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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

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

                                       OR

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

For the Quarterly Period                                       Commission File
Ended June 30, 1997                                            Number 1-10311

                         KANEB PIPE LINE PARTNERS, L.P.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

                         2435 NORTH CENTRAL EXPRESSWAY
                            RICHARDSON, TEXAS 75080
          (Address of principal executive offices, including zip code)

                                 (214) 699-4000
              (Registrant's telephone number, including area code)

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

YES [X]                                           NO [ ]

Number of Senior Preference Units of the Registrant outstanding at August 8,
1997: 7,250,000. Number of Preference Units of the Registrant outstanding at
August 8, 1997: 4,650,000.

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KANEB PIPE LINE PARTNERS, L.P.

FORM 10-Q
QUARTER ENDED JUNE 30, 1997
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                            Page No.
                         Part I. Financial Information
<S>                                                                            <C>
Item 1.           Financial Statements (Unaudited)

                  Consolidated Statements of Income
                      - Three and Six Months Ended June 30, 1997 and 1996      1

                  Condensed Consolidated Balance Sheets
                      - June 30, 1997 and December 31, 1996                    2

                  Condensed Consolidated Statements of Cash Flows
                      - Six Months Ended June 30, 1997 and 1996                3

                  Notes to Consolidated Financial Statements                   4

Item 2.           Management's Discussion and Analysis of
                      Financial Condition and Results of Operations            5

                           Part II. Other Information

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


Signature                                                                      8
</TABLE>




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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS - EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                             Three Months Ended          Six Months Ended
                                                                   June 30,                  June 30,
                                                            ----------------------    ----------------------
                                                               1997         1996         1997         1996
                                                            ---------    ---------    ---------    ---------
<S>                                                         <C>          <C>          <C>          <C>      
Revenues                                                    $  29,793    $  28,795    $  58,372    $  56,621
                                                            ---------    ---------    ---------    ---------
Costs and expenses:
     Operating costs                                           12,557       11,911       24,959       24,019
     Depreciation and amortization                              2,920        2,741        5,798        5,449
     General and administrative                                 1,397        1,302        2,667        2,712
                                                            ---------    ---------    ---------    ---------
         Total costs and expenses                              16,874       15,954       33,424       32,180
                                                            ---------    ---------    ---------    ---------
Operating income                                               12,919       12,841       24,948       24,441
Other income, net (principally interest)                          169          186          275          370
Interest expense                                               (2,849)      (2,657)      (5,703)      (5,387)
                                                            ---------    ---------    ---------    ---------
Income before minority interest
     and income taxes                                          10,239       10,370       19,520       19,424
Minority interest in net income                                  (100)        (100)        (190)        (186)
Income tax provision                                             (190)        (263)        (474)        (554)
                                                            ---------    ---------    ---------    ---------
Net income                                                      9,949       10,007       18,856       18,684
General partner's interest in net income                         (100)        (100)        (190)        (186)
                                                            ---------    ---------    ---------    ---------
Limited partner's interest in net income                    $   9,849    $   9,907    $  18,666    $  18,498
                                                            =========    =========    =========    =========
Allocation of net income per Senior
    Preference Unit and Preference Unit                     $     .61    $     .62    $    1.16    $    1.15
                                                            =========    =========    =========    =========
Weighted average number of Partnership Units outstanding:
      Senior Preference Units                                   7,250        7,250        7,250        7,250
                                                            =========    =========    =========    =========
      Preference Units                                          4,650        4,650        4,650        4,650
                                                            =========    =========    =========    =========
</TABLE>

                See notes to consolidated financial statements.




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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       June 30,  December 31,
                                                         1997        1996
                                                       --------- ------------
<S>                                                    <C>         <C>      
               ASSETS

Current assets:
  Cash and cash equivalents                            $   9,042   $   8,196
  Accounts receivable, trade                              13,006      11,540
  Current portion of receivable from general partner        --           975
  Prepaid expenses                                         3,989       4,321
                                                       ---------   ---------
    Total current assets                                  26,037      25,032
                                                       ---------   ---------

Property  and equipment                                  340,809     337,202
Less accumulated depreciation and amortization            93,021      87,469
                                                       ---------   ---------

     Net property and equipment                          247,788     249,733
                                                       ---------   ---------

                                                       $ 273,825   $ 274,765
                                                       =========   =========

     LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
   Current portion of long-term debt                   $   2,181   $   2,036
   Accounts payable, accrued expenses and
     distributions payable                                16,756      18,715
   Deferred terminaling fees                               4,714       2,874
   Payable to general partner                                968         711
                                                       ---------   ---------

     Total current liabilities                            24,619      24,336
                                                       ---------   ---------

Long-term debt, less current portion                     138,326     139,453
                                                       ---------   ---------

Other liabilities and deferred taxes                       7,136       6,612
                                                       ---------   ---------

Minority interest                                          1,017       1,024
                                                       ---------   ---------

Partners' capital                                        102,727     103,340
                                                       ---------   ---------

                                                       $ 273,825   $ 274,765
                                                       =========   =========
</TABLE>



                See notes to consolidated financial statements.



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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              1997          1996
                                                           ----------    ----------
<S>                                                        <C>           <C>       
Operating activities:
   Net income                                              $   18,856    $   18,684
   Adjustments to reconcile net income
     to net cash provided by operating activities:
       Depreciation and amortization                            5,798         5,449
       Minority interest in net income                            190           186
       Income taxes                                               474           554
       Changes in working capital components                     (946)          349
                                                           ----------    ----------

       Net cash provided by operating activities               24,372        25,222
                                                           ----------    ----------

Investing activities:
   Capital expenditures                                        (5,243)       (3,986)
   Other                                                        1,390          (152)
                                                           ----------    ----------

     Net cash used by investing activities                     (3,853)       (4,138)
                                                           ----------    ----------

Financing activities:
   Changes in receivable from general partner                     975         1,241
   Issuance of long-term debt                                    --          68,000
   Payments of long-term debt                                    (982)      (68,858)
   Distributions to partners                                  (19,666)      (18,026)
                                                           ----------    ----------

     Net cash used by financing activities                    (19,673)      (17,643)
                                                           ----------    ----------

Increase in cash                                                  846         3,441
Cash at beginning of period                                     8,196         6,307
                                                           ----------    ----------

Cash at end of period                                      $    9,042    $    9,748
                                                           ==========    ==========

Supplemental information - cash paid for interest          $    5,731    $    5,451
                                                           ==========    ==========
</TABLE>


                See notes to consolidated financial statements.



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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------------------------


1.   SIGNIFICANT ACCOUNTING POLICIES


     The unaudited financial statements of Kaneb Pipe Line Partners, L.P. and
     its subsidiaries (the "Partnership") for the periods ended June 30, 1997
     and 1996 have been prepared in accordance with generally accepted
     accounting principles applied on a consistent basis. Significant
     accounting policies followed by the Partnership were disclosed in the
     notes to the consolidated financial statements included in the
     Partnership's Annual Report on Form 10-K for the period ended December 31,
     1996. In the opinion of the Partnership's management, the accompanying
     consolidated financial statements contain the adjustments, consisting of
     normal recurring accruals, necessary to present fairly the consolidated
     financial position of the Partnership at June 30, 1997 and the
     consolidated results of its operations and cash flows for the periods
     ended June 30, 1997 and 1996. Operating results for the six months ended
     June 30, 1997 are not necessarily indicative of the results that may be
     expected for the year ended December 31, 1997.


2.   CASH DISTRIBUTIONS TO UNITHOLDERS


     The cash distribution of $.60 per unit for the fourth quarter of 1996 was
     made on February 14, 1997. A cash distribution of $.60 for both the first
     and second quarter of 1997 were declared to holders of record as of April
     30, 1997 and July 30, 1997, respectively. The first quarter distribution
     was paid on May 15, 1997 and the second quarter distribution is payable on
     August 14, 1997.









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<PAGE>   7
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
-------------------------------------------------------------------------------


FINANCIAL CONDITION

     During the six months ended June 30, 1997, the Partnership's working
     capital requirements for operations, capital expenditures and cash
     distributions were funded through the use of internally generated funds.


     Cash provided by operating activities was $24.4 million and $25.2 million
     for the periods ended June 30, 1997 and 1996, respectively. Capital
     expenditures were $5.2 million in the 1997 period compared to $4.0 million
     in 1996. Adequate pipeline capacity exists to accommodate volume growth
     and the expenditures required for environmental and safety improvements
     have not been, and are not expected in the future to be, material.
     Environmental damages caused by sudden and accidental occurrences are
     included under the Partnership's insurance coverage's. The Partnership
     anticipates that capital expenditures will total approximately $8.0
     million to $10.0 million (excluding acquisitions) for the year 1997.


     The Partnership makes distributions of 100% of its Available Cash to
     Unitholders and the General Partner. Available Cash consists generally of
     all the cash receipts less all cash disbursements and reserves.
     Distributions to all Unitholders of $1.20 per unit were declared in the
     six months ended June 30, 1997 and $2.30 per unit was declared in the
     calendar year 1996.


     The Partnership expects to fund future cash distributions and maintenance
     capital expenditures with cash and cash flows from operating activities.
     Expansionary capital expenditures are expected to be funded through
     additional Partnership borrowing.


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







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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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OPERATING RESULTS

     PIPELINE OPERATIONS

<TABLE>
<CAPTION>
                                           Three Months Ended     Six Months Ended
                                                June 30,               June 30,
                                           -------------------   -------------------
                                             1997       1996       1997       1996
                                           --------   --------   --------   --------
     <S>                                   <C>        <C>        <C>        <C>     
     Revenues                              $ 14,999   $ 15,431   $ 28,868   $ 29,827
     Operating costs                          5,501      5,412     10,871     11,389
     Depreciation and amortization            1,217      1,216      2,420      2,401
     General and administrative expenses        728        781      1,338      1,443
                                           --------   --------   --------   --------

       Operating income                    $  7,553   $  8,022   $ 14,239   $ 14,594
                                           ========   ========   ========   ========
</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over
     which such volumes are transported. Revenues for the three and six month
     period ended June 30, 1997 decreased $.4 million and $1.0 million,
     respectively, over the corresponding periods in 1996 primarily due to the
     adverse effect on product demand caused by abnormally high amounts of snow
     and rainfall in the Northern Midwest. Barrel miles totaled 4.0 billion and
     7.7 billion in the three and six months ended June 30, 1997 compared to
     4.2 billion and 8.0 billion in the respective prior year periods.


     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 $.1 million in the three
     months ended June 30, 1997 over the prior year period primarily due to
     higher materials and supplies and outside services. For the six months
     ended June 30, 1997, operating costs decreased $.5 million primarily due
     to lower materials and supplies and outside services costs. General and
     administrative costs include managerial, accounting and administrative
     personnel costs, office rental and expenses, legal and professional costs
     and other non-operating costs.






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<PAGE>   9
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
-------------------------------------------------------------------------------


    TERMINALING OPERATIONS

<TABLE>
<CAPTION>
                                       Three Months Ended     Six Months Ended
                                            June 30,              June 30,
                                       -------------------   -------------------
                                         1997       1996       1997       1996
                                       --------   --------   --------   --------
     <S>                               <C>        <C>        <C>        <C>     
     Revenues                          $ 14,794   $ 13,364   $ 29,504   $ 26,794
     Operating costs                      7,056      6,499     14,088     12,630
     Depreciation and amortization        1,703      1,525      3,378      3,048
     General and administrative 
       expenses                             669        521      1,329      1,269
                                       --------   --------   --------   --------
       Operating income                $  5,366   $  4,819   $ 10,709   $  9,847
                                       ========   ========   ========   ========
</TABLE>

     The increases in revenues are primarily attributable to tankage acquired
     in November and December 1996 and increases in average prices charged for
     storage and tankage volumes utilized. Average annual tankage utilized for
     the three and six months ended June 30, 1997 increased .6 million and .2
     million barrels, respectively, over the comparable prior periods primarily
     as a result of the tankage acquired late in 1996. For the three and six
     months ended June 30, 1997, average annualized revenues per barrel of
     tankage utilized was $4.81 and $4.84 per barrel, respectively, compared to
     $4.55 and $4.48 per barrel for the same prior year periods. The increases
     in per barrel averages is primarily due to larger proportionate volume of
     specialty chemicals being stored with higher rates per barrel than
     petroleum products.

     Total tankage capacity (17.2 million barrels at June 30, 1997) has been,
     and is expected to remain, adequate to meet existing customer storage
     requirements. Customers consider factors such as location, access to cost
     effective transportation and quality of service in addition to pricing
     when selecting terminal storage. For the three and six months ended June
     30, 1997, operating costs increased $.6 million and $1.5 million;
     depreciation and amortization increased $.2 million and $.3 million; and
     general and administrative expenses increased $.1 million and $.1 million,
     respectively, over the comparable prior year periods, primarily as a
     result of terminal acquisitions late in 1996.






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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

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


                          PART II - Other Information

Item 6.        Exhibits and Reports on Form 8-K

         (a)   Exhibits.

               27.  Financial Data Schedule

         (b)   Reports on Form 8-K.  None



                                   Signature


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



                                               KANEB PIPE LINE PARTNERS, L.P.
                                               (Registrant)

                                         By:   KANEB PIPE LINE COMPANY
                                               --------------------------------
                                               (Managing General Partner)


Date:  August 12, 1997                         /s/ Jimmy L. Harrison
                                               --------------------------------
                                               Jimmy L. Harrison
                                               Controller




                                       8
<PAGE>   11

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
------         -----------
<S>            <C>
  27           Financial Data Schedule
</TABLE>