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

                                       OR

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

For the Quarterly Period                                       Commission File
Ended June 30, 1999                                            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 principle executive offices, including zip code)

                                 (972) 699-4000
              (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 July 30, 1999:  18,310,000

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


FORM 10-Q
QUARTER ENDED JUNE 30, 1999
--------------------------------------------------------------------------------

                                                                        Page No.
                           Part I. Financial Information


Item 1. Financial Statements (Unaudited)

        Consolidated Statements of Income -- Three and Six Months
          Ended June 30, 1999 and 1998                                     1

        Condensed Consolidated Balance Sheets -- June 30, 1999
           and December 31, 1998                                           2

        Condensed Consolidated Statements of Cash Flows -- Six
           Months Ended June 30, 1999 and 1998                             3

        Notes to Consolidated Financial Statements                         4

Item 2. Management's Discussion and Analysis of
           Financial Condition and Results of Operations                   8

                           Part II.  Other Information

Item 6. Exhibits and Reports on Form 8-K                                  13



<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       Six Months Ended
                                                June 30,                June 30,
                                          --------------------    --------------------
                                            1999        1998        1999        1998
                                          --------    --------    --------    --------
<S>                                       <C>         <C>         <C>         <C>
Revenues                                  $ 39,171    $ 30,553    $ 76,016    $ 58,623
                                          --------    --------    --------    --------
Costs and expenses:
     Operating costs                        17,163      12,917      33,346      24,605
     Depreciation and amortization           3,770       3,018       7,385       5,965
     General and administrative              2,771       1,672       4,674       3,207
                                          --------    --------    --------    --------
       Total costs and expenses             23,704      17,607      45,405      33,777
                                          --------    --------    --------    --------
          Operating income                  15,467      12,946      30,611      24,846

Interest and other income, net                  38          39         282          87
Interest expense                            (3,785)     (2,760)     (7,294)     (5,467)
                                          --------    --------    --------    --------
Income before minority interest
     and income taxes                       11,720      10,225      23,599      19,466
Minority interest in net income               (115)       (101)       (230)       (192)
Income tax provision                          (192)        (94)       (600)       (284)
                                          --------    --------    --------    --------
Net income                                  11,413      10,030      22,769      18,990

General partner's interest in net income      (367)       (244)       (737)       (334)
                                          --------    --------    --------    --------
Limited partners' interest in net income  $ 11,046    $  9,786    $ 22,032    $ 18,656
                                          ========    ========    ========    ========
Allocation of net income per Unit         $    .69    $    .61    $   1.37    $   1.16
                                          ========    ========    ========    ========
Weighted average number of Partnership
   Units outstanding                        16,060      16,060      16,060      16,060
                                          ========    ========    ========    ========
</TABLE>


                 See notes to consolidated financial statements.
                                        1


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


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

                                                           June 30   December 31
                                                             1999        1998
                                                          ----------   ---------
                                                          (Unaudited)
         ASSETS
Current assets:
     Cash and cash equivalents                             $  2,555    $    849
     Accounts receivable                                     20,134      13,917
     Prepaid expenses and other                               5,416       4,035
                                                           --------    --------

         Total current assets                                28,105      18,801
                                                           --------    --------

Property and equipment                                      421,691     377,248
Less accumulated depreciation                               115,563     108,622
                                                           --------    --------

     Net property and equipment                             306,128     268,626
                                                           --------    --------

Investment in affiliate                                      22,423      21,005
                                                           --------    --------

                                                           $356,656    $308,432
                                                           ========    ========

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
     Short-term and current portion of long-term debt      $   --      $ 10,000
     Accounts payable and accrued expenses                   16,400      14,354
     Accrued distributions payable                           11,729      10,725
     Payable to general partner                               1,219       6,785
                                                           --------    --------

         Total current liabilities                           29,348      41,864
                                                           --------    --------

Long-term debt, less current portion                        211,719     153,000

Other liabilities and deferred taxes                         10,261       7,131

Minority interest                                             1,056       1,049

Commitments and contingencies

Partners' capital                                           104,272     105,388
                                                           --------    --------
                                                           $356,656    $308,432
                                                           ========    ========

                 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)

                                                             Six Months Ended
                                                                 June 30,
                                                           --------------------
                                                             1999       1998
                                                           --------   ---------

Operating activities:
   Net income                                              $ 22,769    $ 18,990
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                            7,385       5,965
     Equity in earnings of affiliate                         (1,556)       --
     Minority interest in net income                            230         192
     Deferred income taxes                                      596         292
     Changes in working capital components                   (5,844)     (1,235)
                                                           --------    --------
         Net cash provided by operating activities           23,580      24,204
                                                           --------    --------
Investing activities:
   Capital expenditures                                      (4,074)     (5,774)
   Acquisitions of terminals                                (37,206)     (6,328)
   Other, net                                                  (857)       (986)
                                                           --------    --------
         Net cash used in investing activities              (42,137)    (13,088)
                                                           --------    --------
Financing activities:
   Changes in payable to general partner                     (5,000)        (96)
   Issuance of short-term and long-term debt                 48,719       6,000
   Payments of long-term debt                                  --        (1,127)
   Distributions to partners, including minority interest   (23,456)    (21,450)
                                                           --------    --------
         Net cash provided by (used in)
               financing activities                          20,263     (16,673)
                                                           --------    --------

Increase (decrease) in cash and cash equivalents              1,706      (5,557)
Cash and cash equivalents at beginning of period                849       6,376
                                                           --------    --------
Cash and cash equivalents at end of period                 $  2,555    $    819
                                                           ========    ========
Supplemental cash flow information -
     cash paid for interest                                $  7,195    $  5,438
                                                           ========    ========


                 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 six month periods  ended June 30, 1999 and 1998,  have been prepared in
     accordance  with  generally  accepted  accounting  principles  applied on a
     consistent  basis.   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,  1998.  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 June 30, 1999 and the  consolidated
     results of their  operations  and cash flows for the periods ended June 30,
     1999 and 1998.  Operating  results for the three and six months  ended June
     30, 1999 are not necessarily indicative of the results that may be expected
     for the year ending December 31, 1999.


2.   ACQUISITION OF TERMINALS

     On February 1, 1999, the  Partnership,  through two  wholly-owned  indirect
     subsidiaries,  acquired  six  terminals  in the  United  Kingdom  from GATX
     Terminal Limited for (pound)22.6 million (approximately $37.2 million) plus
     the assumption of certain liabilities. The acquisition,  which was financed
     by term loans from a bank, has been accounted for using the purchase method
     of accounting.  The term loans, which bear interest in varying amounts, are
     secured by the capital stock of the  subsidiaries  that acquired the United
     Kingdom  terminals,  and pari passu with the  existing  mortgage  notes and
     credit  facility,  by a mortgage on the East Pipeline,  and contain certain
     financial and operational  covenants.  $18.3 million of the term loans were
     repaid in July 1999 with the proceeds from a public unit offering (see Note
     3). The remaining  portion ($25.9  million) is due in January 2002. The pro
     forma  effect  of the  acquisition  was  not  material  to the  results  of
     operations.


3.   PUBLIC OFFERING OF UNITS


     In July 1999, the Partnership issued 2.25 million limited partnership units
     in a public  offering at $30.75 per Unit,  generating  approximately  $65.7
     million in net  proceeds.  A portion of the  proceeds  was used to repay in
     full the  Partnership's  $15.0 million  promissory  note, the $25.0 million
     revolving  credit  facility and $18.3 million in term loans  resulting from
     the United Kingdom terminal acquisition referred to in Note 2. Accordingly,
     the current debt repaid with offering  proceeds  ($33.3 million at June 30,
     1999) has been reclassified as long-term in the accompanying balance sheet.




<PAGE>
4.   COMPREHENSIVE INCOME

     Comprehensive  income for the three and six months  ended June 30, 1999 and
     1998 is as follows:

                                     Three Months  Ended     Six Months Ended
                                          June 30,               June 30,
                                    --------------------   --------------------
                                       1999       1998       1999        1998
                                    --------    --------   --------    --------
                                                  (in thousands)

Net income                          $ 11,413    $ 10,030   $ 22,769    $ 18,990
Other comprehensive income (loss)
   foreign currency translation
   adjustment                           (348)       --         (657)       --
                                    --------    --------   --------    --------

Comprehensive income                $ 11,065    $ 10,030   $ 22,112    $ 18,990
                                    ========    ========   ========    ========


5.   CASH DISTRIBUTIONS

     The  Partnership  makes  quarterly  distributions  of 100% of its Available
     Cash,  as  defined  in the  Partnership  Agreement,  to  holders of limited
     partnership units  ("Unitholders") 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. A cash distribution of $0.70 per unit for the first
     quarter of 1999 was paid on May 14, 1999. A cash  distribution of $0.70 per
     unit for the second  quarter of 1999 was  declared  to holders of record on
     July 30, 1999 and is payable on August 13, 1999.


6.   CONTINGENCIES

     The operations of the Partnership  are subject to Federal,  state and local
     laws and regulations  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 are defendants in a lawsuit filed
     in a Texas state court in 1997 by Grace Energy Corporation, the entity from
     whom the  Partnership  acquired ST Services in 1993.  The lawsuit  involves
     environmental  response and remediation  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, was abandoned in 1973, and
     the  connecting  terminal  was sold to an unrelated  entity in 1976.  Grace
     alleges  that it has  incurred  since 1996  expenses  of  approximately  $3
     million for response and remediation required by the State of Massachusetts
     and that it expects to incur  additional  expenses  in the  future.  Future
     expenses could potentially  include claims by the United States Government,
     as described  below.  Grace alleges 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 caused by the
     jet fuel leaks  from the  pipeline.  Grace is  seeking a ruling  that these
     subsidiaries  are  responsible  for  all  present  and  future  remediation
     expenses  for these  leaks and that Grace has no  obligation  to  indemnify
     these  subsidiaries  for  these  expenses.  The  case is set for  trial  in
     September 1999.

     The consistent position of the Partnership's  subsidiaries is that they did
     not acquire the abandoned  pipeline as part of the 1993 ST transaction  and
     did not assume any responsibility for the environmental damage. In a motion
     for partial summary  judgment,  the trial judge has ruled that the pipeline
     was an asset of the company  acquired by the subsidiary.  The  subsidiaries
     intend to seek a rehearing on this issue from the trial judge. In addition,
     they are continuing with their defense that the pipeline had been abandoned
     prior to the acquisition of ST Services and could not have been included in
     the assets  they  acquired.  The  defendants  also  believe  that they have
     certain  rights  to  indemnification   from  Grace  under  the  acquisition
     agreement  with Grace.  These rights include claims against Grace for fraud
     and breach of environmental  representations in the acquisition  agreement.
     The acquisition  agreement also includes Grace's agreement to indemnify the
     subsidiaries against 60% of post-closing  environmental  remediation costs,
     subject to a maximum indemnity payment of $10 million.

     The  Otis  Air  Force  Base  is  a  part  of  the  Massachusetts   Military
     Reservation,  which has been  declared a  Superfund  Site  pursuant  to the
     Comprehensive  Environmental Response,  Compensation and Liability Act. The
     MMR Site contains nine groundwater  contamination  plumes, two of which are
     allegedly associated with the 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,  has 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  have 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 subsidiaries,  the Government
     advised  the  parties  in April 1999 that it has  identified  the two spill
     areas that it believes to be related to the pipeline that is the subject of
     the Grace suit. The Government  advised the parties that it believes it has
     incurred costs of approximately  $34 million,  and expects 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.  Any claims by the  Government  could be material in
     amount  and, if made and  ultimately  sustained  against the  Partnership's
     subsidiaries,  could adversely affect the Partnership's ability to pay cash
     distributions to its unitholders.

     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.


7.   BUSINESS SEGMENT DATA

     The Partnership  conducts  business through two principal  operations;  the
     "Pipeline  Operations,"  which consists  primarily of the transportation of
     refined  petroleum  products in the Midwestern  states as a common carrier,
     and the  "Terminaling  Operations,"  which  provide  storage for  petroleum
     products, specialty chemicals and other liquids.

     The Partnership  measures segment profit as operating income.  Total assets
     are those controlled by each reportable segment.

                                    Three Months  Ended      Six Months Ended
                                          June 30,               June 30,
                                   --------------------    --------------------
                                     1999        1998       1999        1998
                                   --------    --------    --------    --------
                                                  (in thousands)


Business Segment Revenues:
  Pipeline operations              $ 16,182    $ 15,351    $ 31,346    $ 29,452
  Terminaling operations             22,989      15,202      44,670      29,171
                                   --------    --------    --------    --------
                                   $ 39,171    $ 30,553    $ 76,016    $ 58,623
                                   ========    ========    ========    ========

Business segment profit:
  Pipeline operations              $  8,712    $  7,988    $ 16,068    $ 14,762
  Terminaling operations              6,755       4,958      14,543      10,084
                                   --------    --------    --------    --------
    Operating income                 15,467      12,946      30,611      24,846
  Interest and other income, net         38          39         282          87
  Interest expense                   (3,785)     (2,760)     (7,294)     (5,467)
                                   --------    --------    --------    --------
    Income before minority
      interest and income taxes    $ 11,720    $ 10,225    $ 23,599    $ 19,466
                                   ========    ========    ========    ========

                                    June 30,  December 31,
                                     1999        1998
                                   --------    --------
     Total assets:
        Pipeline operations        $104,294    $103,966
        Terminaling operations      252,362     204,466
                                   --------    --------
                                   $356,656    $308,432
                                   ========    ========


<PAGE>


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


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
                                         Three Months Ended   Six Months Ended
                                               June 30,           June 30,
                                          -----------------   -----------------
                                            1999      1998      1999     1998
                                          -------   -------   -------   -------
                                                     (in thousands)

     Revenues                             $16,182   $15,351   $31,346   $29,452
     Operating costs                        5,411     5,359    11,203    10,761
     Depreciation and amortization          1,274     1,191     2,538     2,377
     General and administrative               785       813     1,537     1,552
                                          -------   -------   -------   -------
         Operating income                 $ 8,712   $ 7,988   $16,068   $14,762
                                          =======   =======   =======   =======


     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  For the three and six months ended June 30,
     1999, revenues increased 5% and 6%, respectively, compared to the same 1998
     periods,  due to an overall  increase in volumes  shipped.  Over 90% of the
     year-to-date  increase in volumes shipped was on the East Pipeline.  Barrel
     miles  totaled 4.6 billion and 4.0 billion for the three  months ended June
     30,  1999 and 1998,  respectively,  and 8.6 billion and 7.7 billion for the
     six months ended June 30, 1999 and 1998, 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,  remained  constant for the three
     month period ended June 30,  1999,  when  compared to the same 1998 period,
     and  increased by 4% for the six month  period  ended June 30,  1999,  when
     compared  to  1998.  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
     decreased slightly over the comparable prior year periods.


     Terminaling Operations

                                        Three Months Ended   Six Months Ended
                                               June 30,           June 30,
                                          -----------------   -----------------
                                            1999      1998      1999     1998
                                          -------   -------   -------   -------
                                                     (in thousands)

          Revenues                        $22,989   $15,202   $44,670   $29,171
          Operating costs                  11,752     7,558    22,143    13,844
          Depreciation and amortization     2,496     1,827     4,847     3,588
          General and administrative        1,986       859     3,137     1,655
                                          -------   -------   -------   -------
              Operating income            $ 6,755   $ 4,958   $14,543   $10,084
                                          =======   =======   =======   =======


     On October 30, 1998, the  Partnership,  through a wholly-owned  subsidiary,
     entered into  acquisition  and joint  venture  agreements  with  Northville
     Industries  Corp.  to acquire  and manage  the former  Northville  terminal
     located  in Linden,  New  Jersey.  Under the  agreements,  the  Partnership
     acquired a 50%  interest  in the newly  formed ST Linden  Terminal  LLC for
     $20.5 million plus  transaction  costs.  During the year ended December 31,
     1998,  the   Partnership   acquired   other   terminals  for  an  aggregate
     consideration  of $15.9  million.  On  February  1, 1999,  the  Partnership
     acquired six terminals in the United Kingdom from GATX Terminal Limited for
     approximately $37.2 million plus the assumption of certain liabilities. The
     acquisitions  (the  "Acquisitions")  were  funded  with bank  financing,  a
     portion of which was paid off using proceeds from a public unit offering in
     July 1999 (see "Liquidity and Capital Resources").

     Terminaling  revenues  increased  51% and 53% for the  three  and six month
     periods  ended  June 30,  1999,  compared  to the same  1998  periods,  due
     primarily to the  Acquisitions  and an increase in tank  utilization due to
     favorable market conditions,  partially offset by a decrease in the overall
     average price realized for storage. For the six months ended June 30, 1999,
     average  annualized  revenues per barrel of tankage  utilized  decreased to
     $4.00,  compared  to $4.40 per barrel for the same prior year  period,  the
     result  of the  storage  of a  larger  proportionate  volume  of  petroleum
     products,  which are  historically at lower per barrel rates than specialty
     chemicals.  Average annual  tankage  utilized for the six months ended June
     30, 1999  increased to 22.3 million  barrels from 13.3 million  barrels for
     the  comparable  prior year  period,  as a result of the  Acquisitions  and
     increased  utilization  at  the  Partnership's  largest  petroleum  storage
     facility.

     For the three and six month  periods ended June 30, 1999,  operating  costs
     increased by $4.2 million and $8.3 million, respectively,  when compared to
     the same 1998  periods,  as a result of the  increase  in tank  utilization
     resulting  primarily  from the  Acquisitions.  General  and  administrative
     expense for the three and six months ended June 30, 1999, increased by $1.1
     million  and  $1.5  million,  when  compared  to  1998,  due  also  to  the
     Acquisitions.

     Total tankage  capacity  (27.7 million  barrels at June 30, 1999) has been,
     and is  expected  to remain,  adequate to meet  existing  customer  storage
     requirements.  Customers consider factors such as location,  access to cost
     effective  transportation  and quality of service,  in addition to pricing,
     when selecting terminal storage.


     Liquidity and Capital Resources

     During  the first six months of 1999,  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 $23.6 million and $24.2 million for the six
     months  ended June 30, 1999 and 1998,  respectively.  Capital  expenditures
     (excluding  acquisitions)  were $4.1  million for the six months ended June
     30,  1999,  compared  to $5.8  million  during  the same 1998  period.  The
     Partnership  anticipates that routine maintenance capital expenditures will
     total approximately $12 million to $16 million (excluding acquisitions) for
     the year ending December 31, 1999.

     In July 1999, the Partnership issued 2.25 million limited partnership units
     in a public  offering at $30.75 per Unit,  generating  approximately  $65.7
     million in net  proceeds.  A portion of the  proceeds  was used to repay in
     full the  Partnership's  $15.0 million  promissory  note, the $25.0 million
     revolving  credit  facility and $18.3 million in term loans  resulting from
     the United Kingdom terminal acquisition.

     In January 1999, the Partnership,  through two  wholly-owned  subsidiaries,
     entered into a credit  agreement with a bank that provides for the issuance
     of $39.2  million  of term  loans in  connection  with the  United  Kingdom
     terminal acquisition and $5.0 million for general Partnership purposes. The
     term  loans,  which bear  interest in varying  amounts,  are secured by the
     capital  stock  of  the  subsidiaries  that  acquired  the  United  Kingdom
     terminals,  and pari  passu  with the  existing  mortgage  notes and credit
     facility, by a mortgage on the East Pipeline, and contain certain financial
     and operational  covenants.  $18.3 million of the term loans were repaid in
     July 1999 with the proceeds  from the public unit  offering.  The remaining
     portion ($25.9 million) is due in January 2002.

     The  Partnership  makes  distributions  of  100% of its  Available  Cash to
     Unitholders and the general partner.  Available Cash consists  generally of
     all  the  cash   receipts  less  all  cash   disbursements   and  reserves.
     Distributions  of $0.70 per unit were  declared to all  Unitholders  in the
     first and second  quarters  of 1999 and $2.60 per unit was  declared in the
     calendar year 1998.

     The Partnership  expects to fund future cash  distributions and maintenance
     capital  expenditures  with cash and cash flows from operating  activities.
     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.


     Year 2000 Issue

     The Partnership  recognizes the challenges associated with Year 2000 Issues
     ("Y2K") and has undertaken a review and testing of its computer  systems to
     identify  Y2K-related  issues  associated  with any  items of  software  or
     hardware used in its business operations. Most of the software systems used
     by the Partnership are licensed from third parties and are Y2K compliant or
     will be upgraded to Y2K  compliant  releases  before the end of 1999.  This
     issue is being addressed by the Partnership in multiple  phases,  including
     assessment,  remediation, testing and implementation, and progress is being
     monitored by the general partner's senior management. All material systems,
     including non-information  technology systems that may house non-compliant,
     embedded technology are being evaluated.

     In addition to  addressing  the  Partnership's  own  systems,  as described
     above, the Partnership must assess the state of readiness of the systems of
     other entities with which it does business. With respect to its third-party
     relationships,  the  Partnership  has contacted  its primary  suppliers and
     service  providers to assess their state of Y2K readiness.  The Partnership
     continues to receive  information  from its critical  suppliers and service
     providers to assist the Partnership in assessing the Y2K readiness of these
     parties.  Failure by these third  parties to  adequately  resolve their Y2K
     problems  could  have  a  material  adverse  effect  on  the  Partnership's
     operations.

     The  Partnership  believes its success in being Y2K  compliant  will not be
     conclusively  known  until  the year  2000 is  actually  reached.  Although
     failure by one or more of the  Partnership's  own systems  could  result in
     lost  revenues  and/or  additional  expenses  required  to carry out manual
     processing of transactions,  the Partnership cannot predict the effect that
     external   forces  could  have  on  its   business.   Failures  by  banking
     institutions,   the  telecommunications  industry  and  others  could  have
     far-reaching effects on the entire economy and the Partnership.

     At June 30, 1999, the initial  assessment  phase has been completed for the
     Partnership's   information   technology  and  non-information   technology
     systems. The major information technology systems on which the pipeline and
     the terminaling  operations depend have been updated,  tested and certified
     to be Y2K compliant.  The Partnership continues to evaluate the appropriate
     courses  of action of its  non-information  technology  systems,  including
     embedded  chips  located  in  pipeline  and   terminaling   hardware.   The
     Partnership  expects to  complete  all phases of its Y2K  program  prior to
     December 31, 1999.

     The  Partnership  believes  that  it is  not  possible  to  determine  with
     certainty  that  all Y2K  problems  affecting  the  Partnership  have  been
     identified or  corrected.  The number of devices that could be affected and
     the interactions among these devices are simply too numerous.  In addition,
     the Partnership  cannot accurately predict how many failures related to the
     Y2K problem will occur or the severity,  duration or financial consequences
     of such failures.  The  Partnership  has hired an outside Y2K consultant to
     assist the  Partnership in meeting its goals and in developing  contingency
     plans to define and address the worst-case  scenario  likely to be faced by
     the Partnership. The plan is expected to be in place by September 30, 1999.

     Through June 30, 1999,  the  Partnership  has incurred  approximately  $0.2
     million  of  costs  related  to  assessing,  remediating  and  testing  its
     information technology and non-information technology systems. A portion of
     these  costs  would  have  been  incurred  as part  of  normal  system  and
     application  upgrades.  In certain cases, the timing of these  expenditures
     has been  accelerated due to Y2K  considerations.  The Partnership does not
     anticipate  that  future  costs  to  become  fully  Y2K  compliant  will be
     material.


     Allocation of Net Income and Earnings

     Net income or loss is allocated  between limited partner  interests and the
     general   partner  pro  rata  based  on  the   aggregate   amount  of  cash
     distributions declared (including general partner incentive distributions).
     Beginning in 1997,  distributions  by the  Partnership  of  Available  Cash
     reached  the Second  Target  Distribution,  as  defined in the  Partnership
     Agreement,  which entitled the general partner to receive certain incentive
     distributions at different levels of cash distributions.  Earnings per Unit
     shown on the  consolidated  statements of income are calculated by dividing
     the limited partners' interest in net income by the weighted average number
     of Units  outstanding.  If the allocation of income had been made as if all
     income  had been  distributed  in cash,  earnings  per Unit would have been
     $0.69 and $0.62 for the three months and $1.38 and $1.17 for the six months
     ended June 30, 1999 and 1998, respectively.




<PAGE>


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES





                           Part II - Other Information

     Item 6.      Exhibits and Reports on Form 8-K

         (a)      Exhibits.
                         27.        Financial Data Schedule

         (b)       Reports on  Form 8-K

                  Registrant's Current Report on Form 8-K, dated July 9, 1999.

                  Registrant's Current Report on Form 8-K, dated July 22, 1999.


                                    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
                                                 (Managing General Partner)


Date: August 13, 1999                                      //s//
                                                 Jimmy L. Harrison
                                                 Vice President and Controller