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 March 31, 1998                                            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 Identification No.)
Incorporation or Organization)

                          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 Senior  Preference  Units of the  Registrant  outstanding at April 30,
1998:  7,250,000.  Number of Preference  Units of the Registrant  outstanding at
April 30, 1998:  5,650,000.


<PAGE>
KANEB PIPE LINE PARTNERS, L.P.  AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
--------------------------------------------------------------------------------

                                                                        Page No.
                           Part I. Financial Information

Item 1.  Financial Statements (Unaudited)

         Consolidated Statements of Income -- Three Months Ended
            March 31, 1998 and 1997                                        1

         Condensed Consolidated Balance Sheets -- March 31, 1998
            and December 31, 1997                                          2

         Condensed Consolidated Statements of Cash Flows -- Three
            Months Ended March 31, 1998 and 1997                           3

         Notes to Consolidated Financial Statements                        4

Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations                  6

                           Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K                                  9

Signature                                                                  9


<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands -- Except Per Unit Amounts)
(Unaudited)
--------------------------------------------------------------------------------
                                                            Three Months Ended
                                                                March 31,
                                                             1998        1997
                                                           --------    --------

Revenues                                                   $ 28,070    $ 28,579
                                                           --------    --------

Costs and expenses:
      Operating costs                                        11,688      12,402
      Depreciation and amortization                           2,947       2,878
      General and administrative                              1,535       1,270
                                                           --------    --------

           Total costs and expenses                          16,170      16,550
                                                           --------    --------

Operating income                                             11,900      12,029
Interest and other income, net                                   48         106
Interest expense                                             (2,707)     (2,854)
                                                           --------    --------

Income before minority interest and income taxes              9,241       9,281
Minority interest in net income                                 (91)        (90)
Income tax provision                                           (190)       (284)
                                                           --------    --------

Net income                                                    8,960       8,907
General partner's interest in net income                        (90)        (90)
                                                           --------    --------

Limited partners' interest in net income                   $  8,870    $  8,817
                                                           ========    ========

Allocation of net income per Senior Preference Unit
     and Preference Unit                                   $    .55    $    .55
                                                           ========    ========

Weighted average number of Partnership units outstanding:
      Senior Preference Units                                 7,250       7,250
                                                           ========    ========
      Preference Units                                        5,650       4,650
                                                           ========    ========





<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
--------------------------------------------------------------------------------
                                                           March 31,   Dec. 31,
                                                              1998       1997
                                                           ---------   --------
                                                          (Unaudited)
         ASSETS
Current assets:
     Cash and cash equivalents                              $  3,941   $  6,376
     Accounts receivable                                      12,075     11,503
     Prepaid expenses                                          4,024      4,021
                                                            --------   --------

         Total current assets                                 20,040     21,900
                                                            --------   --------

Property and equipment                                       353,372    345,802
Less accumulated depreciation and amortization               101,416     98,670
                                                            --------   --------

     Net property and equipment                              251,956    247,132
                                                            --------   --------

                                                            $271,996   $269,032
                                                            ========   ========

     LIABILITIES AND PARTNERS' CAPITAL 
Current liabilities:
     Current portion of long-term debt                      $  5,899   $  2,335
     Accounts payable and accrued expenses                    11,774     10,546
     Distributions payable                                    10,652     10,725
     Payable to general partner                                1,040      1,143
                                                            --------   --------

         Total current liabilities                            29,365     24,749
                                                            --------   --------

Long-term debt, less current portion                         133,000    132,118

Other liabilities and deferred taxes                           6,002      6,935

Minority interest                                              1,019      1,034

Commitments and contingencies

Partners' capital                                            102,610    104,196
                                                            --------   --------

                                                            $271,996   $269,032
                                                            ========   ========


<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
                                                             Three Months Ended
                                                                 March 31,
                                                             1998        1997
                                                           --------    --------

Operating activities:
   Net income                                              $  8,960    $  8,907
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                            2,947       2,878
     Minority interest in net income                             91          90
     Deferred income taxes                                      187         268
     Changes in working capital components                      580       1,591
                                                           --------    --------

         Net cash provided by operating activities           12,765      13,734
                                                           --------    --------

Investing activities:
   Capital expenditures                                      (2,350)     (1,876)
   Acquisition of terminals                                  (5,030)       --
   Other, net                                                (1,438)        397
                                                           --------    --------

         Net cash used in investing activities               (8,818)     (1,479)
                                                           --------    --------

Financing activities:
   Changes in payable to general partner                       (103)        699
   Issuance of long-term debt                                 5,000        --
   Payments of long-term debt                                  (554)       (483)
   Distributions to partners                                (10,725)     (9,834)
                                                           --------    --------

         Net cash used in financing activities               (6,382)     (9,618)
                                                           --------    --------

Increase (decrease) in cash and cash equivalents             (2,435)      2,637
Cash and cash equivalents at beginning of period              6,376       8,196
                                                           --------    --------

Cash and cash equivalents at end of period                 $  3,941    $ 10,833
                                                           ========    ========












<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES

     The  unaudited   consolidated  financial  statements  of  Kaneb  Pipe  Line
     Partners, L.P. and its subsidiaries (the "Partnership") for the three month
     periods ended March 31, 1998 and 1997 have been prepared in accordance with
     generally  accepted  accounting  principles  applied on a consistent basis.
     Significant  accounting policies followed by the Partnership were 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,
     1997.  In the opinion of the  Partnership's  management,  the  accompanying
     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
     March 31, 1998 and the  consolidated  results of their  operations and cash
     flows for the three month periods ended March 31, 1998 and 1997.  Operating
     results  for the three  months  ended  March 31,  1998 are not  necessarily
     indicative of the results that may be expected for the year ending December
     31, 1998.

2.   NEW ACCOUNTING PRONOUNCEMENT

     The  Partnership  has adopted the  provisions  of  Statement  of  Financial
     Accounting  Standards  No. 130,  "Reporting  Comprehensive  Income,"  which
     establishes standards for the reporting and display of comprehensive income
     and its components in a full set of general purpose  financial  statements.
     There were no items to report for the three  months ended March 31, 1998 or
     1997.

3.   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 Company. The Partnership expects
     to make  distributions  of Available Cash for each quarter of not less than
     $0.55 per unit (the "Minimum Quarterly Distribution"), or $2.20 per unit on
     an annualized basis, for the foreseeable  future,  although no assurance is
     given regarding such distributions. The cash distribution of $0.65 per unit
     for the  fourth  quarter  of 1997 was made on  February  14,  1998.  A cash
     distribution of $0.65 for the first quarter of 1998 was declared to holders
     of record as of April 30, 1998 and is payable on May 15, 1998.  As of March
     31, 1998, no arrearages existed on any class of Partnership interest.

     The  distribution  of Available Cash for each quarter during the Preference
     Period, as defined, is subject to the preferential rights of the holders of
     the  Senior  Preference  Units  ("SPU") to receive  the  Minimum  Quarterly
     Distribution  for such quarter,  plus any  arrearages in the payment of the
     Minimum Quarterly Distribution for prior quarters,  before any distribution
     of Available  Cash is made to holders of Preference  Units ("PU") or Common
     Units ("CU") for such  quarter.  The CU's are not entitled to arrearages in
     the  payment  of  the  Minimum  Quarterly  Distribution.  In  general,  the
     Preference Period will continue indefinitely until the Minimum Distribution
     has been paid to the  holders  of the SPU's,  the PU's,  the  Preference  B
     Units,  to the  extent  outstanding,  and the CU's for  twelve  consecutive
     quarters.  The Minimum Quarterly  Distribution has been paid to all classes
     of Unitholders  for all four quarters in 1997 and 1996 and for the quarters
     ended September 30 and December 31, 1995. After the Preference Period ends,
     all  differences  and  distinctions  between  the  classes of units for the
     purposes of cash  distributions  will  cease.  It is  anticipated  that the
     Preference  Period  will end upon the  payment of the  twelfth  consecutive
     quarterly distribution on August 14, 1998.






<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
                                                    March 31,
                                                 1998     1997
                                               -------   -------
                                                 (in thousands)

               Revenues                        $14,101   $13,869
               Operating costs                   5,402     5,370
               Depreciation and amortization     1,186     1,203
               General and administrative          739       610
                                               -------   -------
               Operating income                $ 6,774   $ 6,686
                                               =======   =======


     Pipeline revenues are based on volumes shipped and the distances over which
     such  volumes  are  transported.  For the  quarter  ended  March 31,  1998,
     revenues  increased 2%, compared to the same 1997 period, due to an overall
     increase  in  volumes  shipped,  primarily  on the East  Pipeline.  For the
     quarter ended March 31, 1998, volumes shipped increased 11% to 16.7 million
     barrels,  compared to 15.0 million barrels for the same 1997 period.  Total
     barrel miles  aggregated 3.7 billion for the first quarter of both 1998 and
     1997.

     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  slightly  over the
     comparable  prior year  period.  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 increased $0.1 million over the comparable 1997 period.

     Terminaling Operations

                                                Three Months Ended
                                                     March 31,
                                                 1998       1997
                                               --------   --------
                                                 (in thousands)

               Revenues                        $ 13,969   $ 14,710
               Operating  costs                   6,286      7,032  
               Depreciation  and amortization     1,761      1,675  
               General  and  administrative         796        660  
                                                -------   --------
               Operating income                 $ 5,126   $  5,343  
                                                =======   ========

     Revenues decreased 5% for the quarter ended March 31, 1998, compared to the
     1997  period,  due  primarily  to a decrease in the overall  average  price
     charged for  storage,  partially  offset by an increase in tankage  volumes
     utilized. For the quarter ended March 31, 1998, average annualized revenues
     per barrel of tankage utilized was $4.51 per barrel,  compared to $4.88 per
     barrel for the same  prior  year  period.  The  decrease  in the per barrel
     average is primarily a result of larger  proportionate  volume of petroleum
     products being stored in the first quarter of 1998,  which are historically
     at lower per barrel rates than specialty chemicals.  Average annual tankage
     utilized  for the quarter  ended March 31, 1998  increased  to 12.4 million
     barrels from 12.1  million  barrels for the  comparable  prior year period,
     primarily as a result of increased utilization at the Partnership's largest
     petroleum storage facility.

     For the quarter  ended  March 31,  1998,  operating  costs  decreased  $0.7
     million,  depreciation and amortization increased $0.1 million, and general
     and  administrative  expenses  increased $0.1 million,  over the comparable
     prior year period.  The overall  decrease in operating costs is due largely
     to variance in product mix.

     Total tankage  capacity (17.9 million  barrels at March 31, 1998) 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.

     In March 1998, the Partnership completed the acquisition of certain liquids
     terminaling  assets located in Chicago,  Illinois.  The acquisition,  which
     included  19  storage  tanks with an  aggregate  capacity  of 752  thousand
     barrels,  was  funded  with the  Partnership's  existing  revolving  credit
     facility.

     Financial Condition

     During the first three months of 1998, 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 $12.8  million and $13.7 million for the
     periods ended March 31, 1998 and 1997,  respectively.  Capital expenditures
     (excluding  acquisitions)  were $2.4 million in the first  quarter of 1998,
     compared to $1.9 million in 1997. The Partnership  anticipates that capital
     expenditures  will  total  approximately  $7.0  million  to  $10.0  million
     (excluding acquisitions) for the year ending December 31, 1998.

     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 $0.65 per unit were  declared to all  Unitholders  in the
     first  quarter of 1998 and $2.50 per unit was declared in the calendar year
     1997.

     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 borrowing.

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

     Allocation of Net Income and Earnings

     Net income is allocated to the limited partnership units in an amount equal
     to the cash  distributions  declared  for  each  reporting  period  and any
     remaining  income or loss is  allocated  to any class of units that did not
     receive the same  amount of cash  distributions  per unit (if any).  If the
     same cash  distributions  per unit are  declared  for all classes of units,
     income  or  loss  is  allocated  pro  rata  on  the  aggregate   amount  of
     distributions declared.

     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.
     Earnings per SPU and PU shown on the consolidated  statements of income are
     calculated  by dividing  the amount of net income,  allocated  on the above
     basis with incentives calculated on distributions  declared to the SPUs and
     PUs,  by  the  weighted   average  number  of  SPUs  and  PUs  outstanding,
     respectively.  If the  allocation  of income had been made as if all income
     had been distributed in cash, earnings per SPU and PU would have been $0.55
     and $0.55 for the quarters ended March 31, 1998 and 1997, 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 - none


                                    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.

DATED:  May 12, 1998

                                             KANEB PIPE LINE PARTNERS, L.P.
                                             (Registrant)
                                             By  KANEB PIPE LINE COMPANY
                                             (Managing General Partner)
                                                   //s//
                                             Jimmy L. Harrison
                                             Controller