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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                For the Quarterly Period Ended September 30, 2003

                                       OR

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

                        Commission File Number 001-10311

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

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

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

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

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

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).

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

Number of Units of the Registrant outstanding at October 31, 2003: 28,317,590

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

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


FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                  Page No.
                           Part I. Financial Information

<S>               <C>                                                                             <C>
Item 1.           Financial Statements (Unaudited)

                  Consolidated Statements of Income - Three and Nine Months Ended
                      September 30, 2003 and 2002                                                    1

                  Condensed Consolidated Balance Sheets - September 30, 2003
                      and December 31, 2002                                                          2

                  Condensed Consolidated Statements of Cash Flows - Nine
                      Months Ended September 30, 2003 and 2002                                       3

                  Notes to Consolidated Financial Statements                                         4

Item 2.           Management's Discussion and Analysis of
                      Financial Condition and Results of Operations                                 15

Item 3.           Quantitative and Qualitative Disclosure About Market Risk                         22

Item 4.           Controls and Procedures                                                           22

                           Part II.  Other Information

Item 6.           Exhibits and Reports on Form 8-K                                                  23

</TABLE>


<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,
                                                       -----------------------------  -----------------------------
                                                            2003           2002            2003           2002
                                                       --------------  -------------  -------------  --------------
<S>                                                    <C>             <C>            <C>            <C>
Revenues:
    Services                                           $       89,539  $      75,184  $     265,694  $      207,946
    Products                                                   50,865         28,120        162,415          63,702
                                                       --------------  -------------   ------------  --------------
       Total revenues                                         140,404        103,304        428,109         271,648
                                                       --------------  -------------   ------------  --------------
Costs and expenses:
    Cost of products sold                                      46,835         26,501        146,035          59,433
    Operating costs                                            42,366         34,082        126,339          91,845
    Depreciation and amortization                              13,188         10,302         39,814          27,408
    General and administrative                                  5,999          4,549         17,266          14,111
                                                       --------------  -------------  -------------  --------------
       Total costs and expenses                               108,388         75,434        329,454         192,797
                                                       --------------  -------------  -------------  --------------
Operating income                                               32,016         27,870         98,655          78,851
Interest and other income                                          43            233            132             414
Interest expense                                              (10,660)        (7,202)       (28,178)        (20,132)
Loss on debt extinguishment                                     -               -              -             (2,112)
                                                       --------------  -------------  -------------  --------------
Income before minority interest, income
    taxes and cumulative effect of change
    in accounting principle                                    21,399         20,901         70,609          57,021
Minority interest in net income                                  (203)          (195)          (668)           (540)
Income tax expense                                             (1,076)        (1,410)        (3,815)         (2,981)
                                                       --------------  -------------  -------------  --------------
Income before cumulative effect of change
    in accounting principle                                    20,120         19,296         66,126          53,500

Cumulative effect of change in accounting
    principle - adoption of new accounting
    standard for asset retirement obligations                   -               -            (1,577)          -
                                                       --------------  -------------  -------------  --------------
       Net income                                              20,120         19,296         64,549          53,500

General partner's interest in net income                       (2,275)        (1,414)        (6,174)         (4,112)
                                                       --------------  -------------  -------------  --------------
Limited partners' interest in net income               $       17,845  $      17,882  $      58,375  $       49,388
                                                       ==============  =============  =============  ==============
Allocation of net income per unit:
    Before cumulative effect of change
      in accounting principle                          $          .63  $         .77  $        2.19  $         2.22
    Cumulative effect of change in
      accounting principle                                      -               -              (.06)           -
                                                       --------------  -------------  -------------  --------------
                                                       $          .63  $         .77  $        2.13  $         2.22
                                                       ==============  =============  =============  ==============
Weighted average number of limited
   partnership units outstanding                               28,318         23,100         27,403          22,237
                                                       ==============  =============  =============  ==============

</TABLE>


                     See notes to consolidated financial statements.
                                        1
<PAGE>


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                            September 30,             December 31,
                                                                                2003                     2002
                                                                           -------------            ---------------
                                                                             (Unaudited)
         ASSETS
<S>                                                                        <C>                       <C>
Current assets:
    Cash and cash equivalents                                              $      41,407             $       22,028
    Accounts receivable                                                           51,104                     48,926
    Inventories                                                                    6,321                      4,922
    Prepaid expenses and other                                                     8,599                      8,498
                                                                           -------------             --------------
         Total current assets                                                    107,431                     84,374
                                                                           -------------             --------------

Property and equipment                                                         1,340,046                  1,288,762
Less accumulated depreciation                                                    233,487                    196,570
                                                                           -------------             --------------
     Net property and equipment                                                1,106,559                  1,092,192
                                                                           -------------             --------------

Investment in affiliates                                                          25,481                     25,604

Excess of cost over fair value of net assets of
    acquired businesses and other assets                                          17,469                     13,240
                                                                           -------------             --------------
                                                                           $   1,256,940             $    1,215,410
                                                                           =============             ==============

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Current portion of long-term debt                                      $      27,143             $        -
    Accounts payable                                                              21,117                     22,064
    Accrued expenses                                                              45,321                     32,937
    Accrued distributions payable                                                 26,344                     21,639
    Accrued interest payable                                                       8,601                      7,896
    Accrued terminaling fees                                                       6,735                      6,246
    Payable to general partner                                                     5,145                      5,403
                                                                           -------------             --------------
         Total current liabilities                                               140,406                     96,185
                                                                           -------------             --------------

Long-term debt, less current portion                                             579,882                    694,330

Other liabilities and deferred taxes                                              40,113                     31,581

Minority interest                                                                  1,027                      1,030

Commitments and contingencies

Partners' capital                                                                495,512                    392,284
                                                                           -------------             --------------
                                                                           $   1,256,940             $    1,215,410
                                                                           =============             ==============

</TABLE>

                     See notes to consolidated financial statements.
                                        2
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                           ----------------------------------------
                                                                                2003                      2002
                                                                           -------------             --------------

<S>                                                                        <C>                       <C>
Operating activities:
   Net income                                                              $      64,549             $       53,500
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                              39,814                     27,408
       Minority interest in net income                                               668                        540
       Equity in earnings of affiliates, net of distributions                        123                     (1,331)
       Deferred income taxes                                                       2,361                      2,323
       Cumulative effect of change in accounting principle                         1,577                      -
       Changes in working capital components                                       5,540                    (13,710)
                                                                           -------------             --------------
         Net cash provided by operating activities                               114,632                     68,730
                                                                           -------------             --------------

Investing activities:
   Acquisitions, net of cash acquired                                             (1,644)                  (225,406)
   Capital expenditures                                                          (32,053)                   (21,929)
   Other                                                                          (2,242)                      (529)
                                                                           -------------             --------------
         Net cash used in investing activities                                   (35,939)                  (247,864)
                                                                           -------------             --------------
Financing activities:
   Issuance of debt                                                              286,360                    496,087
   Payment of debt                                                              (382,831)                  (351,647)
   Distributions, including minority interest                                    (71,899)                   (54,600)
   Net proceeds from issuance of limited
     partnership units                                                           109,056                    108,790
                                                                           -------------             --------------
         Net cash provided by (used in) financing activities                     (59,314)                   198,630
                                                                           -------------             --------------

Increase in cash and cash equivalents                                             19,379                     19,496
Cash and cash equivalents at beginning of period                                  22,028                      7,903
                                                                           -------------             --------------
Cash and cash equivalents at end of period                                 $      41,407             $       27,399
                                                                           =============             ==============
Supplemental cash flow information:
   Cash paid for interest                                                  $      25,891             $       20,143
                                                                           =============             ==============

</TABLE>


                     See notes to consolidated financial statements.
                                        3

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


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

1.   SIGNIFICANT ACCOUNTING POLICIES

     The unaudited  condensed  consolidated  financial  statements of Kaneb Pipe
     Line Partners,  L.P. and its subsidiaries (the "Partnership") for the three
     and nine  month  periods  ended  September  30,  2003 and  2002,  have been
     prepared in accordance with accounting principles generally accepted in the
     United States of America.  Significant  accounting policies followed by the
     Partnership  are  disclosed  in the  notes  to the  consolidated  financial
     statements included in the Partnership's Annual Report on Form 10-K for the
     year  ended  December  31,  2002.  In  the  opinion  of  the  Partnership's
     management,  the accompanying  condensed  consolidated financial statements
     contain all of 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, 2003 and the
     consolidated  results of their  operations  and cash flows for the  periods
     ended September 30, 2003 and 2002. Operating results for the three and nine
     months  ended  September  30, 2003 are not  necessarily  indicative  of the
     results that may be expected for the year ending December 31, 2003.


2.   ACQUISITIONS AND FINANCINGS

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

     In February of 2002,  the  Partnership  issued $250 million of 7.75% senior
     unsecured  notes due February 15,  2012.  The net proceeds  from the public
     offering,  $248.2 million,  were used to repay the Partnership's  revolving
     credit  agreement  and to  partially  fund  the  acquisition  of all of the
     liquids  terminaling  subsidiaries of Statia Terminals Group NV ("Statia").
     Under the note indenture,  interest is payable  semi-annually in arrears on
     February  15 and August 15 of each  year.  The notes are  redeemable,  as a
     whole or in part,  at the  option of the  Partnership,  at any  time,  at a
     redemption  price equal to the greater of 100% of the  principal  amount of
     the  notes,  or the sum of the  present  value of the  remaining  scheduled
     payments of principal and interest,  discounted to the  redemption  date at
     the applicable  U.S.  Treasury  rate, as defined in the indenture,  plus 30
     basis points. The note indenture contains certain financial and operational
     covenants,  including certain  limitations on investments,  sales of assets
     and  transactions  with affiliates  and,  absent an event of default,  such
     covenants do not restrict  distributions  to unitholders.  At September 30,
     2003, the Partnership was in compliance with all covenants.

     On  February  28,  2002,  the  Partnership  acquired  all  of  the  liquids
     terminaling  subsidiaries  of  Statia  Terminals  Group NV  ("Statia")  for
     approximately  $178  million in cash (net of acquired  cash).  The acquired
     Statia  subsidiaries had  approximately  $107 million in outstanding  debt,
     including  $101  million of 11.75%  notes due in  November  2003.  The cash
     portion of the  purchase  price was funded by the  Partnership's  revolving
     credit  agreement and proceeds from its February 2002 public debt offering.
     In April of 2002, the Partnership  redeemed all of Statia's 11.75% notes at
     102.938% of the principal amount, plus accrued interest. The redemption was
     funded  by  the  Partnership's  revolving  credit  facility.  Assuming  the
     acquisition occurred on January 1, 2002, unaudited pro forma revenues,  net
     income  and net  income per unit  would  have been  $296.3  million,  $52.6
     million and $2.16,  respectively,  for the nine months ended  September 30,
     2002.

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

     On September 18, 2002, the  Partnership  acquired eight bulk liquid storage
     terminals  in  Australia  and New Zealand  from Burns Philp & Co. Ltd.  for
     approximately $47 million in cash. The results of operations and cash flows
     of  the  acquired  business  are  included  in the  consolidated  financial
     statements of the Partnership since the date of acquisition.

     On November 1, 2002, the Partnership  acquired an approximately  2,000-mile
     anhydrous  ammonia  pipeline  system from Koch Pipeline  Company,  L.P. for
     approximately  $139  million  in  cash.  This  fertilizer  pipeline  system
     originates  in southern  Louisiana,  proceeds  north  through  Arkansas and
     Missouri,  and then  branches  east into Illinois and Indiana and north and
     west into Iowa and Nebraska. The acquisition was financed by bank debt. The
     results of operations and cash flows of the acquired  business are included
     in the consolidated  financial statements of the Partnership since the date
     of acquisition.  At September 30, 2003, the final valuation of the acquired
     assets  and  liabilities  had not  been  completed  and,  accordingly,  the
     Partnership  has recorded a preliminary  allocation  of the purchase  price
     based on the estimated fair value. Based on the preliminary  purchase price
     allocation,  no amounts are  assigned  to  goodwill or to other  intangible
     assets.

     In November of 2002, the Partnership  issued 2,095,000 limited  Partnership
     units in a public  offering  at $33.36 per unit,  generating  approximately
     $66.7  million in net proceeds.  The offering  proceeds were used to reduce
     bank borrowings for the fertilizer pipeline acquisition.

     On  December  24,  2002,  the  Partnership  acquired a  400-mile  petroleum
     products  pipeline and four  terminals in North Dakota and  Minnesota  from
     Tesoro  Refining and Marketing  Company for  approximately  $100 million in
     cash. The  acquisition was funded with bank debt. The results of operations
     and cash flows of the acquired  business  are included in the  consolidated
     financial  statements of the Partnership since the date of acquisition.  At
     September  30,  2003,  the  final  valuation  of the  acquired  assets  and
     liabilities  had not been completed and,  accordingly,  the Partnership has
     recorded  a  preliminary  allocation  of the  purchase  price  based on the
     estimated fair value.  Based on the preliminary  purchase price allocation,
     no amounts are assigned to goodwill or to other intangible assets.

     In March of 2003, the  Partnership  issued  3,122,500  limited  Partnership
     units in a public  offering  at $36.54 per unit,  generating  approximately
     $109.1 million in net proceeds. The proceeds were used to reduce the amount
     of indebtedness under the Partnership's bridge facility.

     In April of 2003, the Partnership  entered into a new credit agreement with
     a group of banks  that  provides  for a $400  million  unsecured  revolving
     credit facility through April of 2006. The credit facility,  which provides
     for an increase in the  commitment  up to an  aggregate  of $450 million by
     mutual agreement  between the Partnership and the banks,  bears interest at
     variable  rates and has a variable  commitment fee on unused  amounts.  The
     credit  facility  contains  certain  financial  and  operating   covenants,
     including limitations on investments, sales of assets and transactions with
     affiliates and, absent an event of default, does not restrict distributions
     to  unitholders.  At September 30, 2003, the  Partnership was in compliance
     with all  covenants.  Initial  borrowings on the credit  agreement  ($324.2
     million) were used to repay all amounts outstanding under the Partnership's
     $275 million credit  agreement and $175 million bridge loan  agreement.  At
     September  30, 2003,  $49.2  million was  outstanding  under the new credit
     agreement.

     On May 19,  2003,  the  Partnership  issued $250  million of 5.875%  senior
     unsecured  notes  due  June 1,  2013.  The net  proceeds  from  the  public
     offering,  $247.6  million,  were  used to  reduce  amounts  due  under the
     revolving credit agreement.  Under the note indenture,  interest is payable
     semi-annually  in arrears on June 1 and December 1 of each year.  The notes
     are redeemable, as a whole or in part, at the option of the Partnership, at
     any  time,  at a  redemption  price  equal  to the  greater  of 100% of the
     principal  amount  of the  notes,  or the sum of the  present  value of the
     remaining  scheduled payments of principal and interest,  discounted to the
     redemption  date at the  applicable  U.S.  Treasury rate, as defined in the
     indenture,  plus 30 basis  points.  The  note  indenture  contains  certain
     financial and  operational  covenants,  including  certain  limitations  on
     investments,  sales of assets and transactions  with affiliates and, absent
     an event of  default,  such  covenants  do not  restrict  distributions  to
     unitholders.  At September 30, 2003, the Partnership was in compliance with
     all  covenants.  In  connection  with the  offering,  on May 8,  2003,  the
     Partnership  entered  into a  treasury  lock  contract  for the  purpose of
     locking in the US Treasury  interest rate  component on $100 million of the
     debt.  The treasury lock contract,  which  qualified as a cash flow hedging
     instrument  under SFAS No.  133,  was  settled on May 19,  2003 with a cash
     payment by the  Partnership  of $1.8 million.  The  settlement  cost of the
     contract   has  been   recorded  as  a  component  of   accumulated   other
     comprehensive income and is being amortized,  as interest expense, over the
     life of the debt.


3.   COMPREHENSIVE INCOME

     Comprehensive income for the three and nine months ended September 30, 2003
     and 2002 is as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Net income                                      $    20,120     $    19,296        $    64,549     $    53,500
     Foreign currency translation
        adjustment                                           355             314              7,235             941
     Interest rate hedging transactions                       52          (5,198)            (1,719)         (5,198)
                                                     -----------     -----------        -----------     -----------
     Comprehensive income                            $    20,527     $    14,412        $    70,065     $    49,243
                                                     ===========     ===========        ===========     ===========

</TABLE>
     Accumulated  other  comprehensive  income  aggregated $6.9 million and $1.4
     million at September 30, 2003 and December 31, 2002, respectively.


4.   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  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less  all of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable  record date. Cash  distributions of $0.81 per unit with respect
     to the  first and  second  quarters  of 2003 were paid on May 15,  2003 and
     August 14, 2003,  respectively.  A cash distribution of $0.84 per unit with
     respect to the third  quarter of 2003 was  declared to holders of record on
     November 3, 2003 and will be paid on November 14, 2003.


5.   CONTINGENCIES

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

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

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

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

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

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

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

     As a result of the rupture,  purported  class  actions  were filed  against
     PEPCO and ST  Services  in federal  and state court in Maryland by property
     and business owners alleging  damages in unspecified  amounts under various
     theories, including under the Oil Pollution Act ("OPA") and Maryland common
     law.  The federal  court  consolidated  all of the federal  cases in a case
     styled as In re Swanson  Creek Oil Spill  Litigation.  A settlement  of the
     consolidated  class action,  and a companion  state-court class action, was
     reached and approved by the federal judge. The settlement involved creation
     and funding by PEPCO and ST Services of a $2,250,000 class settlement fund,
     from  which  all  participating  claimants  would  be paid  according  to a
     court-approved  formula, as well as a court-approved payment to plaintiffs'
     attorneys.  The settlement  was  consummated in 2002 and the fund, to which
     PEPCO and ST Services  contributed  equal  amounts,  has been  distributed.
     Participating claimants' claims were settled and dismissed with prejudice.

     A number of class members  elected not to  participate  in the  settlement,
     i.e., to "opt out," thereby  preserving  their claims  against PEPCO and ST
     Services.  All  non-participant  claims have been  settled  for  immaterial
     amounts  with ST  Services'  portion of such  settlements  provided  by its
     insurance  carrier.  ST Services'  insurance carrier assumed the defense of
     all of these actions and ST Services believes that the carrier would assume
     the defense of any new litigation by a  non-participant  in the settlement,
     should any such  litigation  be  commenced.  While the  Partnership  cannot
     predict the amount, if any, of any liability it may have in other potential
     suits relating to this matter, it believes that such potential  plaintiffs'
     claims would be covered by insurance and therefore  these actions would not
     have a material adverse effect on its financial condition.

     PEPCO and ST Services  agreed with the federal  government and the State of
     Maryland to pay costs of assessing  natural  resource  damages arising from
     the  Swanson  Creek  oil  spill  under  OPA  and of  selecting  restoration
     projects.  This process was completed in mid-2002. ST Services' insurer has
     paid ST Services'  agreed 50 percent share of these  assessment  costs.  In
     late November  2002,  PEPCO and ST Services  entered into a Consent  Decree
     resolving  the Federal  and State  trustees'  claims for  natural  resource
     damages.  The decree required  payments by ST Services and PEPCO of a total
     of  approximately  $3  million  to fund the  restoration  projects  and for
     remaining  damage  assessment  costs. The federal court entered the Consent
     Decree as a final  judgment on December  31,  2002.  PEPCO and ST have each
     paid their 50% share and thus fully  performed  their  payment  obligations
     under  the  Consent  Decree.  ST  Services'  insurance  carrier  funded  ST
     Services' payment.

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

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

     On  December  13,  2002,  ST  Services  sued PEPCO in the  Superior  Court,
     District of Columbia,  seeking, among other causes of action, a declaratory
     judgment as to ST Services' legal  obligations,  if any, to reimburse PEPCO
     for costs of the oil spill. On December 16, 2002, PEPCO sued ST Services in
     the United  States  District  Court for the District of  Maryland,  seeking
     recovery  of all its  costs  for  remediation  of the oil  spill  and other
     alleged  spill-related  costs,  which  PEPCO  alleges  are in excess of $75
     million.  Pursuant to a court-approved  stipulation between ST Services and
     PEPCO,  the  District  of  Columbia  action  has  been  dismissed   without
     prejudice,  such  that  the  federal  case  in  Maryland  is the  operative
     litigation  for resolution of the parties'  liabilities  to each other.  ST
     Services'  insurer  is  paying  for the cost of  defending  PEPCO's  claims
     against ST Services.  The  Partnership  believes  that any costs or damages
     resulting from this lawsuit will be covered by insurance and therefore will
     not materially adversely affect the Partnership's financial condition.

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


6.   BUSINESS SEGMENT DATA

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

     The Partnership  measures segment profit as operating income.  Total assets
     are those controlled by each reportable  segment.  Business segment data is
     as follows:
<TABLE>
<CAPTION>

                                                         Three Months Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Business segment revenues:
       Pipeline operations                           $    31,449     $    20,998        $    88,807     $    57,946
       Terminaling operations                             58,090          54,186            176,887         150,000
       Product sales operations                           50,865          28,120            162,415          63,702
                                                     -----------     -----------        -----------     -----------
                                                     $   140,404     $   103,304        $   428,109     $   271,648
                                                     ===========     ===========        ===========     ===========
     Business segment profit:
       Pipeline operations                           $    14,839     $     9,487        $    39,036     $    27,421
       Terminaling operations                             15,732          18,478             51,567          50,962
       Product sales operations                            1,445             (95)             8,052             468
                                                     -----------     -----------        -----------     -----------
         Operating income                                 32,016          27,870             98,655          78,851
       Interest and other income                              43             233                132             414
       Interest expense                                  (10,660)         (7,202)           (28,178)        (20,132)
       Loss on debt extinguishment                          -              -                   -             (2,112)
                                                     -----------     -----------        -----------     -----------

         Income before minority interest,
           income taxes and cumulative
           effect of change in accounting
           principle                                 $    21,399     $    20,901        $    70,609     $    57,021
                                                     ===========     ===========        ===========     ===========
</TABLE>
<TABLE>
<CAPTION>

                                                                                       September 30,   December 31,
                                                                                           2003            2002
                                                                                     ---------------   --------------
                                                                                              (in thousands)
<S>                                                                                    <C>             <C>
     Total assets:
        Pipeline operations                                                            $     357,480   $     352,657
        Terminaling operations                                                               868,046         844,321
        Product sales operations                                                              31,414          18,432
                                                                                       -------------   -------------
                                                                                       $   1,256,940   $   1,215,410
                                                                                       =============   =============

</TABLE>

7.   ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

     Effective   January  1,  2003,  the  Partnership   adopted  SFAS  No.  143,
     "Accounting   for  Asset   Retirement   Obligations",   which   establishes
     requirements for the removal-type  costs associated with asset retirements.
     At the initial  adoption date of SFAS No. 143, the Partnership  recorded an
     asset retirement  obligation of approximately $5.7 million and recognized a
     cumulative effect of change in accounting principle of $1.6 million for its
     legal  obligations  to dismantle,  dispose of, and restore  certain  leased
     pipeline  and  terminaling  facilities,  including  petroleum  and chemical
     storage tanks,  terminaling  facilities and barges.  At September 30, 2003,
     the Partnership had no assets which were legally restricted for purposes of
     settling asset retirement obligations. The effect of SFAS No. 143, assuming
     adoption on January 1, 2002,  was not material to the results of operations
     of the Partnership for the three and nine month periods ended September 30,
     2003 and 2002, respectively.

     Effective   January  1,  2003,  the  Partnership   adopted  SFAS  No.  146,
     "Accounting for Costs Associated with Exit or Disposal  Activities",  which
     requires  that all  restructurings  initiated  after  December  31, 2002 be
     recorded  when they are  incurred  and can be measured  at fair value.  The
     initial  adoption  of  SFAS  No.  146  had no  effect  on the  consolidated
     financial statements of the Partnership.

     The Partnership has adopted the provisions of FASB  Interpretation  No. 45,
     "Guarantor's   Accounting  and  Disclosure   Requirements   of  Guarantees,
     Including Indirect  Guarantees of Indebtedness to Others, an interpretation
     of  FASB  Statements  No.  5,  57,  and  107,  and  a  rescission  of  FASB
     Interpretation No. 34." This  interpretation  elaborates on the disclosures
     to be made by a guarantor  in its interim and annual  financial  statements
     about its obligations  under guarantees  issued.  The  interpretation  also
     clarifies  that a guarantor  is required to  recognize,  at  inception of a
     guarantee, a liability for the fair value of the obligation undertaken. The
     initial  recognition and measurement  provisions of the  interpretation are
     applicable to guarantees  issued or modified  after  December 31, 2002. The
     initial   application  of  this   interpretation   had  no  effect  on  the
     consolidated financial statements of the Partnership.

     The Partnership has adopted the provisions of FASB  Interpretation  No. 46,
     "Consolidation of Variable Interest Entities,  an interpretation of ARB No.
     51."  This   interpretation   addresses  the   consolidation   by  business
     enterprises of variable interest entities as defined in the interpretation.
     The  interpretation  applies  immediately to variable interests in variable
     interest entities created after January 31, 2003, and to variable interests
     in  variable  interest  entities  obtained  after  January  31,  2003.  The
     interpretation  requires certain disclosures in financial statements issued
     after January 31, 2003. The initial  application of this interpretation had
     no effect on the consolidated financial statements of the Partnership.

     The Partnership  has adopted the provisions of SFAS No. 149,  "Amendment of
     Statement  133 on Derivative  Instruments  and Hedging  Activities",  which
     amends and clarifies  financial  accounting  and  reporting for  derivative
     instruments and hedging activities. The adoption of SFAS No. 149, which was
     effective for derivative contracts and hedging  relationships  entered into
     or  modified  after  June 30,  2003,  had no  impact  on the  Partnership's
     consolidated financial statements.

     On July 1, 2003,  the  Partnership  adopted SFAS No. 150,  "Accounting  for
     Certain Financial  Instruments with Characteristics of both Liabilities and
     Equity",   which  requires  certain  financial   instruments,   which  were
     previously  accounted for as equity,  to be classified as liabilities.  The
     adoption  of SFAS  No.  150 had no  effect  on the  consolidated  financial
     statements of the Partnership.




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


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

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

     Operating Results:

     Pipeline Operations
<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    31,449     $    20,998        $    88,807     $    57,946
     Operating costs                                      11,067           9,511             35,149          23,602
     Depreciation and amortization                         3,540           1,385             10,548           4,132
     General and administrative                            2,003             615              4,074           2,791
                                                     -----------     -----------        -----------     -----------
         Operating income                            $    14,839     $     9,487        $    39,036     $    27,421
                                                     ===========     ===========        ===========     ===========
</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  For the three and nine month  periods ended
     September 30, 2003,  revenues increased by $10.5 million, or 50%, and $30.9
     million,  or 53%,  respectively,  compared  to the same 2002  periods,  due
     primarily  to the November and December  2002  pipeline  acquisitions  (see
     "Liquidity and Capital Resources"). Because tariff rates are regulated, the
     pipelines compete primarily on the basis of quality of services,  including
     delivery of products at convenient  locations on a timely basis to meet the
     needs of its  customers.  Barrel miles on petroleum  pipelines  totaled 5.4
     billion and 5.0 billion for the three months ended  September  30, 2003 and
     2002,  respectively,  and 15.8 billion and 13.7 billion for the nine months
     ended September 30, 2003 and 2002, respectively.

     Operating  costs,  which  include  fuel  and  power  costs,  materials  and
     supplies,  maintenance  and  repair  costs,  salaries,  wages and  employee
     benefits, and property and other taxes, increased by $1.6 million and $11.5
     million for the three and nine month  periods  ended  September  30,  2003,
     respectively,  when compared to 2002, due to the pipeline  acquisitions and
     increases  in  planned  maintenance.  For the three and nine  months  ended
     September 30, 2003, depreciation and amortization increased by $2.2 million
     and $6.4 million, respectively, when compared to the same 2002 periods, due
     primarily to the pipeline  acquisitions.  General and administrative costs,
     which include  managerial,  accounting and administrative  personnel costs,
     office  rent  and  expense,   legal  and   professional   costs  and  other
     non-operating  costs,  increased  by $1.4  million and $1.3 million for the
     three and nine month periods ended September 30, 2003, when compared to the
     same 2002 periods, due to the acquisitions,  increases in personnel-related
     costs and certain reclassifications from operating expense.


     Terminaling Operations

<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    58,090     $    54,186        $   176,887     $   150,000
     Operating costs                                      29,338          23,445             84,673          65,833
     Depreciation and amortization                         9,433           8,728             28,533          22,813
     General and administrative                            3,587           3,535             12,114          10,392
                                                     -----------     -----------        -----------     -----------
         Operating income                            $    15,732     $    18,478        $    51,567     $    50,962
                                                     ===========     ===========        ===========     ===========
</TABLE>

     For the three and nine month periods ended September 30, 2003,  terminaling
     revenues  increased  by $3.9  million,  or 7%, and $26.9  million,  or 18%,
     respectively,  when  compared  to the same  2002  periods,  due to the 2002
     terminal acquisitions (see "Liquidity and Capital Resources") and increases
     in the  average  price  realized  per barrel of tankage  utilized.  Average
     annual  tankage  utilized  for the  three  and  nine  month  periods  ended
     September 30, 2003 was 45.9 million and 47.1 million barrels, respectively,
     compared to 47.8 million and 45.3 million  barrels,  respectively,  for the
     same  prior  year  periods.  For the three  and nine  month  periods  ended
     September  30,  2003,  average  annualized  revenues  per barrel of tankage
     utilized  increased  to $5.02 per  barrel,  compared to $4.50 and $4.43 per
     barrel,  respectively,  for the same prior year  periods,  due primarily to
     changes in product mix resulting from the terminal acquisitions.

     For the three and nine month  periods ended  September 30, 2003,  operating
     costs  increased  by $5.9  million and $18.8  million,  respectively,  when
     compared to the same 2002 periods,  a result of the terminal  acquisitions,
     repair costs  associated  with  hurricane  Isabel and  increases in planned
     maintenance.  For the three  and nine  months  ended  September  30,  2003,
     depreciation and  amortization  increased by $0.7 million and $5.7 million,
     respectively,  when  compared  to the same  2002  periods,  due also to the
     terminal  acquisitions.  General and administrative costs for the three and
     nine month periods ended September 30, 2003,  increased by $0.1 million and
     $1.7 million, respectively, when compared to the same 2002 period, a result
     of the acquisitions and increases in personnel-related costs.


     Product Sales Operations
<TABLE>
<CAPTION>

                                                         Three Months  Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    50,865     $    28,120        $   162,415     $    63,702
     Cost of products sold                                46,835          26,501            146,035          59,433
                                                     -----------     -----------        -----------     -----------
     Gross margin                                    $     4,030     $     1,619        $    16,380     $     4,269
                                                     ===========     ===========        ===========     ===========
     Operating income (loss)                         $     1,445     $       (95)       $     8,052     $       468
                                                     ===========     ===========        ===========     ===========
</TABLE>

     The product sales business,  which was acquired with Statia (see "Liquidity
     and Capital  Resources"),  delivers  bunker fuels to ships in the Caribbean
     and Nova  Scotia,  Canada,  and sells bulk  petroleum  products  to various
     commercial  interests.  For the three  months  ended  September  30,  2003,
     product  sales  revenues,  gross margin and operating  income  increased by
     $22.7 million, $2.4 million and $1.5 million,  respectively,  when compared
     to the same 2002  period,  due to increases in both sales price and volumes
     sold. For the nine months ended September 30, 2003, product sales revenues,
     gross margin and operating  income  increased $98.7 million,  $12.1 million
     and $7.6 million, respectively, when compared to the same 2002 period, also
     a result of  increases  in sales  price and  volumes  sold.  The results of
     operations for the comparable  periods ended September 30, 2002 include the
     operations of the product  sales  business  since the date of  acquisition,
     February 28, 2002. Product  inventories are maintained at minimum levels to
     meet customer's needs;  however,  market prices for petroleum  products can
     fluctuate significantly in short periods of time.

     Interest Expense

     For the three and nine months ended  September 30, 2003,  interest  expense
     increased by $3.5 million and $8.0 million,  respectively,  compared to the
     same 2002 periods,  due to increases in fixed rate debt  resulting from the
     2002  pipeline  and  terminal  acquisitions  (see  "Liquidity  and  Capital
     Resources"),  partially  offset by overall  declines in  interest  rates on
     variable rate debt.

     Income Taxes

     Certain operations are conducted through separate taxable wholly-owned U.S.
     and  foreign  corporate  subsidiaries.  The  income tax  expense  for these
     subsidiaries  was $1.1  million and $1.4 million for the three months ended
     September  30,  2003 and  2002,  respectively,  and $3.8  million  and $3.0
     million,   for  the  nine  months  ended   September  30,  2003  and  2002,
     respectively.

     Liquidity and Capital Resources

     Cash  provided by operations  was $114.6  million and $68.7 million for the
     nine months ended September 30, 2003 and 2002,  respectively.  The increase
     in cash  provided by  operations  for the nine months ended  September  30,
     2003,  compared  to the same 2002  period,  was due  primarily  to the 2002
     acquisitions and changes in working capital  components  resulting from the
     timing of cash receipts and disbursements.

     Capital   expenditures,   including   routine   maintenance  and  expansion
     expenditures  but excluding  acquisitions,  were $32.1 million for the nine
     months ended September 30, 2003,  compared to $21.9 million during the same
     2002 period. The increase in capital expenditures for the nine months ended
     September 30, 2003, when compared to the same 2002 period, is the result of
     planned  maintenance  and  expansion  capital  expenditures  related to the
     pipeline and terminaling operations acquired in 2002 and higher maintenance
     capital  expenditures in the existing pipeline and terminaling  businesses.
     During all  periods,  adequate  pipeline  capacity  existed to  accommodate
     volume growth,  and the expenditures  required for environmental and safety
     improvements  were  not,  and  are  not  expected  in  the  future  to  be,
     significant.   The  Partnership   anticipates  that  capital   expenditures
     (including routine  maintenance and expansion  expenditures,  but excluding
     acquisitions)  will total  approximately  $40 to $45 million in 2003.  Such
     future  expenditures,  however,  will  depend on many  factors  beyond  the
     Partnership's control,  including,  without limitation,  demand for refined
     petroleum  products and terminaling  services in the  Partnership's  market
     areas, local, state and federal government  regulations,  fuel conservation
     efforts and the availability of financing on acceptable terms. No assurance
     can be given that required capital expenditures will not exceed anticipated
     amounts during the year, or thereafter,  or that the Partnership  will have
     the ability to finance such expenditures through borrowings, or will choose
     to do so.

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in the  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less  all of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable  record date. Cash  distributions of $0.81 per unit with respect
     to the  first and  second  quarters  of 2003 were paid on May 15,  2003 and
     August 14, 2003,  respectively.  A cash distribution of $0.84 per unit with
     respect to the third  quarter of 2003 was  declared to holders of record on
     November 3, 2003 and will be paid on November 14, 2003.

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

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

     In February of 2002,  the  Partnership  issued $250 million of 7.75% senior
     unsecured  notes due February 15,  2012.  The net proceeds  from the public
     offering,  $248.2 million,  were used to repay the Partnership's  revolving
     credit  agreement  and to  partially  fund  the  acquisition  of all of the
     liquids  terminaling  subsidiaries of Statia Terminals Group NV ("Statia").
     Under the note indenture,  interest is payable  semi-annually in arrears on
     February  15 and August 15 of each  year.  The notes are  redeemable,  as a
     whole or in part,  at the  option of the  Partnership,  at any  time,  at a
     redemption  price equal to the greater of 100% of the  principal  amount of
     the  notes,  or the sum of the  present  value of the  remaining  scheduled
     payments of principal and interest,  discounted to the  redemption  date at
     the applicable  U.S.  Treasury  rate, as defined in the indenture,  plus 30
     basis points. The note indenture contains certain financial and operational
     covenants,  including certain  limitations on investments,  sales of assets
     and  transactions  with affiliates  and,  absent an event of default,  such
     covenants do not restrict  distributions  to unitholders.  At September 30,
     2003, the Partnership was in compliance with all covenants.

     On February 28, 2002, the  Partnership  acquired  Statia for  approximately
     $178  million  in  cash  (net  of  acquired  cash).   The  acquired  Statia
     subsidiaries had approximately $107 million in outstanding debt,  including
     $101 million of 11.75% notes due in November  2003. The cash portion of the
     purchase price was funded by the  Partnership's  revolving credit agreement
     and proceeds from its February 2002 public debt offering. In April of 2002,
     the  Partnership  redeemed all of Statia's  11.75% notes at 102.938% of the
     principal amount,  plus accrued interest.  The redemption was funded by the
     Partnership's revolving credit facility.

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

     On September 18, 2002, the  Partnership  acquired eight bulk liquid storage
     terminals  in  Australia  and New Zealand  from Burns Philp & Co. Ltd.  for
     approximately $47 million in cash.

     On November 1, 2002, the Partnership  acquired an approximately  2,000-mile
     anhydrous  ammonia  pipeline  system from Koch Pipeline  Company,  L.P. for
     approximately  $139  million  in  cash.  This  fertilizer  pipeline  system
     originates  in southern  Louisiana,  proceeds  north  through  Arkansas and
     Missouri,  and then  branches  east into Illinois and Indiana and north and
     west into Iowa and Nebraska. The acquisition was financed by bank debt.

     In November of 2002, the Partnership  issued 2,095,000 limited  Partnership
     units in a public  offering  at $33.36 per unit,  generating  approximately
     $66.7  million in net proceeds.  The offering  proceeds were used to reduce
     bank borrowings for the fertilizer pipeline acquisition.

     On  December  24,  2002,  the  Partnership  acquired a  400-mile  petroleum
     products  pipeline and four  terminals in North Dakota and  Minnesota  from
     Tesoro  Refining and Marketing  Company for  approximately  $100 million in
     cash. The acquisition was funded with bank debt.

     In March of 2003, the  Partnership  issued  3,122,500  limited  Partnership
     units in a public  offering  at $36.54 per unit,  generating  approximately
     $109.1 million in net proceeds. The proceeds were used to reduce the amount
     of indebtedness under the Partnership's bridge facility.

     In April of 2003, the Partnership  entered into a new credit agreement with
     a group of banks  that  provides  for a $400  million  unsecured  revolving
     credit facility through April of 2006. The credit facility,  which provides
     for an increase in the  commitment  up to an  aggregate  of $450 million by
     mutual agreement  between the Partnership and the banks,  bears interest at
     variable  rates and has a variable  commitment fee on unused  amounts.  The
     credit  facility  contains  certain  financial  and  operating   covenants,
     including limitations on investments, sales of assets and transactions with
     affiliates and, absent an event of default, does not restrict distributions
     to  unitholders.  At September 30, 2003, the  Partnership was in compliance
     with all  covenants.  Initial  borrowings on the credit  agreement  ($324.2
     million) were used to repay all amounts outstanding under the Partnership's
     $275 million credit  agreement and $175 million bridge loan  agreement.  At
     September  30, 2003,  $49.2  million was  outstanding  under the new credit
     agreement.

     On May 19,  2003,  the  Partnership  issued $250  million of 5.875%  senior
     unsecured  notes  due  June 1,  2013.  The net  proceeds  from  the  public
     offering,  $247.6  million,  were  used to  reduce  amounts  due  under the
     revolving credit agreement.  Under the note indenture,  interest is payable
     semi-annually  in arrears on June 1 and December 1 of each year.  The notes
     are redeemable, as a whole or in part, at the option of the Partnership, at
     any  time,  at a  redemption  price  equal  to the  greater  of 100% of the
     principal  amount  of the  notes,  or the sum of the  present  value of the
     remaining  scheduled payments of principal and interest,  discounted to the
     redemption  date at the  applicable  U.S.  Treasury rate, as defined in the
     indenture,  plus 30 basis  points.  The  note  indenture  contains  certain
     financial and  operational  covenants,  including  certain  limitations  on
     investments,  sales of assets and transactions  with affiliates and, absent
     an event of  default,  such  covenants  do not  restrict  distributions  to
     unitholders.  At September 30, 2003, the Partnership was in compliance with
     all  covenants.  In  connection  with the  offering,  on May 8,  2003,  the
     Partnership  entered  into a  treasury  lock  contract  for the  purpose of
     locking in the US Treasury  interest rate  component on $100 million of the
     debt.  The treasury lock contract,  which  qualified as a cash flow hedging
     instrument  under SFAS No.  133,  was  settled on May 19,  2003 with a cash
     payment by the  Partnership  of $1.8 million.  The  settlement  cost of the
     contract   has  been   recorded  as  a  component  of   accumulated   other
     comprehensive income and is being amortized,  as interest expense, over the
     life of the debt.

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

     Information  regarding the Partnership's  Critical  Accounting  Policies is
     included in Item 7 of the Partnership's  Annual Report on Form 10-K for the
     year ended December 31, 2002.







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


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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The principal market risks pursuant to this Item (i.e., the risk of loss arising
from  adverse  changes in market rates and prices) to which the  Partnership  is
exposed are interest rates on the Partnership's  debt and investment  portfolios
and fluctuations of petroleum product prices on inventories held for resale.

The   Partnership's   investment   portfolio   consists  of  cash   equivalents;
accordingly,  the carrying amounts  approximate  fair value.  The  Partnership's
investments are not material to its financial position or performance.  Assuming
variable  rate debt of $79.9  million  at  September  30,  2003,  a one  percent
increase  in  interest  rates  would  increase  annual net  interest  expense by
approximately $0.8 million.

The product sales business  purchases refined  petroleum  products for resale as
bunker  fuel and  sales  to  commercial  interests.  Petroleum  inventories  are
generally  held  for  short  periods  of time,  not  exceeding  90 days.  As the
Partnership does not engage in derivative transactions to hedge the value of the
inventory, it is subject to market risk from changes in global oil markets.


Item 4. Controls and Procedures.

Kaneb  Pipe  Line  Company  LLC's  principal  executive  officer  and  principal
financial officer,  after evaluating as of September 30, 2003, the effectiveness
of the  Partnership's  disclosure  controls and  procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Securities  Exchange Act of 1934), have concluded
that, as of such date, the Partnership's  disclosure controls and procedures are
adequate  and  effective  to ensure that  material  information  relating to the
Partnership  and its  consolidated  subsidiaries  would be made known to them by
others within those entities.

There have been no changes in the  Partnership's  internal  controls or in other
factors  known to  management  that could  significantly  affect those  internal
controls  subsequent  to  the  date  of  the  evaluation,  nor  were  there  any
significant  deficiencies or material  weaknesses in the Partnership's  internal
controls. As a result, no corrective actions were required or undertaken.


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


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

                           Part II - Other Information


Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits.

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

          31.1 Certification of Chief Executive Officer, Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002, dated as of November 13, 2003.

          31.2 Certification of Chief Financial Officer, Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002, dated as of November 13, 2003.

          32.1 Certification  of Chief  Executive  Officer,  Pursuant to Section
               906(a) of the  Sarbanes-Oxley  Act of 2002,  dated as of November
               13, 2003.

          32.2 Certification  of Chief  Financial  Officer,  Pursuant to Section
               906(a) of the  Sarbanes-Oxley  Act of 2002,  dated as of November
               13, 2003.


     (b)  Reports on Form 8-K

          Current Report on Form 8-K, filed August 1, 2003




<PAGE>
                                    Signature

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

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



Date:  November 13, 2003                    //s//
                                     -------------------------------------------
                                     Howard C. Wadsworth
                                     Vice President, Treasurer and Secretary


<PAGE>
                                                                    Exhibit 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


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

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

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

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

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

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

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date:   November 13, 2003



                                                   //s//
                                           -------------------------------------
                                           Edward D. Doherty
                                           Chief Executive Officer

<PAGE>
                                                                    Exhibit 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


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

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

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

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

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

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

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date:   November 13, 2003



                                              //s//
                                        ----------------------------------------
                                        Howard C. Wadsworth
                                        Chief Financial Officer







<PAGE>
                                                                    Exhibit 32.1



                     CERTIFICATE OF CHIEF EXECUTIVE OFFICER

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

The  undersigned,  being the Chief Executive  Officer of Kaneb Pipe Line Company
LLC, as General Partner of Kaneb Pipe Line Partners,  L.P. (the  "Partnership"),
hereby  certifies that the  Partnership's  Quarterly Report on Form 10-Q for the
quarterly  period  ended  September  30,  2003,  filed  with the  United  States
Securities  and Exchange  Commission  pursuant to Section  13(a) or 15(d) of the
Securities  Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)),  fully complies with
the  requirements  of Section 13(a) or 15(d) of the  Securities  Exchange Act of
1934 and that information contained in such Quarterly Report fairly presents, in
all material respects,  the financial condition and results of operations of the
Partnership.

Date:    November 13, 2003


                                               //s//
                                    --------------------------------------------
                                    Edward D. Doherty
                                    Chief Executive Officer




A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been provided to Kaneb Pipe Line Partners, L.P. and
will be  retained  by Kaneb  Pipe  Line  Partners,  L.P.  and  furnished  to the
Securities and Exchange Commission or its staff upon request.




<PAGE>
                                                                    Exhibit 32.2



                     CERTIFICATE OF CHIEF FINANCIAL OFFICER

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

The  undersigned,  being the Chief Financial  Officer of Kaneb Pipe Line Company
LLC, as General Partner of Kaneb Pipe Line Partners,  L.P. (the  "Partnership"),
hereby  certifies that the  Partnership's  Quarterly Report on Form 10-Q for the
quarterly  period  ended  September  30,  2003,  filed  with the  United  States
Securities  and Exchange  Commission  pursuant to Section  13(a) or 15(d) of the
Securities  Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)),  fully complies with
the  requirements  of Section 13(a) or 15(d) of the  Securities  Exchange Act of
1934 and that information contained in such Quarterly Report fairly presents, in
all material respects,  the financial condition and results of operations of the
Partnership.

Date:    November 13, 2003


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



A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been provided to Kaneb Pipe Line Partners, L.P. and
will be  retained  by Kaneb  Pipe  Line  Partners,  L.P.  and  furnished  to the
Securities and Exchange Commission or its staff upon request.