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

                                  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 March 31, 2004

                                       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 April 30, 2004: 28,317,590

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

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


FORM 10-Q
QUARTER ENDED MARCH 31, 2004
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                                                       <C>
                                                                                                          Page No.
                           Part I. Financial Information

Item 1.           Financial Statements (Unaudited)

                  Consolidated Statements of Income - Three Months Ended
                      March 31, 2004 and 2003                                                                1

                  Condensed Consolidated Balance Sheets - March 31, 2004
                      and December 31, 2003                                                                  2

                  Condensed Consolidated Statements of Cash Flows - Three
                      Months Ended March 31, 2004 and 2003                                                   3

                  Notes to Consolidated Financial Statements                                                 4

Item 2.           Management's Discussion and Analysis of
                      Financial Condition and Results of Operations                                         12

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
                                                                                                 March 31,
                                                                                       ----------------------------
                                                                                           2004           2003
                                                                                       ------------   -------------
<S>                                                                                    <C>            <C>
Revenues:
    Services                                                                           $     90,698   $      86,694
    Products                                                                                 55,715          54,063
                                                                                       ------------   -------------
        Total revenues                                                                      146,413         140,757
                                                                                       ------------   -------------
Costs and expenses:
    Cost of products sold                                                                    51,039          47,886
    Operating costs                                                                          43,210          40,458
    Depreciation and amortization                                                            13,898          13,022
    General and administrative                                                                5,704           5,793
                                                                                       ------------   -------------
        Total costs and expenses                                                            113,851         107,159
                                                                                       ------------   -------------
Operating income                                                                             32,562          33,598
Interest and other income                                                                         5              88
Interest expense                                                                            (10,436)         (8,615)
                                                                                       ------------   -------------
Income before minority interest, income taxes and
    cumulative effect of change in accounting principle                                      22,131          25,071
Minority interest in net income                                                                (210)           (236)
Income tax expense                                                                           (1,152)         (1,429)
                                                                                       ------------   -------------
Income before cumulative effect of change in accounting
    principle                                                                                20,769          23,406
Cumulative effect of change in accounting principle - adoption
    of new accounting standard for asset retirement obligations                                -             (1,577)
                                                                                       ------------   -------------
        Net income                                                                           20,769          21,829

General partner's interest in net income                                                     (2,282)         (1,945)
                                                                                       ------------   -------------
Limited partners' interest in net income                                               $     18,487   $      19,884
                                                                                       ============   =============
Allocation of net income per unit:
    Before cumulative effect of change in accounting principle                         $       0.65   $         .84
    Cumulative effect of change in accounting principle                                        -               (.06)
                                                                                       ------------   -------------
                                                                                       $       0.65   $         .78
                                                                                       ============   =============
Weighted average number of Partnership
    units outstanding                                                                        28,318          25,542
                                                                                       ============   =============
</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>
                                                                              March 31,
                                                                                2004               December 31,
                                                                             (Unaudited)               2003
                                                                           ---------------       ---------------
<S>                                                                        <C>                   <C>
            ASSETS
Current assets:
    Cash and cash equivalents                                              $        36,545       $        38,626
    Accounts receivable                                                             56,264                51,864
    Inventories                                                                      8,228                 9,324
    Prepaid expenses and other                                                       7,556                 9,205
                                                                           ---------------       ---------------
        Total current assets                                                       108,593               109,019
                                                                           ---------------       ---------------
Property and equipment                                                           1,367,779             1,360,319
Less accumulated depreciation                                                      261,233               247,349
                                                                           ---------------       ---------------
    Net property and equipment                                                   1,106,546             1,112,970
                                                                           ---------------       ---------------
Investment in affiliates                                                            27,094                25,456

Excess of cost over fair value of net assets of
    acquired businesses and other assets                                            17,191                17,237
                                                                           ---------------       ---------------
                                                                           $     1,259,424       $     1,264,682
                                                                           ===============       ===============


                LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Accounts payable                                                       $        27,723       $        27,941
    Accrued expenses                                                                37,228                35,673
    Accrued distributions payable                                                   26,344                26,344
    Accrued interest payable                                                         8,597                 9,297
    Deferred terminaling fees                                                        7,105                 7,061
    Payable to general partner                                                       3,912                 3,630
                                                                           ---------------       ---------------
        Total current liabilities                                                  110,909               109,946
                                                                           ---------------       ---------------
Long-term debt                                                                     617,578               617,696

Other liabilities and deferred taxes                                                42,903                43,451

Minority interest                                                                      983                 1,018

Commitments and contingencies

Partners' capital                                                                  487,051               492,571
                                                                           ---------------       ---------------
                                                                           $     1,259,424       $     1,264,682
                                                                           ===============       ===============
</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>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                       ----------------------------
                                                                                            2004            2003
                                                                                       ------------   -------------
<S>                                                                                      <C>             <C>
Operating activities:
    Net income                                                                         $     20,769   $      21,829
    Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation and amortization                                                     13,898          13,022
           Minority interest in net income                                                      210             236
           Equity in earnings of affiliates, net of distributions                            (1,638)           (297)
           Deferred income taxes                                                                (53)          1,049
           Cumulative effect of change in accounting principle                                 -              1,577
           Changes in working capital components                                               (692)         (7,273)

                                                                                       ------------   -------------
               Net cash provided by operating activities                                     32,494          30,143
                                                                                       ------------   -------------

Investing activities:
    Capital expenditures                                                                     (7,347)        (11,734)
    Other                                                                                      (884)           (229)
                                                                                       ------------   -------------
               Net cash used in investing activities                                         (8,231)        (11,963)
                                                                                       ------------   -------------

Financing activities:
    Issuance of debt                                                                           -             14,000
    Payments of debt                                                                           -           (105,000)
    Distributions, including minority interest                                              (26,344)        (21,639)
    Net proceeds from issuance of limited partnership units                                    -            104,770
                                                                                       ------------   -------------

               Net cash used in financing activities                                        (26,344)         (7,869)
                                                                                       ------------   -------------

Increase (decrease) in cash and cash equivalents                                             (2,081)         10,311
Cash and cash equivalents at beginning of period                                             38,626          22,028
                                                                                       ------------   -------------

Cash and cash equivalents at end of period                                             $     36,545   $      32,339
                                                                                       ============   =============
Supplemental cash flow information - cash paid for interest                            $     10,738   $      13,280
                                                                                       ============   =============
</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
     month  periods  ended  March 31,  2004 and  2003,  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,  2003.  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 March 31, 2004 and the
     consolidated  results of their  operations  and cash flows for the  periods
     ended March 31, 2004 and 2003. Operating results for the three months ended
     March 31, 2004 are not  necessarily  indicative  of the results that may be
     expected for the year ending December 31, 2004.


2.   FINANCINGS

     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 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 March 31, 2004, 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 March
     31, 2004, $54.2 million was outstanding under the 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 March 31, 2004, 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
     Statement of Financial  Accounting  Standards ("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 months ended March 31, 2004 and 2003, is
     as follows:
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2004                2003
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Net income                                                                 $      20,769      $       21,829
     Foreign currency translation adjustment                                             (233)              2,792
     Interest rate hedging transaction                                                     45               -
                                                                                -------------      --------------
     Comprehensive income                                                       $      20,581      $       24,621
                                                                                =============      ==============
</TABLE>


     Accumulated other  comprehensive  income aggregated $12.1 million and $12.2
     million at March 31, 2004 and December 31, 2003, respectively.


4.   CASH DISTRIBUTIONS

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in its  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. A cash distribution of $0.84 per unit with respect
     to the  fourth  quarter  of 2003  was paid on  February  13,  2004.  A cash
     distribution  of $0.84 per unit with  respect to the first  quarter of 2004
     was declared to holders of record on April 30, 2004 and will be paid on May
     14, 2004.


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 had 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 of 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.  The  Partnership  does not  believe  this  matter  will have a
     materially adverse effect on its financial condition, although there can be
     no assurances as to the ultimate outcome.

     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 costs of $70
     million to $75 million.  PEPCO probably will 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  Services  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 has been consummated and the fund, to which PEPCO
     and  ST  Services   contributed   equal  amounts,   has  been  distributed.
     Participating  claimants'  claims  have been  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.

     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 Services 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.

     The U.S.  Department  of  Transportation  ("DOT")  has  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  has 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 things, 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 and response to the oil spill. Pursuant
     to an  agreement  between ST  Services  and PEPCO,  ST  Services'  suit was
     dismissed,  subject to refiling.  ST Services has moved to dismiss  PEPCO's
     suit. ST Services is vigorously  defending  against  PEPCO's  claims and is
     pursuing  its own  counterclaims  for  return  of monies  ST  Services  has
     advanced  to PEPCO for  settlements  and  cleanup  costs.  The  Partnership
     believes that any costs or damages  resulting  from these  lawsuits will be
     covered by insurance and therefore will not materially adversely affect the
     Partnership's  financial  condition.  The  amounts  claimed  by  PEPCO,  if
     recovered,  would trigger an excess  insurance  policy which has a $600,000
     retention,  but the Partnership  does not believe that such  retention,  if
     incurred,  would 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  contingencies  will  not  have a
     materially adverse effect on the financial position,  results of operations
     or liquidity 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.
<PAGE>
     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
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2004                2003
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Business segment revenues:
        Pipeline operations                                                     $      27,903      $       28,008
        Terminaling operations                                                         62,795              58,686
        Product sales operations                                                       55,715              54,063
                                                                                -------------      --------------
                                                                                $     146,413      $      140,757
                                                                                =============      ==============

     Business segment profit:
        Pipeline operations                                                     $      11,210      $       11,977
        Terminaling operations                                                         18,484              18,040
        Product sales operations                                                        2,868               3,581
                                                                                -------------      --------------
            Operating income                                                           32,562              33,598
        Interest and other income                                                           5                  88
        Interest expense                                                              (10,436)             (8,615)
                                                                                -------------      --------------
            Income before minority interest, income
               taxes and cumulative effect of change
               in accounting principle                                          $      22,131      $       25,071
                                                                                =============      ==============
</TABLE>
<TABLE>
<CAPTION>

                                                                                  March 31,         December 31,
                                                                                    2004                2003
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Total assets:
        Pipeline operations                                                     $     357,604      $      352,901
        Terminaling operations                                                        858,523             874,185
        Product sales                                                                  43,297              37,596
                                                                                -------------      --------------
                                                                                $   1,259,424      $    1,264,682
                                                                                =============      ==============
</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 $5.5 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.  The  Partnership  did not  record  a
     retirement  obligation for certain of its pipeline and  terminaling  assets
     because  sufficient  information  is presently  not available to estimate a
     range of potential settlement dates for the obligation. In these cases, the
     obligation will be initially  recognized in the period in which  sufficient
     information  exists to estimate  the  obligation.  At March 31,  2004,  the
     Partnership  had no assets  which were legally  restricted  for purposes of
     settling asset retirement obligations.  The application of SFAS No. 143 did
     not have a material  impact on the results of operations of the Partnership
     for the three months ended March 31, 2004 or 2003.

     In December 2003, the FASB issued  Interpretation  No. 46 (Revised December
     2003), "Consolidation of Variable Interest Entities (FIN 46R), primarily to
     clarify the required accounting for interests in variable interest entities
     (VIEs). This standard replaces FASB Interpretation No. 46, Consolidation of
     Variable  Interest  Entities,  that was issued in  January  2003 to address
     certain  situations  in which a company  should  include  in its  financial
     statements the assets,  liabilities and activities of another  entity.  For
     the  Partnership,  application  of FIN 46R is  required  for  interests  in
     certain VIEs that are commonly referred to as special-purpose  entities, or
     SPEs, as of December 31, 2003, and for interests in all other types of VIEs
     as of March 31, 2004.  The  application  of FIN 46R did not have a material
     impact 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.

     General

     In September 1989, Kaneb Pipe Line Company LLC ("KPL"),  now a wholly owned
     subsidiary of Kaneb Services LLC, formed the Partnership to own and operate
     its refined petroleum products pipeline business.  KPL manages and controls
     the operations of the Partnership  through its general partner interest and
     an 18% (at  March 31,  2004)  limited  partner  interest.  The  Partnership
     operates through Kaneb Pipe Line Operating  Partnership,  L.P. ("KPOP"),  a
     limited  partnership  in which  the  Partnership  holds a 99%  interest  as
     limited  partner.  KPL  owns  a 1%  interest  as  general  partner  of  the
     Partnership and a 1% interest as general partner of KPOP.

     The Partnership's  petroleum  pipeline  business consists  primarily of the
     transportation,  as a common  carrier,  of refined  petroleum  products  in
     Kansas, Nebraska,  Iowa, South Dakota, North Dakota, Colorado,  Wyoming and
     Minnesota.  Common carrier activities are those under which  transportation
     through the pipelines is available at published  tariffs filed, in the case
     of interstate shipments with the Federal Energy Regulatory  Commission (the
     "FERC"),  or in the case of intrastate  shipments,  with the relevant state
     authority,  to any shipper of refined petroleum  products who requests such
     services   and   satisfies   the   conditions   and    specifications   for
     transportation.  The  petroleum  pipelines  primarily  transport  gasoline,
     diesel  oil,  fuel  oil and  propane.  Substantially  all of the  petroleum
     pipeline  operations  constitute common carrier operations that are subject
     to  federal  or state  tariff  regulations.  The  Partnership  also owns an
     approximately  2,000-mile  anhydrous  ammonia pipeline system acquired from
     Koch Pipeline  Company,  L.P. in November of 2002. The fertilizer  pipeline
     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 Partnership's  petroleum pipeline business
     depends  on the level of  demand  for  refined  petroleum  products  in the
     markets  served  by the  pipelines  and  the  ability  and  willingness  of
     refineries  and  marketers  having  access to the  pipelines to supply such
     demand by deliveries  through the  pipelines.  The  Partnership's  pipeline
     revenues  are based on volumes  shipped  and the  distance  over which such
     volumes are transported.

     The Partnership's  terminaling  business is one of the largest  independent
     petroleum  products and  specialty  liquids  terminaling  businesses in the
     United States. In the United States, the Partnership operates 37 facilities
     in 20 states.  The Partnership also owns and operates six terminals located
     in the United  Kingdom,  eight  terminals in Australia  and New Zealand,  a
     terminal  on  the  Island  of St.  Eustatius,  Netherlands  Antilles  and a
     terminal at Point Tupper, Nova Scotia, Canada.  Independent terminal owners
     generally  compete  on the basis of the  location  and  versatility  of the
     terminals,  service and price.  Terminal  versatility  is a function of the
     operator's  ability to offer  handling  for diverse  products  with complex
     handling  requirements.  The  service  function  typically  provided by the
     terminal includes the safe storage of product at specified temperatures and
     other  conditions,  as well as receipt and delivery from the terminal.  The
     ability to obtain  attractive  pricing is dependent largely on the quality,
     versatility and reputation of the facility. Terminaling revenues are earned
     based on fees for the storage and handling of products.

     The Partnership's  product sales business delivers bunker fuels to ships in
     the Caribbean and Nova Scotia, Canada, and sells bulk petroleum products to
     various commercial customers at those locations. In the bunkering business,
     the  Partnership  competes with ports offering bunker fuels along the route
     of the vessel.  Vessel owners or charterers are charged  berthing and other
     fees  for  associated  services  such as  pilotage,  tug  assistance,  line
     handling, launch service and emergency response services.

     Consolidated Results of Operations
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                --------------------------------
                                                                                    2004                2003
                                                                                -------------       ------------
                                                                                      (in thousands, except
                                                                                        per share amounts)

<S>                                                                             <C>                 <C>
     Revenues                                                                   $    146,413        $    140,757
                                                                                ============        ============
     Operating Income                                                           $     32,562        $     33,598
                                                                                ============        ============
     Income before cumulative effect of change in
         accounting principle                                                   $     20,769        $     23,406
     Cumulative effect of change in accounting principle                                -                 (1,577)
                                                                                ------------        ------------
     Net income                                                                 $     20,769        $     21,829
                                                                                ============        ============
     Allocation of net income per unit:
         Before cumulative effect of change in accounting
              principle                                                         $       0.65        $       0.84
         Cumulative effect of change in accounting principle                            -                  (0.06)
                                                                                ------------        ------------
                                                                                $       0.65        $       0.78
                                                                                ============        ============
     Cash distributions declared per unit                                       $       0.84        $       0.81
                                                                                ============        ============
     Capital expenditures, excluding acquisitions                               $      7,347        $     11,734
                                                                                ============        ============
</TABLE>

     For the three  months  ended March 31,  2004,  revenues  increased  by $5.7
     million,  or 4%, when compared to the first quarter of 2003,  due to a $4.1
     million  increase  in  terminaling  business  revenues  and a $1.7  million
     increase in product  sales  revenues,  partially  offset by a $0.1  million
     decrease in pipeline revenues.  Operating income for the three months ended
     March 31, 2004 decreased by $1.0 million,  or 3%, when compared to the same
     period in 2003, due to a $0.8 million decrease in pipeline operating income
     and a $0.7 million  decrease in product sales operating  income,  partially
     offset by a $0.4 million increase in terminaling  operating income.  Income
     before  cumulative  effect of change in accounting  principle for the three
     months ended March 31, 2004 decreased by $2.6 million, when compared to the
     first three months of 2003. Overall,  net income for the three months ended
     March 31, 2004  decreased by $1.1  million,  when compared the three months
     ended  March 31,  2003,  which  included a charge of $1.6  million  for the
     cumulative  effect  of  change  in  accounting  principle-adoption  of  new
     accounting  standard for asset retirement  obligations.  See "Liquidity and
     Capital  Resources"  regarding  the 2003  issuance  of limited  partnership
     units.

     Pipeline Operations
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2004                2003
                                                                                -------------       -------------
                                                                                          (in thousands)

<S>                                                                             <C>                <C>
     Revenues                                                                   $      27,903      $       28,008
     Operating costs                                                                   11,487              11,241
     Depreciation and amortization                                                      3,599               3,497
     General and administrative                                                         1,607               1,293
                                                                                -------------      --------------
        Operating income                                                        $      11,210      $       11,977
                                                                                =============      ==============
</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  Because  tariff rates are  regulated by the
     FERC or the Surface  Transportation  Board, the pipelines compete primarily
     on the basis of quality of  service,  including  delivery  of  products  at
     convenient  locations  on a  timely  basis  to  meet  the  needs  of  their
     customers.  For the three  month  period  ended  March 31,  2004,  revenues
     decreased by $0.1 million,  when  compared to the same 2003 period,  due to
     decreases in barrel miles of petroleum  products  shipped.  Barrel miles on
     petroleum  pipelines  totaled  5.1  billion  and 5.4  billion for the three
     months ended March 31, 2004 and 2003, 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 $0.2 million for the
     three month  period  ended March 31, 2004,  when  compared to 2003,  due to
     unusually  high expenses  relating to maintenance  and repairs  required by
     government  regulation and increases in power and fuel costs. For the three
     months ended March 31, 2004,  depreciation  and  amortization  increased by
     $0.1  million,  when  compared to the same 2003  period,  due  primarily to
     routine maintenance capital expenditures. 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 $0.3 million for the three month period
     ended March 31, 2004, when compared to the same 2003 period,  due primarily
     to increases in personnel-related costs.
<PAGE>
     Terminaling Operations
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2004                2003
                                                                                -------------       -------------
                                                                                          (in thousands)

<S>                                                                             <C>                <C>
     Revenues                                                                   $      62,795      $       58,686
     Operating costs                                                                   30,343              27,277
     Depreciation and amortization                                                     10,084               9,244
     General and administrative                                                         3,884               4,125
                                                                                -------------      --------------
        Operating income                                                        $      18,484      $       18,040
                                                                                =============      ==============

</TABLE>
     For the three month  period  ended  March 31,  2004,  terminaling  revenues
     increased by $4.1  million,  or 7%, when  compared to the same 2003 period,
     due to increases in both the average tankage utilized and the average price
     realized per barrel of tankage  utilized.  Average tankage utilized for the
     three month period ended March 31, 2004 was 48.2 million,  compared to 47.4
     million,  for the same prior year period.  For the three month period ended
     March 31, 2004, average annualized  revenues per barrel of tankage utilized
     increased  to $5.24 per  barrel,  compared to $5.02 per barrel for the same
     prior year period, due primarily to favorable domestic market conditions.

     For the three month period ended March 31, 2004,  operating costs increased
     by $3.1 million, when compared to the same 2003 period, a result of overall
     increases in tank utilization and planned maintenance. For the three months
     ended March 31,  2004,  depreciation  and  amortization  increased  by $0.8
     million,  when  compared  to the same 2003  period,  due to  expansion  and
     routine maintenance capital expenditures.  General and administrative costs
     for the three month period ended March 31, 2004,  decreased slightly,  when
     compared to the same 2003 period.



     Product Sales
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2004                2003
                                                                                -------------       -------------
                                                                                          (in thousands)

<S>                                                                             <C>                <C>

     Revenues                                                                   $      55,715      $       54,063
     Cost of products sold                                                             51,039              47,886
                                                                                -------------      --------------
     Gross margin                                                               $       4,676      $        6,177
                                                                                =============      ==============
     Operating income                                                           $       2,868      $        3,581
                                                                                =============      ==============
</TABLE>

     For the three months ended March 31, 2004, product sales revenues increased
     by $1.7 million and gross  margin and  operating  income  decreased by $1.5
     million  and $0.7  million,  respectively,  when  compared to the same 2003
     period.  The revenue  increase is a result of  increases  in volumes  sold,
     partially  offset by a decrease in the overall  sales price  realized.  The
     decrease in gross margins and  operating  income for the three months ended
     March 31, 2004,  when compared to the three months ended March 31, 2003, is
     due to lower overall  sales prices  realized and  resulting  margins,  when
     compared to the unusually high levels realized in 2003. 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 months ended March 31, 2004,  interest  expense  increased by
     $1.8  million,  compared  to the  same  2003  period,  due to the May  2003
     refinancing  of variable  rate bank debt with $250 million of 5.875% senior
     unsecured  notes,  partially  offset by  overall  declines  in debt  levels
     outstanding  due to the March 2003  issuance of limited  partnership  units
     (see "Liquidity and Capital Resources").

     Income Taxes

     Partnership  operations  are not subject to federal or state income  taxes.
     However,   certain   operations  are  conducted  through  separate  taxable
     wholly-owned  U.S.  and  foreign  corporate  subsidiaries.  The  income tax
     expense for these  subsidiaries  was $1.2  million and $1.4 million for the
     three month periods ended March 31, 2004 and 2003, respectively.

     On June 1,  1989,  the  governments  of the  Netherlands  Antilles  and St.
     Eustatius  approved  a Free Zone and Profit Tax  Agreement  retroactive  to
     January 1, 1989,  which  expired  on  December  31,  2000.  This  agreement
     requires a subsidiary  of the  Partnership,  which was acquired on February
     28, 2002,  to pay a 2% rate on taxable  income,  as defined  therein,  or a
     minimum payment of 500,000 Netherlands Antilles guilders ($0.3 million) per
     year. The agreement further provides that any amounts paid in order to meet
     the  minimum  annual  payment  will  be  available  to  offset  future  tax
     liabilities  under the  agreement  to the extent  that the  minimum  annual
     payment is greater than 2% of taxable  income.  The subsidiary is currently
     engaged  in  discussions  with  representatives  appointed  by  the  Island
     Territory of St.  Eustatius  regarding the renewal or  modification  of the
     agreement,  but the ultimate  outcome cannot be predicted at this time. The
     subsidiary has accrued amounts assuming a new agreement becomes  effective,
     and continues to make payments, as required, under the previous agreement.

     Liquidity and Capital Resources

     Cash  provided by  operations  was $32.5  million and $30.1 million for the
     three months ended March 31, 2004 and 2003, respectively.  The increase was
     due primarily to changes in working capital  components  resulting from the
     timing of cash receipts and disbursements,  partially offset by the overall
     decrease in first quarter 2004 operating income,  when compared to the same
     2003 period.

     Capital expenditures were $7.3 million for the three months ended March 31,
     2004,  compared  to  $11.7  million  during  the  same  2003  period.  Such
     expenditures  included  $5.7  million and $6.3 million in  maintenance  and
     environmental  expenditures  and $1.6 million and $5.4 million in expansion
     expenditures   for  the  three  months  ended  March  31,  2004  and  2003,
     respectively. The decrease in first quarter 2004 capital expenditures, when
     compared to the same 2003 period,  is primarily  the result of decreases in
     planned  maintenance  and  expansion  capital  expenditures  related to the
     terminaling  business.  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 to be,
     significant.   The  Partnership   anticipates  that  capital   expenditures
     (including routine  maintenance and expansion  expenditures,  but excluding
     acquisitions)  will total  approximately  $28 to $32 million in 2004.  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 its  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. A cash distribution of $0.84 per unit with respect
     to the  fourth  quarter  of 2003  was paid on  February  13,  2004.  A cash
     distribution  of $0.84 per unit with  respect to the first  quarter of 2004
     was declared to holders of record on April 30, 2004 and will be paid on May
     14, 2004.

     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 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 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 March 31, 2004, 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 March
     31, 2004, $54.2 million was outstanding under the 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 March 31, 2004, 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
     Statement of Financial  Accounting  Standards ("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.

     The following is a schedule by period of the  Partnership's  debt repayment
     obligations and material contractual commitments as of March 31, 2004:
<TABLE>
<CAPTION>

                                                        Less than                                        After
                                            Total         1 year         1 -3 years   4 -5 years        5 years
                                          ----------   ------------    ------------  ------------    --------------
                                                                    (in thousands)
<S>                                       <C>          <C>              <C>          <C>              <C>
     Debt:
       Revolving credit facility          $   54,169   $      -         $    54,169  $      -         $      -
       7.75% senior unsecured
          notes                              250,000          -              -              -               250,000
       5.875% senior unsecured
          notes                              250,000          -              -              -               250,000
       Other bank debt                        63,409          -              63,409         -               -
                                          ----------   ------------    ------------  ------------    --------------
          Debt subtotal                      617,578          -             117,578         -               500,000
                                          ----------   ------------    ------------  ------------    --------------
     Contractual commitments:
       Operating leases                       18,895          6,947           9,016         2,590               342
                                          ----------   ------------    ------------  ------------    --------------
          Contractual commitments
              subtotal                        18,895          6,947           9,016         2,590               342
                                          ----------   ------------    ------------  ------------    --------------
          Total                           $  636,473   $      6,947    $    126,594  $      2,590    $      500,342
                                          ==========   ============    ============  ============    ==============
</TABLE>

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

     Off-Balance Sheet Transactions

     The Partnership was not a party to any  off-balance  sheet  transactions at
     March 31,  2004,  or for the three month  periods  ended March 31, 2004 and
     2003.

     Critical Accounting Policies and Estimates

     The  preparation of the  Partnership's  financial  statements in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America  requires  management to make estimates and assumptions that affect
     the  reported   amounts  of  assets  and  liabilities  and  disclosures  of
     contingent  assets and liabilities at the date of the financial  statements
     and the  reported  amounts of revenues and  expenses  during the  reporting
     period.  Actual  results  could  differ from those  estimates.  Significant
     accounting policies are included in the Notes to the Consolidated Financial
     Statements  of the  Partnership's  Annual  Report on Form 10-K for the year
     ended December 31, 2003.

     Critical  accounting  policies  are those  that are most  important  to the
     portrayal  of  the   Partnership's   financial   position  and  results  of
     operations. These policies require management's most difficult,  subjective
     or complex judgments, often employing the use of estimates about the effect
     of matters that are inherently  uncertain.  The Partnership's most critical
     accounting  policies  pertain to  impairment  of property and equipment and
     environmental costs.

     The carrying  value of property and  equipment  is  periodically  evaluated
     using management's estimates of undiscounted future cash flows, or, in some
     cases,  third-party  appraisals,  as the basis of determining if impairment
     exists under the provisions of SFAS No. 144, "Accounting for the Impairment
     or Disposal of Long-Lived  Assets",  which was adopted effective January 1,
     2002. To the extent that  impairment  is indicated to exist,  an impairment
     loss is recognized  under SFAS No. 144 based on fair value. The application
     of SFAS No. 144 did not have a material impact on the results of operations
     of the  Partnership  for the three month  periods  ended March 31, 2004 and
     2003.  However,  future evaluations of carrying value are dependent on many
     factors,  several of which are out of the Partnership's control,  including
     demand for  refined  petroleum  products  and  terminaling  services in the
     Partnership's  market  areas,  and local,  state and  federal  governmental
     regulations.  To the extent that such factors or conditions  change,  it is
     possible that future  impairments might occur,  which could have a material
     effect on the results of operations of the Partnership.

     Environmental  expenditures that relate to current  operations are expensed
     or  capitalized,  as appropriate.  Expenditures  that relate to an existing
     condition caused by past operations, and which do not contribute to current
     or future revenue generation,  are expensed.  Liabilities are recorded when
     environmental  assessments  and/or remedial  efforts are probable,  and the
     costs can be reasonably estimated.  Generally, the timing of these accruals
     coincides with the completion of a feasibility  study or the  Partnership's
     commitment to a formal plan of action. The application of the Partnership's
     environmental  accounting  policies  did not have a material  impact on the
     results of operations of the  Partnership for the three month periods ended
     March  31,  2004 and  2003.  Although  the  Partnership  believes  that its
     operations  are  in  general   compliance  with  applicable   environmental
     regulations,  risks of substantial  costs and  liabilities  are inherent in
     pipeline and terminaling  operations.  Moreover,  it is possible that other
     developments,  such as increasingly strict environmental laws,  regulations
     and  enforcement  policies  thereunder,  and legal  claims  for  damages to
     property or persons  resulting from the operations of the Partnership could
     result in  substantial  costs and  liabilities,  any of which  could have a
     material effect on the results of operations of the Partnership.

     Recent Accounting Pronouncement

     In December 2003, the FASB issued  Interpretation  No. 46 (Revised December
     2003), "Consolidation of Variable Interest Entities (FIN 46R), primarily to
     clarify the required accounting for interests in variable interest entities
     (VIEs). This standard replaces FASB Interpretation No. 46, Consolidation of
     Variable  Interest  Entities,  that was issued in  January  2003 to address
     certain  situations  in which a company  should  include  in its  financial
     statements the assets,  liabilities and activities of another  entity.  For
     the  Partnership,  application  of FIN 46R is  required  for  interests  in
     certain VIEs that are commonly referred to as special-purpose  entities, or
     SPEs,  as of December 31, 2003 and for interests in all other types of VIEs
     as of March 31, 2004.  The  application  of FIN 46R did not have a material
     impact on the consolidated financial statements of the Partnership.




<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,
fluctuations  of petroleum  product prices on inventories  held for resale,  and
fluctuations in foreign currency.

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 $117.6  million at March 31, 2004, a one percent  increase
in interest rates would increase  annual net interest  expense by  approximately
$1.2 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.

A portion of the  terminaling  business  is exposed to  fluctuations  in foreign
currency  exchange rates.  Such  fluctuations were not significant for the three
months ended March 31, 2004.


Item 4. Controls and Procedures

Kaneb  Pipe  Line  Company  LLC's  principal  executive  officer  and  principal
financial  officer,  after evaluating as of March 31, 2004, 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.

During  the  first  quarter  of  2004,   there  have  been  no  changes  in  the
Partnership's  internal  controls over financial  reporting that have materially
affected, or are reasonably likely to materially affect, those internal controls
subsequent to the date of the  evaluation.  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 May 6, 2004.

          31.2 Certification of Chief Financial Officer, Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002, dated May 6, 2004.

          32.1 Certification  of Chief  Executive  Officer,  Pursuant to Section
               906(a) of the Sarbanes-Oxley Act of 2002, dated May 6, 2004.

          32.2 Certification  of Chief  Financial  Officer,  Pursuant to Section
               906(a) of the Sarbanes-Oxley Act of 2002, dated May 6, 2004.

     (b)  Reports on Form 8-K

          Current Report on Form 8-K, filed February 26, 2004.

                                    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
                                           (General Partner)


Date:   May 6, 2004                      //s//         HOWARD C. WADSWORTH
                                       -----------------------------------------
                                       Howard C. Wadsworth
                                       Vice President, Treasurer and Secretary
<PAGE>
                                                                    Exhibit 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


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  quarterly  report on Form  10-Q of Kaneb  Pipe Line
     Partners, L.P.;

2.   Based on my knowledge,  this  quarterly  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 quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  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
     quarterly report;

4.   The  registrant's  other  certifying  officers  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 quarterly report is being prepared;

     b)   [intentionally omitted pursuant to SEC Release No. 34-47986];

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

     d)   disclosed  in this  quarterly  report any  change in the  registrant's
          internal  control over financial  reporting  that occurred  during the
          registrant's most recent fiscal quarter 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  officers 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: May 6, 2004

                                         //s//  EDWARD D. DOHERTY
                                       -----------------------------------------
                                       Edward D. Doherty
                                       Chief Executive Officer
<PAGE>
                                                                    Exhibit 31.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


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  quarterly  report on Form  10-Q of Kaneb  Pipe Line
     Partners, L.P.;

2.   Based on my knowledge,  this  quarterly  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 quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  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
     quarterly report;

4.   The  registrant's  other  certifying  officers  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 quarterly report is being prepared;

     b)   [intentionally omitted pursuant to SEC Release No. 34-47986];

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

     d)   disclosed  in this  quarterly  report any  change in the  registrant's
          internal  control over financial  reporting  that occurred  during the
          registrant's most recent fiscal quarter 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  officers 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: May 6, 2004


                                         //s//  HOWARD C. WADSWORTH
                                       -----------------------------------------
                                       Howard C. Wadsworth
                                       Chief Financial Officer
<PAGE>
                                                                    Exhibit 32.1


                    CERTIFICATION 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, to his knowledge,  the Partnership's  Quarterly Report on
Form 10-Q for the three  months  ended  March 31,  2004,  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.

This  written  statement  is being  furnished  to the  Securities  and  Exchange
Commission  as an exhibit to such Form 10-Q.  A signed  original 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.

Date: May 6, 2004

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

<PAGE>
                                                                    Exhibit 32.2



                    CERTIFICATION 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, to his knowledge,  the Partnership's  Quarterly Report on
Form 10-Q for the three  months  ended  March 31,  2004,  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.

This  written  statement  is being  furnished  to the  Securities  and  Exchange
Commission  as an exhibit to such Form 10-Q.  A signed  original 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.

Date: May 6, 2004


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