--------------------------------------------------------------------------------
                       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, 2003

                                       OR

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


                        Commission File Number 001-10311

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

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

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

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

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

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

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

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


Number of Units of the Registrant outstanding at April 30, 2003: 28,317,590

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


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


FORM 10-Q
QUARTER ENDED MARCH 31, 2003
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                           Page No.
                           Part I. Financial Information

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

                  Consolidated Statements of Income - Three Months Ended
                      March 31, 2003 and 2002                                                                1

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

                  Condensed Consolidated Statements of Cash Flows - Three
                      Months Ended March 31, 2003 and 2002                                                   3

                  Notes to Consolidated Financial Statements                                                 4

Item 2.           Management's Discussion and Analysis of
                      Financial Condition and Results of Operations                                         14

Item 3.           Quantitative and Qualitative Disclosure About Market Risk                                 20

Item 4.           Controls and Procedures                                                                   20

                           Part II.  Other Information

Item 6.           Exhibits and Reports on Form 8-K                                                          21

</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,
                                                                                       ----------------------------
                                                                                           2003           2002
                                                                                       ------------   -------------

<S>                                                                                    <C>            <C>
Revenues:
    Services                                                                           $     86,694   $      59,088
    Products                                                                                 54,063           8,554
                                                                                       ------------   -------------
        Total revenues                                                                      140,757          67,642
                                                                                       ------------   -------------
Costs and expenses:
    Cost of products sold                                                                    47,886           7,829
    Operating costs                                                                          40,458          25,139
    Depreciation and amortization                                                            13,022           7,113
    General and administrative                                                                5,793           4,336
                                                                                       ------------   -------------
        Total costs and expenses                                                            107,159          44,417
                                                                                       ------------   -------------
Operating income                                                                             33,598          23,225
Interest and other income                                                                        88              71
Interest expense                                                                             (8,615)         (5,277)
Loss on debt extinguishment                                                                     -              (155)
                                                                                       ------------   -------------
Income before minority interest, income taxes and
    cumulative effect of change in accounting principle                                      25,071          17,864
Minority interest in net income                                                                (236)           (174)
Income tax expense                                                                           (1,429)           (448)
                                                                                       ------------   -------------
Income before cumulative effect of change in accounting
    principle                                                                                23,406          17,242
Cumulative effect of change in accounting principle - adoption
    of new accounting standard for asset retirement obligations                              (1,577)           -
                                                                                       ------------   -------------
        Net income                                                                           21,829          17,242

General partner's interest in net income                                                     (1,945)         (1,309)
                                                                                       ------------   -------------
Limited partners' interest in net income                                               $     19,884   $      15,933
                                                                                       ============   =============
Allocation of net income per unit:
    Before cumulative effect of change in accounting principle                         $        .84   $         .75
    Cumulative effect of change in accounting principle                                        (.06)           -
                                                                                       ------------   -------------
                                                                                       $        .78   $         .75
                                                                                       ============   =============

Weighted average number of Partnership
    units outstanding                                                                        25,542          21,299
                                                                                       ============   =============
</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,             December 31,
                                                                                2003                   2002
                                                                         -----------------       ---------------
                                                                             (Unaudited)
            ASSETS
<S>                                                                        <C>                   <C>
Current assets:
    Cash and cash equivalents                                              $        32,339       $        22,028
    Accounts receivable                                                             53,077                48,926
    Inventories                                                                      5,783                 4,922
    Prepaid expenses and other                                                      11,019                 8,498
                                                                           ---------------       ---------------
        Total current assets                                                       102,218                84,374
                                                                           ---------------       ---------------

Property and equipment                                                           1,306,798             1,288,762
Less accumulated depreciation                                                      209,581               196,570
                                                                           ---------------       ---------------
    Net property and equipment                                                   1,097,217             1,092,192
                                                                           ---------------       ---------------

Investment in affiliates                                                            25,901                25,604

Excess of cost over fair value of net assets of
    acquired businesses and other assets                                            13,034                13,240
                                                                           ---------------       ---------------
                                                                           $     1,238,370       $     1,215,410
                                                                           ===============       ===============


                LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Current portion of long-term debt                                      $        25,843       $          -
    Accounts payable                                                                22,824                22,064
    Accrued expenses                                                                32,416                32,937
    Accrued distributions payable                                                   25,130                21,639
    Accrued interest payable                                                         3,040                 7,896
    Deferred terminaling fees                                                        6,693                 6,246
    Payable to general partner                                                       4,647                 5,403
                                                                           ---------------       ---------------
        Total current liabilities                                                  120,593                96,185
                                                                           ---------------       ---------------

Long-term debt                                                                     577,000               694,330

Other liabilities and deferred taxes                                                38,668                31,581

Minority interest                                                                    1,044                 1,030

Commitments and contingencies

Partners' capital                                                                  501,065               392,284
                                                                           ---------------       ---------------
                                                                           $     1,238,370       $     1,215,410
                                                                           ===============       ===============

</TABLE>


                 See notes to consolidated financial statements.
                                        2


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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                       ----------------------------
                                                                                           2003           2002
                                                                                       ------------   -------------
<S>                                                                                    <C>            <C>
Operating activities:
    Net income                                                                         $     21,829   $      17,242
    Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation and amortization                                                     13,022           7,113
           Minority interest in net income                                                      236             174
           Equity in earnings of affiliates, net of distributions                              (297)             10
           Deferred income taxes                                                              1,049             374
           Cumulative effect of change in accounting principle                                1,577            -
           Changes in working capital components                                             (7,273)         (7,020)
                                                                                       ------------   -------------
               Net cash provided by operating activities                                     30,143          17,893
                                                                                       ------------   -------------

Investing activities:
    Acquisitions, net of cash acquired                                                         -           (177,692)
    Capital expenditures                                                                    (11,734)         (5,164)
    Other                                                                                      (229)           (127)
                                                                                       ------------   -------------
               Net cash used in investing activities                                        (11,963)       (182,983)
                                                                                       ------------   -------------

Financing activities:
    Issuance of debt                                                                         14,000         388,375
    Payments of debt                                                                       (105,000)       (245,148)
    Distributions, including minority interest                                              (21,639)        (16,263)
    Net proceeds from issuance of limited partnership units                                 104,770          49,650
                                                                                       ------------   -------------
               Net cash provided by (used in) financing activities                           (7,869)        176,614
                                                                                       ------------   -------------

Increase in cash and cash equivalents                                                        10,311          11,524
Cash and cash equivalents at beginning of period                                             22,028           7,903
                                                                                       ------------   -------------
Cash and cash equivalents at end of period                                             $     32,339   $      19,427
                                                                                       ============   =============
Supplemental cash flow information:
    Cash paid for interest                                                             $     13,280   $       2,254
                                                                                       ============   =============

</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,  2003 and  2002,  have  been  prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States  of  America.   Significant  accounting  policies  followed  by  the
     Partnership  are  disclosed  in the  notes  to the  consolidated  financial
     statements included in the Partnership's Annual Report on Form 10-K for the
     year  ended  December  31,  2002.  In  the  opinion  of  the  Partnership's
     management,  the accompanying  condensed  consolidated financial statements
     contain all of the adjustments,  consisting of normal  recurring  accruals,
     necessary  to present  fairly the  consolidated  financial  position of the
     Partnership  and its  consolidated  subsidiaries  at March 31, 2003 and the
     consolidated  results of their  operations  and cash flows for the  periods
     ended March 31, 2003 and 2002. Operating results for the three months ended
     March 31, 2003 are not  necessarily  indicative  of the results that may be
     expected for the year ending December 31, 2003.


2.   ACQUISITIONS AND FINANCINGS

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

     On  February  28,  2002,  the  Partnership  acquired  all  of  the  liquids
     terminaling  subsidiaries  of  Statia  Terminals  Group NV  ("Statia")  for
     approximately  $178  million in cash (net of acquired  cash).  The acquired
     Statia  subsidiaries had  approximately  $107 million in outstanding  debt,
     including  $101  million of 11.75%  notes due in  November  2003.  The cash
     portion of the  purchase  price was funded by the  Partnership's  revolving
     credit  agreement and proceeds from its February 2002 public debt offering.
     In April of 2002, the Partnership  redeemed all of Statia's 11.75% notes at
     102.938% of the principal amount, plus accrued interest. The redemption was
     funded  by  the  Partnership's  revolving  credit  facility.  Assuming  the
     acquisition occurred on January 1, 2002, unaudited pro forma revenues,  net
     income and net income per unit would have been $92.3 million, $16.3 million
     and $0.69, respectively, for the three months ended March 31, 2002.

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

     On September 18, 2002, the  Partnership  acquired eight bulk liquid storage
     terminals  in  Australia  and New Zealand  from Burns Philp & Co. Ltd.  for
     approximately $47 million in cash. The results of operations and cash flows
     of  the  acquired  business  are  included  in the  consolidated  financial
     statements of the Partnership  since the date of acquisition.  At March 31,
     2003, the final  valuation of the acquired  assets and  liabilities has not
     been completed and, accordingly, the Partnership has recorded a preliminary
     allocation of the purchase price based on the estimated  fair value.  Based
     on the preliminary  purchase price  allocation,  no amounts are assigned to
     goodwill or to other intangible assets.

     On November 1, 2002, the Partnership  acquired an approximately  2,000-mile
     anhydrous  ammonia  pipeline  system from Koch Pipeline  Company,  L.P. for
     approximately  $139  million  in  cash.  This  fertilizer  pipeline  system
     originates  in southern  Louisiana,  proceeds  north  through  Arkansas and
     Missouri,  and then  branches  east into Illinois and Indiana and north and
     west into Iowa and Nebraska. The acquisition was financed by bank debt. The
     results of operations and cash flows of the acquired  business are included
     in the consolidated  financial statements of the Partnership since the date
     of  acquisition.  At March 31,  2003,  the final  valuation of the acquired
     assets  and  liabilities  has not  been  completed  and,  accordingly,  the
     Partnership  has recorded a preliminary  allocation  of the purchase  price
     based on the estimated fair value. Based on the preliminary  purchase price
     allocation,  no amounts are  assigned  to  goodwill or to other  intangible
     assets.

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

     On  December  24,  2002,  the  Partnership  acquired a  400-mile  petroleum
     products  pipeline and four  terminals in North Dakota and  Minnesota  from
     Tesoro  Refining and Marketing  Company for  approximately  $100 million in
     cash. The  acquisition was funded with bank debt. The results of operations
     and cash flows of the acquired  business  are included in the  consolidated
     financial  statements of the Partnership since the date of acquisition.  At
     March 31, 2003, the final  valuation of the acquired assets and liabilities
     has not been completed and,  accordingly,  the  Partnership  has recorded a
     preliminary  allocation of the purchase  price based on the estimated  fair
     value. Based on the preliminary  purchase price allocation,  no amounts are
     assigned to goodwill or to other intangible assets.

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

     On April 24, 2003, the Partnership entered into a new credit agreement with
     a group of banks  that  provides  for a $400  million  unsecured  revolving
     credit facility through April of 2006. The credit facility,  which provides
     for an increase in the  commitment  up to an  aggregate  of $450 million by
     mutual agreement  between the Partnership and the banks,  bears interest at
     variable  rates and has a variable  commitment fee on unused  amounts.  The
     credit  facility  contains  certain  financial  and  operating   covenants,
     including limitations on investments, sales of assets and transactions with
     affiliates and, absent an event of default,  do not restrict  distributions
     to  unitholders.  Proceeds  from the initial  draw 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.


3.   COMPREHENSIVE INCOME

     Comprehensive  income for the three months ended March 31, 2003 and 2002 is
     as follows:

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2003                2002
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Net income                                                                 $      21,829      $       17,242
     Other comprehensive income (loss)
        - foreign currency translation adjustment                                       2,792                (408)
                                                                                -------------      --------------
     Comprehensive income                                                       $      24,621      $       16,834
                                                                                =============      ==============
</TABLE>

     Accumulated  other  comprehensive  income  aggregated $4.2 million and $1.4
     million at March 31, 2003 and December 31, 2002, respectively.


4.   CASH DISTRIBUTIONS

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in the  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less  all of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable  record  date.  A cash  distribution  of $0.79  per unit for the
     fourth  quarter of 2002 was paid on February 14, 2003. A cash  distribution
     of $0.81 per unit for the first  quarter of 2003 was declared to holders of
     record on April 30, 2003 and will be paid on May 15, 2003.


5.   CONTINGENCIES

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

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

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

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

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

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

     On April 7, 2000, a fuel oil pipeline in Maryland owned by Potomac Electric
     Power  Company  ("PEPCO")  ruptured.  Work  performed  with  regard  to the
     pipeline  was  conducted by a  partnership  of which ST Services is general
     partner. PEPCO has reported that it has incurred total cleanup 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 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  except one have been
     settled  for  immaterial   amounts  with  ST  Services'   portion  of  such
     settlements  provided by its  insurance  carrier.  ST  Services'  insurance
     carrier has assumed  the defense of the  continuing  action and ST Services
     believes that the carrier would assume the defense of any new litigation by
     a  non-participant  in  the  settlement,  should  any  such  litigation  be
     commenced.  While the Partnership cannot predict the amount, if any, of any
     liability it may have in the continuing  action or in other potential suits
     relating  to this  matter,  it  believes  that the  current  and  potential
     plaintiffs' claims will be covered by insurance and therefore these actions
     will not have a material adverse effect on its financial condition.

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

     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 causes of action, a declaratory
     judgment as to ST Services' legal  obligations,  if any, to reimburse PEPCO
     for costs of the oil spill. On December 16, 2002, PEPCO sued ST Services in
     the United  States  District  Court for the District of  Maryland,  seeking
     recovery of all its costs for  remediation  of the oil spill.  Both parties
     have pending  motions to dismiss the other  party's suit.  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 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  or  results  of
     operations of the Partnership.


6.   BUSINESS SEGMENT DATA

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

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

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2003                2002
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Business segment revenues:
        Pipeline operations                                                     $      28,008      $       17,626
        Terminaling operations                                                         58,686              41,462
        Product sales operations                                                       54,063               8,554
                                                                                -------------      --------------
                                                                                $     140,757      $       67,642
                                                                                =============      ==============
     Business segment profit:
        Pipeline operations                                                     $      11,977      $        8,451
        Terminaling operations                                                         18,040              14,636
        Product sales operations                                                        3,581                 138
                                                                                -------------      --------------
            Operating income                                                           33,598              23,225
        Interest and other income                                                          88                  71
        Interest expense                                                               (8,615)             (5,277)
        Loss on debt extinguishment                                                      -                   (155)
                                                                                -------------      --------------
            Income before minority interest, income
               taxes and cumulative effect of change
               in accounting principle                                          $      25,071      $       17,864
                                                                                =============      ==============


</TABLE>
<TABLE>
<CAPTION>


                                                                                  March 31,         December 31,
                                                                                    2003                2002
                                                                              ----------------   ------------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Total assets:
        Pipeline operations                                                     $     355,762      $      352,657
        Terminaling operations                                                        836,361             844,321
        Product sales                                                                  46,247              18,432
                                                                                -------------      --------------
                                                                                $   1,238,370      $    1,215,410
                                                                                =============      ==============
</TABLE>


7.   ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

     Effective  January 1, 2003, the Partnership  adopted Statement of Financial
     Accounting  Standards  ("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  $6.7 million and recognized a cumulative effect of change in
     accounting  principle  of  $1.6  million,  for  its  legal  obligations  to
     dismantle,  dispose of, and restore certain leased pipeline and terminaling
     facilities,  including  petroleum and chemical  storage tanks,  terminaling
     facilities  and barges.  At March 31, 2003, the  Partnership  had no assets
     which were legally  restricted  for purposes of settling  asset  retirement
     obligations.  The effect of adopting  SFAS No. 143 was not  material to the
     results of operations of the  Partnership for the three month periods ended
     March 31, 2003 and 2002, respectively.

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

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

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


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


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

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

     Operating Results:

     Pipeline Operations
<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2003                2002
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Revenues                                                                   $      28,008      $       17,626
     Operating costs                                                                   11,241               6,476
     Depreciation and amortization                                                      3,497               1,373
     General and administrative                                                         1,293               1,326
                                                                                -------------      --------------
        Operating income                                                        $      11,977      $        8,451
                                                                                =============      ==============

</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over which
     such  volumes are  transported.  For the three months ended March 31, 2003,
     revenues  increased  by $10.4  million,  or 59%,  compared to the same 2002
     period,  due to the November and December 2002 pipeline  acquisitions  (see
     "Liquidity and Capital Resources"). Because tariff rates are regulated, the
     pipelines compete primarily on the basis of quality of services,  including
     delivering  products at convenient  locations on a timely basis to meet the
     needs of its  customers.  Barrel miles on petroleum  pipelines  totaled 5.4
     billion for the three months ended March 31, 2003,  compared to 4.2 billion
     for the three months ended March 31, 2002.

     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 $4.8 million for the
     three months ended March 31, 2003,  when compared to the three months ended
     March 31, 2002, due to the pipeline acquisitions and increases in power and
     fuel costs.  For the three months ended March 31,  2003,  depreciation  and
     amortization  increased  by $2.1  million,  when  compared to the same 2002
     period,   due   primarily  to  the  pipeline   acquisitions.   General  and
     administrative  costs include  managerial,  accounting,  and administrative
     personnel costs,  office rental and expense,  legal and professional  costs
     and other non-operating costs.



<PAGE>
     Terminaling Operations
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2003                2002
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Revenues                                                                   $      58,686      $       41,462
     Operating costs                                                                   27,277              18,318
     Depreciation and amortization                                                      9,244               5,673
     General and administrative                                                         4,125               2,835
                                                                                -------------      --------------
        Operating income                                                        $      18,040      $       14,636
                                                                                =============      ==============

</TABLE>

     Terminaling  revenues  for the three  month  period  ended  March 31,  2003
     increased by $17.2 million,  or 42%, when compared to the same 2002 period,
     due  to  the  2002  terminal   acquisitions  (see  "Liquidity  and  Capital
     Resources")  and overall  increases in utilization  at existing  locations.
     Approximately  $15.4  million of the revenue  increase  was a result of the
     terminal acquisitions. Average annual tankage utilized for the three months
     ended  March 31,  2003  increased  to 47.4  million  barrels,  up from 39.0
     million  barrels for the three months  ended March 31, 2002.  For the three
     months  ended March 31,  2003,  average  annualized  revenues per barrel of
     tankage  utilized  increased  to $5.02 per  barrel,  compared  to $4.32 per
     barrel for the three months ended March 31, 2002, due to changes in product
     mix resulting from the terminal  acquisitions  and more favorable  domestic
     market conditions.

     For the three month period ended March 31, 2003,  operating costs increased
     by $9.0 million,  when compared to the same 2002 period,  the result of the
     terminal   acquisitions   and  increases  in  volumes  stored  at  existing
     locations.  For the three  months ended March 31,  2003,  depreciation  and
     amortization  increased  by $3.6  million,  when  compared to the same 2002
     period,   due   primarily  to  the  terminal   acquisitions.   General  and
     administrative  costs for the three  month  period  ended  March 31,  2003,
     increased by $1.3 million,  when  compared to the same 2002 period,  also a
     result of the terminal acquisitions.


     Product Sales
<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ---------------------------------
                                                                                    2003                2002
                                                                                -------------      --------------
                                                                                         (in thousands)
<S>                                                                             <C>                <C>
     Revenues                                                                   $      54,063      $        8,554
     Cost of products sold                                                             47,886               7,829
                                                                                -------------      --------------
     Gross margin                                                               $       6,177      $          725
                                                                                =============      ==============
     Operating income                                                           $       3,581      $          138
                                                                                =============      ==============
</TABLE>

     The product sales business,  which was acquired with Statia (see "Liquidity
     and Capital  Resources"),  delivers  bunker fuels to ships in the Caribbean
     and Nova  Scotia,  Canada  and sells  bulk  petroleum  products  to various
     commercial  interests.  For the three months ended March 31, 2003,  product
     sales  revenues,  gross  margin and  operating  income  increased  by $45.5
     million, $5.5 million and $3.4 million, respectively,  when compared to the
     same 2002 period. The results of operations for the comparative 2002 period
     includes the  operations  of the product sales  business  since the date of
     acquisition, February 28, 2002.

     Product  inventories  are maintained at minimum  levels to meet  customers'
     needs;  however,   market  prices  for  petroleum  products  can  fluctuate
     significantly in short periods of time.

     Interest Expense

     For the three months ended March 31, 2003,  interest  expense  increased by
     $3.3  million,  compared to the same 2002 period,  due to increases in debt
     resulting from the 2002 pipeline and terminal  acquisitions (see "Liquidity
     and Capital  Resources"),  partially offset by overall declines in interest
     rates on variable rate debt.

     Income Taxes

     Certain  operations are conducted  through  separate  taxable  wholly-owned
     corporate  subsidiaries.  The income tax expense for these subsidiaries for
     the three  months  ended March 31, 2003 and 2002 was $1.4  million and $0.4
     million, respectively.

     Liquidity and Capital Resources

     Cash  provided by  operations  was $30.1  million and $17.9 million for the
     three months ended March 31, 2003 and 2002,  respectively.  The increase in
     cash  provided by  operations  for the three  months  ended March 31, 2003,
     compared to the same 2002 period, was due to the 2002 pipeline and terminal
     acquisitions,  partially  offset by changes in working  capital  components
     resulting from the timing of cash receipts and disbursements.

     Capital   expenditures,   including   routine   maintenance  and  expansion
     expenditures but excluding  acquisitions,  were $11.7 million for the three
     months ended March 31, 2003,  compared to $5.2 million during the same 2002
     period.  The  increase in capital  expenditures  for the three months ended
     March 31, 2003,  when  compared to the same 2002  period,  is the result of
     planned  maintenance  and  expansion  capital  expenditures  related to the
     pipeline and terminaling operations acquired in 2002 and higher maintenance
     capital  expenditures in the existing pipeline and terminaling  businesses.
     During all  periods,  adequate  pipeline  capacity  existed to  accommodate
     volume growth,  and the expenditures  required for environmental and safety
     improvements  were  not,  and  are  not  expected  in  the  future  to  be,
     significant.   The  Partnership   anticipates  that  capital   expenditures
     (including routine  maintenance and expansion  expenditures,  but excluding
     acquisitions)  will total  approximately  $40 million in 2003.  Such future
     expenditures, however, will depend on many factors beyond the Partnership's
     control,  including,  without  limitation,  demand  for  refined  petroleum
     products and terminaling services in the Partnership's market areas, local,
     state and federal government regulations, fuel conservation efforts and the
     availability  of financing on acceptable  terms.  No assurance can be given
     that required  capital  expenditures  will not exceed  anticipated  amounts
     during the year or thereafter or that the Partnership will have the ability
     to finance such expenditures through borrowings, or will choose to do so.

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in the  Partnership  agreement,  to  holders of limited
     partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less all of its cash  disbursements  and any  additions  to
     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 $0.79 per unit for
     the  fourth  quarter  of  2002  was  paid  on  February  14,  2003.  A cash
     distribution  of $0.81 per unit for the first  quarter of 2003 was declared
     to holders of record on April 30, 2003 and will be paid on May 15, 2003.

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

     On April 24, 2003, the Partnership entered into a new credit agreement with
     a group of banks  that  provides  for a $400  million  unsecured  revolving
     credit facility through April of 2006. The credit facility,  which provides
     for an increase in the  commitment  up to an  aggregate  of $450 million by
     mutual agreement  between the Partnership and the banks,  bears interest at
     variable  rates and has a variable  commitment fee on unused  amounts.  The
     credit  facility  contains  certain  financial  and  operating   covenants,
     including limitations on investments, sales of assets and transactions with
     affiliates and, absent an event of default,  do not restrict  distributions
     to  unitholders.  Proceeds  from the initial  draw 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.

     The  Partnership  had a credit  agreement  with a group of banks  that,  as
     amended,  provided for $275 million  unsecured  revolving  credit  facility
     through January 2, 2004. At March 31, 2003, $257.0 million was drawn on the
     facility, at an average annual interest rate of 2.07%. The credit agreement
     was repaid in April of 2003 with proceeds from the  Partnership's  new $400
     million credit agreement.

     On December 24, 2002, the Partnership entered into a $175 million unsecured
     bridge loan  agreement  with a bank in  connection  with its 2002  pipeline
     acquisitions.  The bridge loan  agreement,  as amended,  was  scheduled  to
     expire in January of 2004. At March 31, 2003, $70.0 million was outstanding
     on the bridge  agreement,  at an average annual interest rate of 2.84%. The
     bridge  loan  was  repaid  in  April  of  2003  with   proceeds   from  the
     Partnership's new $400 million credit agreement.

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

     In February of 2002,  the  Partnership  issued $250 million of 7.75% senior
     unsecured  notes due February 15,  2012.  The net proceeds  from the public
     offering,  $248.2 million,  were used to repay the Partnership's  revolving
     credit  agreement  and to  partially  fund  the  acquisition  of all of the
     liquids  terminaling  subsidiaries of Statia Terminals Group NV ("Statia").
     Under the note indenture,  interest is payable  semi-annually in arrears on
     February  15 and August 15 of each  year.  The notes are  redeemable,  as a
     whole or in part,  at the  option of the  Partnership,  at any  time,  at a
     redemption  price equal to the greater of 100% of the  principal  amount of
     the  notes,  or the sum of the  present  value of the  remaining  scheduled
     payments of principal and interest,  discounted to the  redemption  date at
     the applicable  U.S.  Treasury  rate, as defined in the indenture,  plus 30
     basis points. The note indenture contains certain financial and operational
     covenants,  including certain  limitations on investments,  sales of assets
     and  transactions  with affiliates  and,  absent an event of default,  such
     covenants do not restrict distributions to unitholders.  At March 31, 2003,
     the Partnership was in compliance with all covenants.

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

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

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

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

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

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

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

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

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



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



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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

The   Partnership's   investment   portfolio   consists  of  cash   equivalents;
accordingly,  the carrying amounts  approximate  fair value.  The  Partnership's
investments are not material to its financial position or performance.  Assuming
variable rate debt of $327 million at March 31, 2003, a one percent  increase in
interest rates would increase annual net interest expense by approximately  $3.3
million.

The product sales business periodically purchases refined petroleum products for
resale as bunker fuel,  for small volume sales to  commercial  interests  and to
maintain an inventory of blendstocks for customers.  Such 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.
Increases or decreases  in the market  value of inventory  are  reflected in the
product sales operations cost of products sold.

Item 4. Controls and Procedures.

Included in its Release No. 34-46427,  effective August 29, 2002, the Securities
and Exchange  Commission adopted rules requiring reporting companies to maintain
disclosure  controls  and  procedures  to provide  reasonable  assurance  that a
registrant  is able to record,  process,  summarize  and report the  information
required in the  registrant's  quarterly and annual reports under the Securities
Exchange Act of 1934 (the "Exchange Act").  While  management  believes that the
Partnership's existing disclosure controls and procedures have been effective to
accomplish  these  objectives,  it intends to continue  to  examine,  refine and
formalize the  Partnership's  disclosure  controls and procedures and to monitor
ongoing developments in this area.

Kaneb  Pipe  Line  Company  LLC's  principal  executive  officer  and  principal
financial  officer,  after  evaluating the  effectiveness  of the  Partnership's
disclosure  controls and procedures (as defined in Exchange Act Rules  13a-14(c)
and Rule  15d-14(c))  as of a date within 90 days before the filing date of this
Report,  have  concluded  that, as of such date,  the  Partnership's  disclosure
controls  and  procedures  are adequate  and  effective to ensure that  material
information relating to the Partnership and its consolidated  subsidiaries would
be made known to them by others within those entities.

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


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


--------------------------------------------------------------------------------
                            Part II - Other Information



Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits.

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

          10.1 ST Agreement  and Plan of Merger  dated  December 21, 1992 by and
               between  Grace Energy  Corporation,  Support  Terminal  Services,
               Inc.,  Standard  Transpipe  Corp.,  and Kaneb Pipe Line Operating
               Partnership, NSTS, Inc. and NSTI, Inc. as amended by Amendment of
               STS Merger  Agreement dated March 2, 1993,  filed as Exhibit 10.1
               of the exhibits to Registrant's Current Report on Form 8-K ("Form
               8-K"), dated March 16, 1993, which exhibit is hereby incorporated
               by reference.

          10.2 Agreement for Sale and Purchase of Assets  between Wyco Pipe Line
               Company and KPOP,  dated February 19, 1995, filed as Exhibit 10.1
               of the exhibits to the  Registrant's  March 1995 Form 8-K,  which
               exhibit is hereby incorporated by reference.

          10.3 Asset  Purchase  Agreements  between and among Steuart  Petroleum
               Company,  SPC  Terminals,  Inc.,  Piney Point  Industries,  Inc.,
               Steuart   Investment   Company,   Support   Terminals   Operating
               Partnership,  L.P. and KPOP,  as amended,  dated August 27, 1995,
               filed as Exhibits 10.1,  10.2,  10.3, and 10.4 of the exhibits to
               Registrant's  Current  Report on Form 8-K dated  January 3, 1996,
               which exhibits are hereby incorporated by reference.

          10.4 Formation  and  Purchase  Agreement,  between  and among  Support
               Terminal Operating Partnership, L.P., Northville Industries Corp.
               and AFFCO,  Corp.,  dated October 30, 1998, filed as exhibit 10.9
               to the  Registrant's  Form 10-K for the year ended  December  31,
               1998, which exhibit is hereby incorporated by reference.

          10.5 Agreement,   between  and  among,  GATX  Terminals  Limited,   ST
               Services,  Ltd., ST Eastham,  Ltd.,  GATX Terminals  Corporation,
               Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line
               Partners, L.P., dated January 26, 1999, filed as Exhibit 10.10 to
               the Registrant's  Form 10-K for the year ended December 31, 1998,
               which exhibit is hereby incorporated by reference.

          10.6 Credit  Agreement,  between and among,  Kaneb Pipe Line Operating
               Partnership,  L.P., ST Services, Ltd. and SunTrust Bank, Atlanta,
               dated   January  27,  1999,   filed  as  Exhibit   10.11  to  the
               Registrant's  Form 10-K for the year  ended  December  31,  1998,
               which exhibit is hereby incorporated by reference.

          10.7 Revolving Credit  Agreement,  dated as of December 28, 2000 among
               Kaneb  Pipe Line  Operating  Partnership,  L.P.,  Kaneb Pipe Line
               Partners,  L.P., The Lenders From Time To Time Party Hereto,  and
               SunTrust Bank, as Administrative  Agent, filed as Exhibit 10.7 to
               the Registrant's  Form 10-K for the year ended December 31, 2001,
               which exhibit is incorporated herein by reference.

          10.8 Securities  Purchase  Agreement  Among Shore Terminals LLC, Kaneb
               Pipe Line Partners,  L.P. and the Sellers Named Therein, dated as
               of September 22, 2000,  Amendment  No. 1 To  Securities  Purchase
               Agreement,  dated as of November 28, 2000 and Registration Rights
               Agreement,  dated as of January 3, 2001,  filed as Exhibits 10.1,
               10.2 and 10.3 of the exhibits to  Registrant's  Current Report on
               Form 8-K  dated  January  3,  2001,  which  exhibits  are  hereby
               incorporated by reference.

          10.9 Stock Purchase  Agreement,  dated as of November 12, 2001, by and
               between Kaneb Pipe Line Operating  Partnership,  L.P., and Statia
               Terminals  Group  NV, a public  company  with  limited  liability
               organized  under the laws of the Netherlands  Antilles,  filed as
               Exhibit 10.1 to the exhibits to  Registrant's  Current  Report on
               Form 8-K,  dated  January 11, 2002,  and  incorporated  herein by
               reference.

         10.10 Voting and Option  Agreement  dated as of November 12,  2001,  by
               and between  Kaneb Pipe Line  Operating  Partnership,  L.P.,  and
               Statia  Terminals  Holdings N.V., a Netherlands  Antilles company
               and a  shareholder  of Statia  Terminals  Group NV, a Netherlands
               Antilles  company  filed  as  Exhibit  10.1  to the  exhibits  to
               Registrant's  Current Report on Form 8-K, dated January 11, 2002,
               and incorporated herein by reference.

         10.11 Revolving  Credit  Agreement,  dated as of April 24,  2003  among
               Kaneb  Pipe Line  Operating  Partnership,  L.P.,  Kaneb Pipe Line
               Partners,  L.P., The Lenders From Time To Time Party Hereto,  and
               SunTrust Bank, as Administrative Agent, filed herewith.

       10.12*  Kaneb LLC  2002  Long Term  Incentive  Plan,  effective  July 18,
               2002,  filed as Exhibit 10.11 to the  Registrant's  Form 10-K for
               the year ended December 31, 2002,  which exhibit is  incorporated
               herein by reference.

          99.1 Certification  of Chief  Executive  Officer,  Pursuant to Section
               906(a)  of the  Sarbanes-Oxley  Act of 2002,  dated as of May 14,
               2003, filed herewith.

          99.2 Certification  of Chief  Financial  Officer,  Pursuant to Section
               906(a)  of the  Sarbanes-Oxley  Act of 2002,  dated as of May 14,
               2003, filed herewith.

          *    Denotes management contract.

     (b)  Reports on Form 8-K

          Current Report on Form 8-K, filed January 8, 2003

          Current Report on Form 8-K, filed March 18, 2003

                                    Signature

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

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

                                      By  KANEB PIPE LINE COMPANY LLC
                                         (General Partner)


Date:   May 15, 2003                            //s//
                                      ------------------------------------------
                                      Howard C. Wadsworth
                                      Vice President, Treasurer and Secretary


<PAGE>
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


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

1.   I have  reviewed  this  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-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  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)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

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

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:   May 14, 2003

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


<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


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

1.   I have  reviewed  this  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-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  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)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

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

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:   May 14, 2003

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