including under the Oil Pollution Act ("OPA") and Maryland common
     law.  The federal  court  consolidated  all of the federal  cases in a case
     styled as In re Swanson  Creek Oil Spill  Litigation.  A settlement  of the
     consolidated  class action,  and a companion  state-court class action, was
     reached and approved by the federal judge. The settlement involved creation
     and funding by PEPCO and ST Services of a $2,250,000 class settlement fund,
     from  which  all  participating  claimants  would  be paid  according  to a
     court-approved  formula, as well as a court-approved payment to plaintiffs'
     attorneys. The settlement has been consummated and the fund, to which PEPCO
     and  ST  Services   contributed   equal  amounts,   has  been  distributed.
     Participating  claimants'  claims  have been  settled  and  dismissed  with
     prejudice.  A number of class  members  elected not to  participate  in the
     settlement,  i.e., to "opt out," thereby  preserving  their claims  against
     PEPCO and ST Services.  Those electing not to participate in the settlement
     include 23  plaintiffs  in a lawsuit  in  Maryland  state  court who allege
     damage to their property from the oil spill, two individuals who have filed
     separate  lawsuits alleging damage to their property from the oil spill, as
     well as a small number of other individuals who have not filed lawsuits and
     whose  intentions  are  currently  unknown  to ST  Services.  ST  Services'
     insurance carrier has assumed the defense of the continuing  actions and ST
     Services  believes  that the  carrier  would  assume the defense of any new
     litigation  by  a  non-participant  in  the  settlement,  should  any  such
     litigation be commenced.  While the Partnership  cannot predict the amount,
     if any, of any liability it may have in the continuing  actions or in other
     potential  suits relating to this matter,  it believes that the current and
     potential  plaintiffs'  claims will be covered by insurance  and  therefore
     these  actions  will not have a material  adverse  effect on its  financial
     condition.

     PEPCO and ST Services have agreed with the federal government and the State
     of Maryland to pay costs of assessing natural resource damages arising from
     the Swanson  Creek oil spill under OPA.  ST  Services'  insurer has paid ST
     Services' agreed 50 percent share of these assessment costs. The assessment
     process is  substantially  complete  and ST Services  anticipates  that the
     federal  government and the state of Maryland will conclude that a total of
     approximately $2.7 million of compensable natural resource damages occurred
     as a result of the oil spill.  ST Services  has no  agreement  at this time
     with the  federal  government  or the State of  Maryland,  nor with  PEPCO,
     concerning  payment for natural  resource damages or restoration of damaged
     resources. The Partnership believes that both the assessment costs and such
     damages  are  covered  by  insurance  and  therefore  will  not  materially
     adversely affect the Partnership's financial condition.

     The U.S.  Department  of  Transportation  ("DOT")  has  issued a Notice  of
     Proposed  Violation  to PEPCO  and ST  Services  alleging  violations  over
     several years of pipeline safety  regulations and proposing a civil penalty
     of $647,000  jointly against the two companies.  ST Services and PEPCO have
     contested the DOT allegations and the proposed penalty.  A hearing was held
     before the Office of Pipeline  Safety at the DOT in late 2001.  ST Services
     does not  anticipate  any  further  hearings  on the  subject  and is still
     awaiting the DOT's ruling.

     By letter  dated  January 4, 2002,  the Attorney  General's  Office for the
     State of Maryland  advised ST Services  that it intended to seek  penalties
     from ST Services in connection  with the April 7, 2000 spill.  The State of
     Maryland  subsequently  asserted  that it would seek  penalties  against ST
     Services and PEPCO  totaling up to $12 million.  A settlement of this claim
     has been reached in principle  under which ST Services'  insurer will pay a
     total of  slightly  more than $1 million in  installments  over a five year
     period.  PEPCO has also reached a settlement of these claims with the State
     of Maryland.  Accordingly,  the Partnership  believes that this matter will
     not have a material adverse effect on its financial condition.

     The Partnership has other contingent liabilities resulting from litigation,
     claims  and  commitments  incident  to the  ordinary  course  of  business.
     Management  believes,  based on the advice of  counsel,  that the  ultimate
     resolution of such  contingencies will not have a materially adverse effect
     on the financial position or results of operations of the Partnership.


6.   BUSINESS SEGMENT DATA

     The Partnership  conducts  business through three principal  segments;  the
     "Pipeline  Operations,"  which consists  primarily of the transportation of
     refined  petroleum  products in the Midwestern  states as a common carrier,
     the  "Terminaling   Operations,"   which  provides  storage  for  petroleum
     products,  specialty  chemicals and other  liquids,  and the "Product Sales
     Operations", which delivers bunker fuels to ships in the Caribbean and Nova
     Scotia,  Canada and sells bulk  petroleum  products  to various  commercial
     interests.

     The Partnership  measures segment profit as operating income.  Total assets
     are those controlled by each reportable  segment.  Business segment data is
     as follows:
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Business segment revenues:
       Pipeline operations                           $    20,998     $    20,195        $    57,946     $    55,155
       Terminaling operations                             54,186          33,208            150,000          99,269
       Product sales operations                           28,120            -                63,702            -
                                                     -----------     -----------        -----------     -----------
                                                     $   103,304     $    53,403        $   271,648     $   154,424
                                                     ===========     ===========        ===========     ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Business segment profit:
       Pipeline operations                           $     9,487     $     9,827        $    27,421     $    26,640
       Terminaling operations                             18,478          12,249             50,962          35,642
       Product sales operations                              (95)           -                   468            -
                                                     -----------     -----------        -----------     -----------
         Operating income                                 27,870          22,076             78,851          62,282
       Interest and other income                             233             122                414           4,218
       Interest expense                                   (7,202)         (3,380)           (20,132)        (12,144)
                                                     -----------     -----------        -----------     -----------
         Income before minority interest,
           income taxes and extraordinary
           item                                      $    20,901     $    18,818        $    59,133     $    54,356
                                                     ===========     ===========        ===========     ===========

</TABLE>
<TABLE>
<CAPTION>
                                                                                  September 30,      December 31,
                                                                                     2002                2001
                                                                                ---------------    ----------------
                                                                                          (in thousands)
<S>                                                                             <C>                <C>
     Total assets:
        Pipeline operations                                                     $       112,564    $        105,156
        Terminaling operations                                                          830,413             443,215
        Product sales operations                                                         10,855                -
                                                                                ---------------    ----------------
                                                                                $       953,832    $        548,371
                                                                                ===============    ================
</TABLE>

7.   DERIVATIVE INSTRUMENTS

     In August of 2000,  KPOP filed a shelf  registration  statement on Form S-3
     for the  issuance  of up to $500  million  of public  debt  securities.  At
     September 30, 2002, $250 million remained  available for issuance under the
     shelf  registration  statement.  In September of 2002,  KPOP entered into a
     Treasury Lock  Contract,  maturing on November 4, 2002,  for the purpose of
     locking in the US  Treasury  interest  rate  component  on $150  million of
     anticipated  thirty-year public debt offerings.  The Treasury Lock Contract
     called  for a net  cash  settlement  on the  maturity  date,  based  on the
     difference between the contract's fixed interest rate and the applicable US
     Treasury  yield on maturity.  As the Treasury Lock Contract  qualified as a
     cash flow  hedging  instrument  under  Statement  of  Financial  Accounting
     Standards ("SFAS") No. 133,  unrealized gains and losses for the applicable
     reporting period are recorded in other comprehensive  income, along with an
     asset or  liability  in the  same  amount,  based on the fair  value of the
     contract. Upon completion of the anticipated public debt offering, the gain
     or loss realized on the Treasury Lock Contract at settlement  date would be
     recognized  as a component of interest  expense over the life of the public
     debt  instrument.  At September 30, 2002, the Partnership had an unrealized
     loss of  approximately  $5.3  million,  before  minority  interest  of $0.1
     million,  which was recognized in other  comprehensive  income in the third
     quarter of 2002. In October of 2002,  KPOP, due to various market  factors,
     elected  to defer  issuance  of the  public  debt  securities,  effectively
     eliminating  the  cash  flow  hedging  designation  for the  Treasury  Lock
     Contract.  On October 29, 2002, the contract was settled resulting in a net
     realized gain of $3.0  million,  which will be recognized as a component of
     net income in the fourth quarter of 2002.


8.   ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 2002, the Partnership  adopted SFAS No. 142, "Goodwill
     and Other  Intangible  Assets"  ("SFAS  No.  142"),  which  eliminates  the
     amortization  for  goodwill  and other  intangible  assets with  indefinite
     lives.  Under SFAS No.  142,  intangible  assets with lives  restricted  by
     contractual, legal, or other means will continue to be amortized over their
     useful lives.  As of September 30, 2002, the  Partnership had no intangible
     assets  subject to  amortization  under SFAS No.  142.  Goodwill  and other
     intangible  assets not subject to  amortization  are tested for  impairment
     annually or more frequently if events or changes in circumstances  indicate
     that the assets might be impaired. SFAS No. 142 requires a two-step process
     for testing  impairment.  First,  the fair value of each  reporting unit is
     compared  to its  carrying  value to  determine  whether an  indication  of
     impairment  exists.  If an impairment is indicated,  then the fair value of
     the reporting  unit's  goodwill is determined by allocating the unit's fair
     value to its assets and liabilities (including any unrecognized  intangible
     assets)  as  if  the  reporting  unit  had  been  acquired  in  a  business
     combination.  The amount of  impairment  for  goodwill  is  measured as the
     excess of its carrying  value over its fair value.  Based on valuations and
     analysis  performed by the  Partnership  in the second quarter of 2002, the
     Partnership determined that the implied fair value of its goodwill exceeded
     carrying value, and therefore, no impairment charge was necessary. Goodwill
     amortization  included in the results of operations of the  Partnership for
     the three and nine months ended September 30, 2001 was not material.

     Additionally,  effective January 1, 2002, the Partnership  adopted SFAS No.
     144 "Accounting for the Impairment or Disposal of Long-Lived Assets", which
     addresses financial accounting and reporting for the impairment or disposal
     of long-lived  assets.  The adoption of SFAS No. 144, which superceded SFAS
     No.  121,  did not have a  material  impact on the  consolidated  financial
     statements of the Partnership.



<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations
--------------------------------------------------------------------------------

     This  discussion  should  be  read in  conjunction  with  the  consolidated
     financial statements of Kaneb Pipe Line Partners,  L.P. (the "Partnership")
     and notes thereto included elsewhere in this report.

     Operating Results:

     Pipeline Operations
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    20,998     $    20,195        $    57,946     $    55,155
     Operating costs                                       9,511           8,448             23,602          22,356
     Depreciation and amortization                         1,385           1,324              4,132           3,937
     General and administrative                              615             596              2,791           2,222
                                                     -----------     -----------        -----------     -----------
         Operating income                            $     9,487     $     9,827        $    27,421     $    26,640
                                                     ===========     ===========        ===========     ===========

</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  For the three and nine month  periods ended
     September 30, 2002, revenues increased by 4% and 5%, respectively, compared
     to the same 2001  periods,  due to higher  per  barrel  rates  realized  on
     volumes  shipped.  Barrel  miles  totaled 5.0 billion for each of the three
     month periods ended  September  30, 2002 and 2001,  respectively,  and 13.7
     billion and 13.9 billion for the nine months ended  September  30, 2002 and
     2001, respectively.

     Operating  costs,  which  include  fuel  and  power  costs,  materials  and
     supplies,  maintenance  and  repair  costs,  salaries,  wages and  employee
     benefits,  and property and other taxes, increased by $1.1 million and $1.2
     million for the three and nine month  periods  ended  September  30,  2002,
     respectively,  when  compared to 2001,  due primarily to  expenditures  for
     routine repairs and maintenance.  General and  administrative  costs, which
     include managerial,  accounting, and administrative personnel costs, office
     rental and expense,  legal and professional  costs and other  non-operating
     costs,  remained relatively flat for the three month period ended September
     30, 2002, and increased by $0.6 million for the nine months ended September
     30, 2002,  due  primarily to first quarter 2002  increases in  professional
     services and personnel related costs.



                                       13
<PAGE>
     Terminaling Operations
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    54,186     $    33,208        $   150,000     $    99,269
     Operating costs                                      23,445          14,948             65,833          44,977
     Depreciation and amortization                         8,728           4,300             22,813          13,389
     General and administrative                            3,535           1,711             10,392           5,261
                                                     -----------     -----------        -----------     -----------
         Operating income                            $    18,478     $    12,249        $    50,962     $    35,642
                                                     ===========     ===========        ===========     ===========
</TABLE>

     Terminaling   revenues  increased  by  $21.0  million  and  $50.7  million,
     respectively,  for the three and nine month  periods  ended  September  30,
     2002, compared to the same 2001 periods, due to the Statia acquisition (See
     "Liquidity and Capital  Resources") and overall increases in utilization at
     existing locations.  Average annual tankage utilized for the three and nine
     month periods ended  September 30, 2002  increased to 47.8 million and 45.3
     million  barrels,  respectively,  up from  30.0  million  and 30.1  million
     barrels, respectively, for the comparable prior year periods. For the three
     and nine  month  periods  ended  September  30,  2002,  average  annualized
     revenues  per barrel of tankage  utilized  increased to $4.50 and $4.43 per
     barrel, respectively, compared to $4.40 and $4.42 per barrel, respectively,
     for the same prior year periods.

     For the three and nine month  periods ended  September 30, 2002,  operating
     costs  increased  by $8.5  million and $20.9  million,  respectively,  when
     compared to the same 2001 periods, the result of the Statia acquisition and
     increases in volumes stored. General and administrative costs for the three
     and nine month periods ended September 30, 2002,  increased by $1.8 million
     and $5.1 million, respectively, when compared to the same 2001 periods, due
     to the Statia acquisition and overall increases in personnel costs.


     Product Sales Operations
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2002           2001                2002           2001
                                                     -----------     -----------        -----------     -----------
                                                                            (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    28,120     $      -           $    63,702     $      -
     Cost of products sold                                26,501            -                59,433            -
                                                     -----------     -----------        -----------     -----------
     Gross margin                                    $     1,619     $      -           $     4,269     $      -
                                                     ===========     ===========        ===========     ===========
     Operating income (loss)                         $       (95)    $      -           $       468     $      -
                                                     ===========     ===========        ===========     ===========
</TABLE>


     The product sales business,  which was acquired with Statia on February 28,
     2002,  delivers  bunker  fuels to ships in the  Caribbean  and Nova Scotia,
     Canada and sells bulk petroleum products to various  commercial  interests.
     For the three months ended  September  30, 2002,  product  sales  revenues,
     gross margin and operating loss were $28.1  million,  $1.6 million and $0.1
     million,  respectively.  For the nine  months  ended  September  30,  2002,
     product  sales  revenues,  gross  margin and  operating  income  were $63.7
     million, $4.3 million and $0.5 million, respectively.


     Interest and Other Income

     In March of 2001, a wholly-owned subsidiary of the Partnership entered into
     two contracts for the purpose of locking in interest  rates on $100 million
     of anticipated  ten-year public debt offerings.  As the interest rate locks
     were not designated as hedging instruments  pursuant to the requirements of
     Statement of Financial  Accounting Standards ("SFAS") No. 133, increases or
     decreases in the fair value of the contracts are included as a component of
     interest and other  income.  On May 22, 2001,  the  contracts  were settled
     resulting in an aggregate gain of $3.8 million.

<PAGE>
     Interest Expense

     For the three and nine months ended  September 30, 2002,  interest  expense
     increased by $3.8 million and $8.0 million,  respectively,  compared to the
     same 2001  periods,  due to  increases  in debt  resulting  from the Statia
     acquisition,  partially  offset by overall  declines in  variable  interest
     rates.


     Income Tax Provision

     Income tax provision for the three and nine months ended September 30, 2002
     includes $0.9 million and $1.7 million, respectively, in income tax expense
     relating to separate taxable wholly-owned  corporate  subsidiaries acquired
     with Statia.


     Liquidity and Capital Resources

     During the first nine months of 2002,  the  Partnership's  working  capital
     requirements for operations,  capital expenditures (excluding acquisitions)
     and cash distributions were funded through the use of internally  generated
     funds.

     Cash  provided by  operations  was $70.8  million and $80.3 million for the
     nine months ended September 30, 2002 and 2001,  respectively.  The decrease
     in cash  provided by  operations  for the nine months ended  September  30,
     2002,  compared  to the same 2001  period,  was due to  changes  in working
     capital  components   resulting  from  the  timing  of  cash  receipts  and
     disbursements.  Capital  expenditures  (excluding  acquisitions) were $21.9
     million for the nine months  ended  September  30,  2002,  compared to $9.6
     million  during  the  same  2001  period.  The  increase  in  2002  capital
     expenditures,  when  compared to 2001,  is the result of higher than normal
     2002 maintenance capital  expenditures in both the pipeline and terminaling
     businesses and  maintenance  capital  expenditures  related to the acquired
     Statia operations.

     The Partnership has a credit  agreement with a group of banks that provides
     for a $275 million  unsecured  revolving  credit facility  through December
     2003.  The credit  facility  bears  interest  at  variable  rates and has a
     variable commitment fee on unutilized amounts. The credit facility contains
     certain  financial and  operational  covenants,  including  limitations  on
     investments,  sales of assets and transactions with affiliates, and, absent
     an event  of  default,  the  covenants  do not  restrict  distributions  to
     unitholders.  At  September  30,  2002,  $243.0  million  was  drawn on the
     facility, at an interest rate of 3.12%.

     In January of 2001, the Partnership used proceeds from its revolving credit
     agreement  to repay in full its $128 million of mortgage  notes.  Under the
     provisions of the mortgage notes,  the Partnership  incurred a $6.5 million
     prepayment  penalty which,  net of minority  interest and income taxes, was
     recognized as an extraordinary expense in the first quarter of 2001.

     In January of 2001, the  Partnership,  through a  wholly-owned  subsidiary,
     acquired  Shore  Terminals  LLC  ("Shore")  for  $107  million  in cash and
     1,975,090  Partnership  units  (valued  at  $56.5  million  on the  date of
     agreement  and its  announcement).  Financing  for the cash  portion of the
     purchase  price  was  supplied  by  the   Partnership's   revolving  credit
     agreement.

     In January of 2002, the Partnership  issued 1,250,000  limited  Partnership
     units in a public  offering  at $41.65 per unit,  generating  approximately
     $49.7 million in net proceeds.  The proceeds were used to reduce the amount
     of  indebtedness  outstanding  under  the  Partnership's  revolving  credit
     agreement.

     In February of 2002, Kaneb Pipe Line Operating Partnership,  L.P. ("KPOP"),
     an operating  subsidiary of the  Partnership,  issued $250 million of 7.75%
     senior  unsecured  notes due February 15, 2012.  The net proceeds  from the
     public  offering,  $248.2  million,  were used to repay  the  Partnership's
     revolving  credit agreement and to partially fund the acquisition of all of
     the  liquids   terminaling   subsidiaries  of  Statia  Terminals  Group  NV
     ("Statia").

     On February 28, 2002, the  Partnership  acquired  Statia for  approximately
     $178  million  in  cash  (net  of  acquired  cash).   The  acquired  Statia
     subsidiaries had approximately $107 million in outstanding debt,  including
     $101 million of 11.75% notes due in November  2003. The cash portion of the
     purchase price was funded by the  Partnership's  revolving credit agreement
     and proceeds from KPOP's February 2002 public debt offering.

     In April of 2002, the Partnership  redeemed all of Statia's 11.75% notes at
     102.938% of the principal amount, plus accrued interest. The redemption was
     funded by the Partnership's revolving credit facility. Under the provisions
     of the 11.75% notes,  the  Partnership  incurred a $3.0 million  prepayment
     penalty, of which $2.0 million, net of minority interest, was recognized as
     an extraordinary expense in the second quarter of 2002.

     In May of 2002, the Partnership issued 1,565,000 limited  Partnership units
     in  a  public   offering  at  a  price  of  $39.60  per  unit,   generating
     approximately  $59.1  million in net  proceeds.  A portion of the  offering
     proceeds  were  used to  fund  KPOP's  September  2002  acquisition  of the
     Australia and New Zealand terminals.

     On September 18, 2002, KPOP acquired eight bulk liquid storage terminals in
     Australia and New Zealand from Burns Philp & Co. Ltd. for approximately $44
     million in cash,  subject to  adjustment  based on a closing  date  balance
     sheet.

     On November 1, 2002,  KPOP acquired an  approximately  2,000 mile anhydrous
     ammonia pipeline system from Koch Pipeline  Company,  L.P. for $140 million
     in cash, subject to normal  post-closing  adjustments.  The acquisition was
     financed by bank debt maturing in May of 2003.

     In November of 2002, the Partnership  issued 2,000,000 limited  Partnership
     units in a public  offering  at $33.36 per unit,  generating  approximately
     $63.7  million in net proceeds.  The offering  proceeds were used to reduce
     bank borrowings for the Koch pipeline acquisition.

     In August of 2000,  KPOP filed a shelf  registration  statement on Form S-3
     for the  issuance  of up to $500  million  of public  debt  securities.  At
     September 30, 2002, $250 million remained  available for issuance under the
     shelf  registration  statement.  In September of 2002,  KPOP entered into a
     Treasury Lock  Contract,  maturing on November 4, 2002,  for the purpose of
     locking in the US  Treasury  interest  rate  component  on $150  million of
     anticipated  thirty-year public debt offerings.  The Treasury Lock Contract
     called  for a net  cash  settlement  on the  maturity  date,  based  on the
     difference between the contract's fixed interest rate and the applicable US
     Treasury  yield on maturity.  As the Treasury Lock Contract  qualified as a
     cash flow  hedging  instrument  under SFAS No.  133,  unrealized  gains and
     losses  for  the  applicable   reporting   period  are  recorded  in  other
     comprehensive  income, along with an asset or liability in the same amount,
     based on the fair value of the contract. Upon completion of the anticipated
     public  debt  offering,  the gain or loss  realized  on the  Treasury  Lock
     Contract at settlement  date would be recognized as a component of interest
     expense over the life of the public debt instrument. At September 30, 2002,
     the  Partnership  had an  unrealized  loss of  approximately  $5.3 million,
     before  minority  interest of $0.1 million,  which was  recognized in other
     comprehensive  income in the third  quarter  of 2002.  In  October of 2002,
     KPOP,  due to various  market  factors,  elected to defer  issuance  of the
     public  debt  securities,  effectively  eliminating  the cash flow  hedging
     designation  for the  Treasury  Lock  Contract.  On October 29,  2002,  the
     contract  was settled  resulting in a net  realized  gain of $3.0  million,
     which will be recognized as a component of net income in the fourth quarter
     of 2002.

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in its  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance  less  all  of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable  record date. Cash  distributions of $0.79 per unit with respect
     to the  first and  second  quarters  of 2002 were paid on May 15,  2002 and
     August 14, 2002,  respectively.  A cash distribution of $0.79 per unit with
     respect to the third quarter of 2002 will be paid on November 14, 2002.

     The Partnership  expects to fund future cash  distributions and maintenance
     capital  expenditures  with existing cash and  anticipated  cash flows from
     operations.  Expansionary  capital  expenditures  are expected to be funded
     through  additional   Partnership  borrowings  and/or  future  public  unit
     offerings.

     Additional information relative to sources and uses of cash is presented in
     the financial statements included in this report.

     Information  regarding the Partnership's  Critical  Accounting  Policies is
     included in Item 7 of the Partnership's  Annual Report on Form 10-K for the
     year ended December 31, 2001.

     Recent Accounting Pronouncements

     The  FASB  has  issued  SFAS  No.  143  "Accounting  for  Asset  Retirement
     Obligations",  which  establishes  requirements for the removal-type  costs
     associated with asset retirements.  The Partnership is currently  assessing
     the impact of SFAS No. 143,  which must be adopted in the first  quarter of
     2003.

     In April of 2002, the FASB issued SFAS No. 145,  which,  among other items,
     affects the income statement  classification of gains and losses from early
     extinguishment  of debt.  Under SFAS No. 145,  which must be adopted by the
     first quarter of 2003,  early  extinguishment  of debt is now  considered a
     risk  management  strategy,  with  resulting  gains  and  losses  no longer
     classified an  extraordinary  item,  unless the debt  extinguishment  meets
     certain unusual in nature and infrequency of occurrence criteria,  which is
     expected to be rare. Upon adoption,  companies must reclassify  prior items
     that do not meet the new extraordinary  item  classification  criteria as a
     component  of operating  income.  Had the  provisions  of SFAS No. 145 been
     applied at September 30, 2002,  the  extraordinary  items (before  minority
     interest  and  income  taxes)  recorded  for the nine month  periods  ended
     September  30,  2002  and  2001,  respectively,  would be  reclassified  as
     components  of  operating  income.  Adoption  of SFAS No.  145 will have no
     effect on the net income of the Partnership.

     In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
     with  Exit or  Disposal  Activities",  which  requires  all  restructurings
     initiated  after  December 31, 2002 be recorded  when they are incurred and
     can be measured at fair value.  The Partnership is currently  assessing the
     impact of SFAS No. 146, which must be adopted in the first quarter of 2003.





<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES



--------------------------------------------------------------------------------

Item 3.     Quantitative and Qualitative Disclosure About Market Risk

The principal market risks (i.e., the risk of loss arising from the adverse
changes in market rates and prices) to which the Partnership is exposed are
interest rates on the Partnership's debt and investment portfolios. The
Partnership's investment portfolio consists of cash equivalents; accordingly,
the carrying amounts approximate fair value. The Partnership's investments are
not material to its financial position or performance. Assuming variable rate
debt of $243.0 million at September 30, 2002, a one percent increase in interest
rates would increase annual net interest expense by approximately $2.4 million.

Information regarding the Partnership's September 2002 interest rate hedging
transaction is included in "Liquidity and Capital Resources".


Item 4.     Controls and Procedures

In its recent Release No. 34-46427, effective August 29, 2002, the SEC, among
other things, adopted rules requiring reporting companies to maintain disclosure
controls and procedures to provide reasonable assurance that a registrant is
able to record, process, summarize and report the information required in the
registrant's quarterly and annual reports under the Securities Act of 1934 (the
"Exchange Act"). While the Partnership believes that its disclosure controls and
procedures have been effective to accomplish these objectives, the Partnership
intends to continue to examine, refine and formalize its disclosure controls and
procedures and to monitor ongoing developments in this area.

The principal executive officer and the principal financial officer of Kaneb
Pipe Line Company LLC, the general partner, have informed the Partnership that,
based upon their evaluation within 90 days of the date of this filing of the
Partnership's disclosure controls and procedures (as defined in Rule 13a-14(c)
and Rule 15d-14(c) under the Exchange Act), they have concluded that those
disclosure controls and procedures are effective.

There have been no changes in the Partnership's internal controls or in the
other factors known to the Company that could significantly affect these
controls subsequent to their evaluation, nor have any corrective actions with
regard to significant deficiencies and material weaknesses been necessary.


                           Part II - Other Information

Item 1. Legal Proceedings

     The information contained in Note 5 of the Notes to Consolidated  Financial
     Statements included in this report is hereby incorporated by reference.

                                       20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits.

          3.1  Amended  and  Restated  Agreement  of Limited  Partnership  dated
               September  27, 1989,  as revised July 23, 1998,  filed as Exhibit
               3.1 to  Registrant's  Form 10-K for the year ended  December  31,
               2000, which exhibit is hereby incorporated by reference.

          10.1 ST Agreement  and Plan of Merger  dated  December 21, 1992 by and
               between  Grace Energy  Corporation,  Support  Terminal  Services,
               Inc.,  Standard  Transpipe  Corp.,  and Kaneb Pipe Line Operating
               Partnership, NSTS, Inc. and NSTI, Inc. as amended by Amendment of
               STS Merger  Agreement dated March 2, 1993,  filed as Exhibit 10.1
               of the exhibits to Registrant's Current Report on Form 8-K ("Form
               8-K"), dated March 16, 1993, which exhibit is hereby incorporated
               by reference.

          10.2 Agreement for Sale and Purchase of Assets  between Wyco Pipe Line
               Company and KPOP,  dated February 19, 1995, filed as Exhibit 10.1
               of the exhibits to the  Registrant's  March 1995 Form 8-K,  which
               exhibit is hereby incorporated by reference.

          10.3 Asset  Purchase  Agreements  between and among Steuart  Petroleum
               Company,  SPC  Terminals,  Inc.,  Piney Point  Industries,  Inc.,
               Steuart   Investment   Company,   Support   Terminals   Operating
               Partnership,  L.P. and KPOP,  as amended,  dated August 27, 1995,
               filed as Exhibits 10.1,  10.2,  10.3, and 10.4 of the exhibits to
               Registrant's  Current  Report on Form 8-K dated  January 3, 1996,
               which exhibits are hereby incorporated by reference.

          10.4 Formation  and  Purchase  Agreement,  between  and among  Support
               Terminal Operating Partnership, L.P., Northville Industries Corp.
               and AFFCO,  Corp.,  dated October 30, 1998, filed as exhibit 10.9
               to the  Registrant's  Form 10-K for the year ended  December  31,
               1998, which exhibit is hereby incorporated by reference.

          10.5 Agreement,   between  and  among,  GATX  Terminals  Limited,   ST
               Services,  Ltd., ST Eastham,  Ltd.,  GATX Terminals  Corporation,
               Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line
               Partners, L.P., dated January 26, 1999, filed as Exhibit 10.10 to
               the Registrant's  Form 10-K for the year ended December 31, 1998,
               which exhibit is hereby incorporated by reference.

          10.6 Credit  Agreement,  between and among,  Kaneb Pipe Line Operating
               Partnership,  L.P., ST Services, Ltd. and SunTrust Bank, Atlanta,
               dated   January  27,  1999,   filed  as  Exhibit   10.11  to  the
               Registrant's  Form 10-K for the year  ended  December  31,  1998,
               which exhibit is hereby incorporated by reference.

          10.7 Revolving Credit  Agreement,  dated as of December 28, 2000 among
               Kaneb  Pipe Line  Operating  Partnership,  L.P.,  Kaneb Pipe Line
               Partners,  L.P., The Lenders From Time To Time Party Hereto,  and
               SunTrust Bank, as Administrative  Agent, filed as Exhibit 10.7 to
               the Registrant's  Form 10-K for the year ended December 31, 2001,
               which exhibit is incorporated herein by reference.

          10.8 Securities  Purchase  Agreement  Among Shore Terminals LLC, Kaneb
               Pipe Line Partners,  L.P. and the Sellers Named Therein, dated as
               of September 22, 2000,  Amendment  No. 1 To  Securities  Purchase
               Agreement,  dated as of November 28, 2000 and Registration Rights
               Agreement,  dated as of January 3, 2001,  filed as Exhibits 10.1,
               10.2 and 10.3 of the exhibits to  Registrant's  Current Report on
               Form 8-K  dated  January  3,  2001,  which  exhibits  are  hereby
               incorporated by reference.

          10.9 Stock Purchase  Agreement,  dated as of November 12, 2001, by and
               between Kaneb Pipe Line Operating  Partnership,  L.P., and Statia
               Terminals  Group  NV, a public  company  with  limited  liability
               organized  under the laws of the Netherlands  Antilles,  filed as
               Exhibit 10.1 to the exhibits to  Registrant's  Current  Report on
               Form 8-K,  dated  January 11, 2002,  and  incorporated  herein by
               reference.

         10.10 Voting and Option  Agreement  dated as of November 12,  2001,  by
               and between  Kaneb Pipe Line  Operating  Partnership,  L.P.,  and
               Statia  Terminals  Holdings N.V., a Netherlands  Antilles company
               and a  shareholder  of Statia  Terminals  Group NV, a Netherlands
               Antilles  company  filed  as  Exhibit  10.1  to the  exhibits  to
               Registrant's  Current Report on Form 8-K, dated January 11, 2002,
               and incorporated herein by reference.

         10.11 Asset  Purchase and Sale  Agreement,  dated as of  September  17,
               2002, by and between Koch Pipeline Company, L.P., Koch Fertilizer
               Storage  and  Terminal  Company  and Kaneb  Pipe  Line  Operating
               Partnership,  L.P.,  filed as  Exhibit  10.2 to the  exhibits  to
               Registrant's  Current Report on Form 8-K, dated November 1, 2002,
               and incorporated herein by reference.

         10.12 First  Amendment to Asset Purchase and Sale  Agreement,  dated as
               of October 31, 2002, by and between Koch Pipeline Company,  L.P.,
               Koch Fertilizer  Storage and Terminal Company and Kaneb Pipe Line
               Operating  Partnership,  L.P.,  filed  as  Exhibit  10.3  to  the
               exhibits  to  Registrant's  Current  Report  on Form  8-K,  dated
               November 1, 2002, and incorporated herein by reference.

         10.13 Bridge  Loan  Agreement,  dated as of  November  1, 2002,  by and
               between  Kaneb  Operating  Partnership,  L.P.,  Kaneb  Pipe  Line
               Partners,  L.P., the Lenders and SunTrust Bank as  Administrative
               Agent,  filed as Exhibit  10.4 to the  exhibits  to  Registrant's
               Current   Report  on  Form  8-K,  dated  November  1,  2002,  and
               incorporated herein by reference.

         10.14 Subsidiary  Guaranty  Agreement,  dated as of  November  1, 2002,
               among  each  of  the  Subsidiaries,  Kaneb  Pipe  Line  Operating
               Partnership, L.P. and SunTrust Bank, filed as Exhibit 10.5 to the
               exhibits  to  Registrant's  Current  Report  on Form  8-K,  dated
               November 1, 2002, and incorporated herein by reference.

         10.15 Amendment No. 1 to Revolving Credit  Agreement,  dated as of July
               31, 2002, by and between Kaneb Operating Partnership, L.P., Kaneb
               Pipe Line  Partners,  L.P.,  the  Lenders  and  SunTrust  Bank as
               Administrative  Agent,  filed as Exhibit  10.6 to the exhibits to
               Registrant's  Current Report on Form 8-K, dated November 1, 2002,
               and incorporated herein by reference.

         10.16 Amendment  No.  2 to  Revolving  Credit  Agreement,  dated  as of
               October 31, 2002,  by and between  Kaneb  Operating  Partnership,
               L.P.,  Kaneb Pipe Line  Partners,  L.P., the Lenders and SunTrust
               Bank  as  Administrative  Agent,  filed  as  Exhibit  10.7 to the
               exhibits  to  Registrant's  Current  Report  on Form  8-K,  dated
               November 1, 2002, and incorporated herein by reference.

     (b)  Reports on Form 8-K

          None.


<PAGE>

                                    Signature

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned.



                                        KANEB PIPE LINE PARTNERS, L.P.
                                        (Registrant)
                                        By  KANEB PIPE LINE COMPANY LLC
                                        --------------------------------
                                        (Managing General Partner)


Date:  November 14, 2002                           //s//
                                        ----------------------------------------
                                        Howard C. Wadsworth
                                        Vice President, Treasurer and Secretary




<PAGE>


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
          Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Edward D. Doherty, Chief Executive Officer of Kaneb Pipe Line Company LLC, as
General Partner for Kaneb Pipe Line Partners, L.P. certify that:

1.   I have  reviewed  this  quarterly  report on Form  10-Q of Kaneb  Pipe Line
     Partners, L.P.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing  and  maintaining   disclosure  controls  and  procedures  and
     internal  controls and  procedures  for financial  reporting (as defined in
     Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          issuer, including its consolidated  subsidiaries,  is made known to us
          by others  within those  entities,  particularly  during the period in
          which this report is being prepared;

     b)   Designed  such  internal   controls  and   procedures   for  financial
          reporting,  or  caused  such  internal  controls  and  procedures  for
          financial reporting to be designed under their supervision, to provide
          reasonable  assurances that the registrant's  financial statements are
          fairly  presented in conformity  with  generally  accepted  accounting
          principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures  and internal  controls and  procedures  for financial
          reporting  as of  the  end  of  the  period  covered  by  this  report
          ("Evaluation Date");

     d)   Presented in this report our conclusions  about the  effectiveness  of
          the  disclosure  controls and  procedures  and  internal  controls and
          procedures for financial  reporting  based on our evaluation as of the
          Evaluation Date;

     e)   Disclosed to the registrant's  auditors and the audit committee of the
          board of directors:

          (i)  All  significant  deficiencies  and  material  weaknesses  in the
               design or  operation  of internal  controls  and  procedures  for
               financial reporting which could adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information  required to be  disclosed by the  registrant  in the
               reports that it files or submits under the Act (15 U.S.C.  78a et
               seq.),  within the time periods specified in the U.S.  Securities
               and Exchange Commission's rules and forms; and

          (ii) Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls and procedures for financial reporting; and

     f)   Indicated in this report any significant  changes in the  registrant's
          internal  controls and procedures for financial  reporting or in other
          factors  that  could   significantly   affect  internal  controls  and
          procedures  for financial  reporting made during the period covered by
          this  report,  including  any  actions  taken to  correct  significant
          deficiencies  and material  weaknesses  in the  registrant's  internal
          controls and procedures for financial reporting.

Date:  November 14, 2002

                                                   //s//
                                        ----------------------------------------
                                        Edward D. Doherty
                                        Chairman of the Board
                                        (Chief Executive Officer)
<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
          Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Howard C. Wadsworth,  Chief Financial Officer of Kaneb Pipe Line Company LLC,
as General Partner for Kaneb Pipe Line Partners, L.P. certify that:

1.   I have  reviewed  this  quarterly  report on Form  10-Q of Kaneb  Pipe Line
     Partners, L.P.;


2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing  and  maintaining   disclosure  controls  and  procedures  and
     internal  controls and  procedures  for financial  reporting (as defined in
     Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          issuer, including its consolidated  subsidiaries,  is made known to us
          by others  within those  entities,  particularly  during the period in
          which this report is being prepared;

     b)   Designed  such  internal   controls  and   procedures   for  financial
          reporting,  or  caused  such  internal  controls  and  procedures  for
          financial reporting to be designed under their supervision, to provide
          reasonable  assurances that the registrant's  financial statements are
          fairly  presented in conformity  with  generally  accepted  accounting
          principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures  and internal  controls and  procedures  for financial
          reporting  as of  the  end  of  the  period  covered  by  this  report
          ("Evaluation Date");

     d)   Presented in this report our conclusions  about the  effectiveness  of
          the  disclosure  controls and  procedures  and  internal  controls and
          procedures for financial  reporting  based on our evaluation as of the
          Evaluation Date;

     e)   Disclosed to the registrant's  auditors and the audit committee of the
          board of directors:

          (i)  All  significant  deficiencies  and  material  weaknesses  in the
               design or  operation  of internal  controls  and  procedures  for
               financial reporting which could adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information  required to be  disclosed by the  registrant  in the
               reports that it files or submits under the Act (15 U.S.C.  78a et
               seq.),  within the time periods specified in the U.S.  Securities
               and Exchange Commission's rules and forms; and

          (ii) Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls and procedures for financial reporting; and

     f)   Indicated in this report any significant  changes in the  registrant's
          internal  controls and procedures for financial  reporting or in other
          factors  that  could   significantly   affect  internal  controls  and
          procedures  for financial  reporting made during the period covered by
          this  report,  including  any  actions  taken to  correct  significant
          deficiencies  and material  weaknesses  in the  registrant's  internal
          controls and procedures for financial reporting.


Date:  November 14, 2002


                                                 //s//
                                        ----------------------------------------
                                        Howard C. Wadsworth
                                        Vice President, Treasurer and Secretary
<PAGE>
                     CERTIFICATE OF CHIEF EXECUTIVE OFFICER

          Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002

The  undersigned,  being the Chief Executive  Officer of Kaneb Pipe Line Company
LLC, as General  Partner of Kaneb Pipe Line Partners,  L.P. (the  "Partnership")
hereby  certifies that the  Partnership's  Quarterly Report on Form 10-Q for the
quarterly  period  ended  September  30,  2002,  filed  with the  United  States
Securities  and Exchange  Commission  pursuant to Section  13(a) or 15(d) of the
Securities  Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)),  fully complies with
the  requirements  of Section 13(a) or 15(d) of the  Securities  Exchange Act of
1934 and that information contained in such Quarterly Report fairly presents, in
all material respects,  the financial condition and results of operations of the
Partnership.

Date:  November 14, 2002

                                                   //s//
                                        ----------------------------------------
                                        Edward D. Doherty
                                        Chairman of the Board
                                        (Chief Executive Officer)





<PAGE>

                     CERTIFICATE OF CHIEF FINANCIAL OFFICER

          Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002

The  undersigned,  being the Chief Financial  Officer of Kaneb Pipe Line Company
LLC, as General  Partner of Kaneb Pipe Line Partners,  L.P. (the  "Partnership")
hereby  certifies that the  Partnership's  Quarterly Report on Form 10-Q for the
quarterly  period  ended  September  30,  2002,  filed  with the  United  States
Securities  and Exchange  Commission  pursuant to Section  13(a) or 15(d) of the
Securities  Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)),  fully complies with
the  requirements  of Section 13(a) or 15(d) of the  Securities  Exchange Act of
1934 and that information contained in such Quarterly Report fairly presents, in
all material respects,  the financial condition and results of operations of the
Partnership.

Date:  November 14, 2002


                                                 //s//
                                        ----------------------------------------
                                        Howard C. Wadsworth
                                        Vice President, Treasurer and Secretary
                                        (Chief Financial Officer)