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 September 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 November 1, 1999:  18,310,000




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


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


                                                                        Page No.
                           Part I. Financial Information

Item 1.  Financial Statements (Unaudited)

         Consolidated Statements of Income -- Three and Nine Months Ended
           September 30, 1999 and 1998                                     1

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

         Condensed Consolidated Statements of Cash Flows -- Nine
           Months Ended September 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         Nine Months Ended
                                                              September 30,             September 30,
                                                         ----------------------    ----------------------
                                                            1999         1998         1999         1998
                                                         ---------    ---------    ---------    ---------

<S>                                                      <C>          <C>          <C>          <C>
Revenues                                                 $  41,573    $  33,709    $ 117,589    $  92,332
                                                         ---------    ---------    ---------    ---------

Costs and expenses:
     Operating costs                                        18,057       13,176       51,403       37,781
     Depreciation and amortization                           3,764        3,075       11,149        9,040
     General and administrative                              2,301        1,748        6,975        4,955
                                                         ---------    ---------    ---------    ---------
       Total costs and expenses                             24,122       17,999       69,527       51,776
                                                         ---------    ---------    ---------    ---------
Operating income                                            17,451       15,710       48,062       40,556
Interest and other income, net                                 103           20          385          107
Interest expense                                            (3,107)      (2,816)     (10,401)      (8,283)
                                                         ---------    ---------    ---------    ---------
Income before minority interest
     and income taxes                                       14,447       12,914       38,046       32,380
Minority interest in net income                               (140)        (127)        (370)        (319)
Income tax provision                                          (472)        (189)      (1,072)        (473)
                                                         ---------    ---------    ---------    ---------
Net income                                                  13,835       12,598       36,604       31,588
General partner's interest in net income                      (481)        (205)      (1,218)        (539)
                                                         ---------    ---------    ---------    ---------
Limited partners' interest in net income                 $  13,354    $  12,393    $  35,386    $  31,049
                                                         =========    =========    =========    =========
Allocation of net income per unit                        $     .76    $     .77    $    2.14    $    1.93
                                                         =========    =========    =========    =========
Weighted average number of Partnership
   units outstanding                                        17,560       16,060       16,560       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)
--------------------------------------------------------------------------------

                                                        September 30 December 31
                                                             1999       1998
                                                        ------------ -----------
                                                         (Unaudited)
         ASSETS
Current assets:
     Cash and cash equivalents                              $  5,930   $    849
     Accounts receivable                                      18,392     13,917
     Prepaid expenses and other                                5,418      4,035
                                                            --------   --------

         Total current assets                                 29,740     18,801
                                                            --------   --------

Property and equipment                                       436,380    377,248
Less accumulated depreciation                                119,138    108,622
                                                            --------   --------

     Net property and equipment                              317,242    268,626
                                                            --------   --------

Investment in affiliate                                       23,466     21,005
                                                            --------   --------

                                                            $370,448   $308,432
                                                            ========   ========

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
     Short-term and current portion of long-term debt       $   --     $ 10,000
     Accounts payable and accrued expenses                    18,850     14,354
     Accrued distributions payable                            13,372     10,725
     Payable to general partner                                1,260      6,785
                                                            --------   --------

         Total current liabilities                            33,482     41,864
                                                            --------   --------

Long-term debt, less current portion                         156,472    153,000

Other liabilities and deferred taxes                          10,186      7,131

Minority interest                                              1,696      1,049

Commitments and contingencies

Partners' capital                                            168,612    105,388
                                                            --------   --------

                                                            $370,448   $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)
--------------------------------------------------------------------------------

                                                            Nine Months Ended
                                                               September 30
                                                           --------------------
                                                             1999        1998
                                                           --------    --------

Operating activities:
   Net income                                              $ 36,604    $ 31,588
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                           11,149       9,040
     Equity in earnings of affiliate                         (2,515)       --
     Minority interest in net income                            370         319
     Deferred income taxes                                    1,110         292
     Changes in working capital components                       70       1,980
                                                           --------    --------
         Net cash provided by operating activities           46,788      43,219
                                                           --------    --------
Investing activities:
   Capital expenditures                                     (11,243)     (8,048)
   Acquisitions of terminals                                (44,390)    (14,673)
   Other, net                                                (1,642)        500
                                                           --------    --------
         Net cash used in investing activities              (57,275)    (22,221)
                                                           --------    --------
Financing activities:
   Changes in payable to general partner                     (5,000)        (98)
   Issuance of short-term and long-term debt                 50,919      11,736
   Payments of long-term debt                               (57,447)     (1,127)
   Distributions to partners, including minority interest   (38,478)    (32,175)
   Net proceeds from issuance of KPP units                   65,574        --
                                                           --------    --------
         Net cash provided by (used in)
               financing activities                          15,568     (21,664)
                                                           --------    --------
Increase (decrease) in cash and cash equivalents              5,081        (666)
Cash and cash equivalents at beginning of period                849       6,376
                                                           --------    --------
Cash and cash equivalents at end of period                 $  5,930    $  5,710
                                                           ========    ========
Supplemental cash flow information
   - cash paid for interest                                $  8,845    $  6,880
                                                           ========    ========


                 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,  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  September  30,  1999  and  the
     consolidated  results of their  operations  and cash flows for the  periods
     ended September 30, 1999 and 1998. Operating results for the three and nine
     months  ended  September  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
     Terminals  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.  $13.3 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  $65.6
     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 (including $13.3
     million  in  term  loans   resulting  from  the  United  Kingdom   terminal
     acquisition referred to in Note 2).


4.   COMPREHENSIVE INCOME

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

                                     Three Months Ended      Nine Months Ended
                                         September 30,         September 30,
                                     -------------------   --------------------
                                       1999       1998       1999        1998
                                     --------   --------   --------    --------
                                                  (in thousands)

     Net income                      $ 13,835   $ 12,598   $ 36,604    $ 31,588
     Other comprehensive
        income (loss)
         - foreign currency
           translation adjustment         460       --         (197)       --
                                     --------   --------   --------    --------
     Comprehensive income            $ 14,295   $ 12,598   $ 36,407    $ 31,588
                                     ========   ========   ========    ========


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 each the
     first and second  quarters  of 1999 was paid on May 14, 1999 and August 13,
     1999,  respectively.  A cash  distribution  of $0.70 per unit for the third
     quarter of 1999 was  declared  to holders of record on October 29, 1999 and
     was paid on November 12, 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 January
     2000.

     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      Nine Months Ended
                                         September 30,         September 30,
                                     -------------------   --------------------
                                       1999       1998       1999        1998
                                     --------   --------   --------    --------
                                                  (in thousands)

     Business segment revenues:
       Pipeline operations           $ 18,708   $ 17,406   $ 50,054    $ 46,858
       Terminaling operations          22,865      16,303    67,535      45,474
                                     --------   ---------  --------    --------
                                     $ 41,573   $  33,709  $117,589    $ 92,332
                                     ========   =========  ========    ========
     Business segment profit:
       Pipeline operations           $ 10,053   $   9,346  $ 26,121    $ 24,108
       Terminaling operations           7,398       6,364    21,941      16,448
                                     --------   ---------  --------    --------
         Operating income              17,451      15,710    48,062      40,556
       Interest and other income, net     103          20       385         107
       Interest expense                (3,107)     (2,816)  (10,401)     (8,283)
                                     --------   ---------  --------    --------

         Income before minority
           interest and income taxes $ 14,447   $  12,914  $ 38,046    $ 32,380
                                     ========   =========  ========    ========

                                                           Sept. 30    Dec. 31
                                                             1999        1998
                                                           --------    --------
     Total assets:
        Pipeline operations                                $104,168    $103,966
        Terminaling operations                              266,280     204,466
                                                           --------    --------
                                                           $370,448    $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      Nine Months Ended
                                         September 30,         September 30,
                                     -------------------   --------------------
                                       1999       1998       1999        1998
                                     --------   --------   --------    --------
                                                  (in thousands)

     Revenues                        $ 18,708   $ 17,406   $ 50,054    $ 46,858
     Operating costs                    6,565      6,055     17,768      16,816
     Depreciation and amortization      1,273      1,192      3,811       3,569
     General and administrative           817        813      2,354       2,365
                                     --------   --------   --------    --------
         Operating income            $ 10,053   $  9,346   $ 26,121    $ 24,108
                                     ========   ========   ========    ========

     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  For each of the three and nine months ended
     September  30,  1999,  revenues  increased  7%  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  5.1 billion  and 4.8  billion  for the three  months  ended
     September  30,  1999 and  1998,  respectively,  and 13.7  billion  and 12.5
     billion  for  the  nine  months   ended   September   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, increased 8% and 6 %, respectively,
     for the three  and nine  month  periods  ended  September  30,  1999,  when
     compared to the same 1998 periods.  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, are consistent with the comparable prior year periods.

<PAGE>
     Terminaling Operations

                                     Three Months Ended      Nine Months Ended
                                         September 30,         September 30,
                                     -------------------   --------------------
                                       1999       1998       1999        1998
                                     --------   --------   --------    --------
                                                  (in thousands)

     Revenues                        $ 22,865   $ 16,303   $ 67,535    $ 45,474
     Operating costs                   11,492      7,121     33,635      20,965
     Depreciation and amortization      2,491      1,883      7,338       5,471
     General and administrative         1,484        935      4,621       2,590
                                     --------   --------   --------    --------
         Operating income            $  7,398   $  6,364   $ 21,941    $ 16,448
                                     ========   ========   ========    ========

     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  Terminals  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  40% and 49% for the three and nine  month
     periods ended  September 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 nine months ended September 30,
     1999, average annualized  revenues per barrel of tankage utilized decreased
     to $4.00,  compared to $4.23 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 nine  months  ended
     September  30, 1999  increased  to 22.5  million  barrels from 14.3 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 nine month  periods ended  September 30, 1999,  operating
     costs  increased  by $4.4  million and $12.7  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 nine months ended  September  30,
     1999,  increased by $0.5 million and $2.0  million,  when compared to 1998,
     due also to the Acquisitions.

     Total tankage  capacity  (28.9  million  barrels at September 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 nine 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 $46.8  million and $43.2 million for the
     nine  months  ended  September  30,  1999 and 1998,  respectively.  Capital
     expenditures  (excluding  acquisitions)  were  $11.2  million  for the nine
     months ended  September 30, 1999,  compared to $8.0 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 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.

     In July 1999, the Partnership issued 2.25 million limited partnership units
     in a public  offering at $30.75 per unit,  generating  approximately  $65.6
     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 (including $13.3
     million  in  term  loans   resulting  from  the  United  Kingdom   terminal
     acquisition).

     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, second and third 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 September 30, 1999, the major information technology and non-information
     technology  systems on which the  pipeline and the  terminaling  operations
     depend have been evaluated and updated,  where necessary,  and are believed
     to be Y2K compliant.  The  Partnership  continues to evaluate and remediate
     certain of its less significant  information technology and non-information
     technology  systems.  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.  At  September  30,  1999,  Y2K  contingency  plans  were
     substantially  complete  and  in  place  for  both  the  pipeline  and  the
     terminaling operations.

     Through September 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
     $0.75  and  $0.76  for the  three  months  and $2.13 and $1.93 for the nine
     months ended September 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

                  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.


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


Date:   November 15, 1999                                  //s//
                                                --------------------------------
                                                Jimmy L. Harrison
                                                Vice President and Controller