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


                                 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 June 30, 2003

                                       OR

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

                        Commission File Number 001-10311

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

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

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

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

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

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

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

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

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

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


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

<TABLE>
<CAPTION>
                                                                                               Page No.
                           Part I. Financial Information

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

                  Consolidated Statements of Income - Three and Six Months Ended
                      June 30, 2003 and 2002                                                         1

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

                  Condensed Consolidated Statements of Cash Flows - Six
                      Months Ended June 30, 2003 and 2002                                            3

                  Notes to Consolidated Financial Statements                                         4

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

Item 3.           Quantitative and Qualitative Disclosure About Market Risk                          21

Item 4.           Controls and Procedures                                                            21

                           Part II.  Other Information

Item 6.           Exhibits and Reports on Form 8-K                                                   22


</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             Six Months Ended
                                                                  June 30,                      June 30,
                                                       -----------------------------  -----------------------------
                                                            2003           2002            2003           2002
                                                       --------------  -------------  -------------  --------------
<S>                                                    <C>             <C>            <C>            <C>
Revenues:
    Services                                           $       89,461  $      73,674  $     176,155  $      132,762
    Products                                                   57,487         27,028        111,550          35,582
                                                       --------------  -------------  -------------  --------------
       Total revenues                                         146,948        100,702        287,705         168,344
                                                       --------------  -------------  -------------  --------------

Costs and expenses:
     Cost of products sold                                     51,314         25,103         99,200          32,932
     Operating costs                                           43,515         32,624         83,973          57,763
     Depreciation and amortization                             13,604          9,993         26,626          17,106
     General and administrative                                 5,474          5,226         11,267           9,562
                                                       --------------  -------------  -------------  --------------
       Total costs and expenses                               113,907         72,946        221,066         117,363
                                                       --------------  -------------  -------------  --------------

Operating income                                               33,041         27,756         66,639          50,981
Interest and other income                                           1            110             89             181
Interest expense                                               (8,903)        (7,653)       (17,518)        (12,930)
Loss on debt extinguishment                                     -             (1,957)          -             (2,112)
                                                       --------------  -------------  -------------  --------------
Income before minority interest, income
    taxes and cumulative effect of change in
    accounting principle                                       24,139         18,256         49,210          36,120
Minority interest in net income                                  (229)          (171)          (465)           (345)
Income tax expense                                             (1,310)        (1,123)        (2,739)         (1,571)
                                                       --------------  -------------  -------------  --------------
Income before cumulative effect of change
    in accounting principle                                    22,600         16,962         46,006          34,204

Cumulative effect of change in accounting
    principle - adoption of new accounting
    standard for asset retirement obligations                   -               -            (1,577)          -
                                                       --------------  -------------  -------------  --------------
       Net income                                              22,600         16,962         44,429          34,204

General partner's interest in net income                       (1,954)        (1,389)        (3,899)         (2,698)
                                                       --------------  -------------  -------------  --------------
Limited partners' interest in net income               $       20,646  $      15,573  $      40,530  $       31,506
                                                       ==============  =============  =============  ==============

Allocation of net income per unit:
    Before cumulative effect of change in
      accounting principle                             $          .73  $         .70   $       1.56  $         1.45
    Cumulative effect of change in accounting
      principle                                                 -               -              (.06)           -
                                                       --------------  -------------   ------------  --------------
                                                       $          .73  $         .70   $       1.50  $         1.45
                                                       ==============  =============   ============  ==============
Weighted average number of limited
   partnership units outstanding                               28,318         22,292         26,937          21,798
                                                       ==============  =============  =============  ==============
</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>
                                                                              June 30,                December 31,
                                                                                2003                     2002
                                                                           -------------            ---------------
                                                                             (Unaudited)
         ASSETS
<S>                                                                        <C>                       <C>
Current assets:
    Cash and cash equivalents                                              $      40,321             $       22,028
    Accounts receivable                                                           50,482                     48,926
    Inventories                                                                    6,496                      4,922
    Prepaid expenses and other                                                    10,370                      8,498
                                                                           -------------             --------------
         Total current assets                                                    107,669                     84,374
                                                                           -------------             --------------

Property and equipment                                                         1,323,233                  1,288,762
Less accumulated depreciation                                                    222,023                    196,570
                                                                           -------------             --------------
     Net property and equipment                                                1,101,210                  1,092,192
                                                                           -------------             --------------

Investment in affiliates                                                          25,947                     25,604

Excess of cost over fair value of net assets of
    acquired businesses and other assets                                          17,326                     13,240
                                                                           -------------             --------------
                                                                           $   1,252,152             $    1,215,410
                                                                           =============             ==============

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Current portion of long-term debt                                      $      26,997             $        -
    Accounts payable                                                              26,177                     22,064
    Accrued expenses                                                              32,142                     32,937
    Accrued distributions payable                                                 25,130                     21,639
    Accrued interest payable                                                       9,800                      7,896
    Accrued terminaling fees                                                       6,402                      6,246
    Payable to general partner                                                     5,175                      5,403
                                                                           -------------             --------------
         Total current liabilities                                               131,823                     96,185
                                                                           -------------             --------------

Long-term debt, less current portion                                             579,435                    694,330

Other liabilities and deferred taxes                                              38,746                     31,581

Minority interest                                                                  1,062                      1,030

Commitments and contingencies

Partners' capital                                                                501,086                    392,284
                                                                           -------------             --------------
                                                                           $   1,252,152             $    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>
                                                                                       Six Months Ended
                                                                                            June 30,
                                                                           ----------------------------------------
                                                                                2003                      2002
                                                                           -------------             --------------
<S>                                                                        <C>                       <C>
Operating activities:
   Net income                                                              $      44,429             $       34,204
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                              26,626                     17,106
       Minority interest in net income                                               465                        345
       Equity in earnings of affiliates, net of distributions                       (343)                       375
       Deferred income taxes                                                       1,916                      1,196
       Cumulative effect of change in accounting principle                         1,577                      -
       Changes in working capital components                                         148                    (10,076)
                                                                           -------------             --------------
         Net cash provided by operating activities                                74,818                     43,150
                                                                           -------------             --------------

Investing activities:
   Acquisitions, net of cash acquired                                               -                      (181,682)
   Capital expenditures                                                          (22,512)                   (14,218)
   Other                                                                             154                       (363)
                                                                           -------------             --------------
         Net cash used in investing activities                                   (22,358)                  (196,263)
                                                                           -------------             --------------

Financing activities:
   Issuance of debt                                                              286,377                    496,087
   Payments of debt                                                             (382,831)                  (351,647)
   Distributions, including minority interest                                    (46,769)                   (34,759)
   Net proceeds from issuance of limited
     partnership units                                                           109,056                    108,790
                                                                           -------------             --------------
         Net cash provided by (used in) financing activities                     (34,167)                   218,471
                                                                           -------------             --------------

Increase in cash and cash equivalents                                             18,293                     65,358
Cash and cash equivalents at beginning of period                                  22,028                      7,903
                                                                           -------------             --------------
Cash and cash equivalents at end of period                                 $      40,321             $       73,261
                                                                           =============             ==============
Supplemental cash flow information:
   Cash paid for interest                                                  $      14,269             $        8,446
                                                                           =============             ==============

</TABLE>


                 See notes to consolidated financial statements.
                                        3


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


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

1.   SIGNIFICANT ACCOUNTING POLICIES

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


2.   ACQUISITIONS AND FINANCINGS

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

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

     On  February  28,  2002,  the  Partnership  acquired  all  of  the  liquids
     terminaling  subsidiaries  of  Statia  Terminals  Group NV  ("Statia")  for
     approximately  $178  million in cash (net of acquired  cash).  The acquired
     Statia  subsidiaries had  approximately  $107 million in outstanding  debt,
     including  $101  million of 11.75%  notes due in  November  2003.  The cash
     portion of the  purchase  price was funded by the  Partnership's  revolving
     credit  agreement and proceeds from its February 2002 public debt offering.
     In April of 2002, the Partnership  redeemed all of Statia's 11.75% notes at
     102.938% of the principal amount, plus accrued interest. The redemption was
     funded  by  the  Partnership's  revolving  credit  facility.  Assuming  the
     acquisition occurred on January 1, 2002, unaudited pro forma revenues,  net
     income  and net  income per unit  would  have been  $193.0  million,  $33.3
     million and $1.39, respectively, for the six months ended June 30, 2002.

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

     On September 18, 2002, the  Partnership  acquired eight bulk liquid storage
     terminals  in  Australia  and New Zealand  from Burns Philp & Co. Ltd.  for
     approximately $47 million in cash. The results of operations and cash flows
     of  the  acquired  business  are  included  in the  consolidated  financial
     statements of the Partnership  since the date of  acquisition.  At June 30,
     2003, the final  valuation of the acquired  assets and  liabilities had not
     been completed and, accordingly, the Partnership has recorded a preliminary
     allocation of the purchase price based on the estimated  fair value.  Based
     on the preliminary  purchase price  allocation,  no amounts are assigned to
     goodwill or to other intangible assets.

     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 June 30,  2003,  the final  valuation  of the acquired
     assets  and  liabilities  had not  been  completed  and,  accordingly,  the
     Partnership  has recorded a preliminary  allocation  of the purchase  price
     based on the estimated fair value. Based on the preliminary  purchase price
     allocation,  no amounts are  assigned  to  goodwill or to other  intangible
     assets.

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

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

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

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

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


3.   COMPREHENSIVE INCOME

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

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

<S>                                                  <C>             <C>                <C>             <C>
     Net income                                      $    22,600     $    16,962        $    44,429     $    34,204
     Foreign currency translation
        adjustment                                         4,088           1,035              6,880             627
     Unamoritized loss on interest rate
        hedging transaction (Note 2)                      (1,771)          -                 (1,771)          -
                                                     -----------     -----------        -----------     -----------
     Comprehensive income                            $    24,917     $    17,997        $    49,538     $    34,831
                                                     ===========     ===========        ===========     ===========
</TABLE>

     Accumulated  other  comprehensive  income  aggregated $6.5 million and $1.4
     million at June 30, 2003 and December 31, 2002, respectively.


4.   CASH DISTRIBUTIONS

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in the  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less  all of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable record date. A cash distribution of $0.81 per unit for the first
     quarter of 2003 was paid on May 15, 2003. A cash  distribution of $0.81 per
     unit for the second  quarter of 2003 was  declared  to holders of record on
     July 31, 2003 and will be paid on August 14, 2003.


5.   CONTINGENCIES

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

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

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

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

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

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

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

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

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

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

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

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

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

     The Partnership has other contingent liabilities resulting from litigation,
     claims  and  commitments  incident  to the  ordinary  course  of  business.
     Management  of the  Partnership  believes,  based on the advice of counsel,
     that  the  ultimate  resolution  of  such  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.
<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                 Six Months Ended
                                                              June 30,                           June 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)
<S>                                                  <C>             <C>                <C>             <C>
     Business segment revenues:
       Pipeline operations                           $    29,350     $    19,322        $    57,358     $    36,948
       Terminaling operations                             60,111          54,352            118,797          95,814
       Product sales operations                           57,487          27,028            111,550          35,582
                                                     -----------     -----------        -----------     -----------
                                                     $   146,948     $   100,702        $   287,705     $   168,344
                                                     ===========     ===========        ===========     ===========
     Business segment profit:
       Pipeline operations                           $    12,220     $     9,483        $    24,197     $    17,934
       Terminaling operations                             17,795          17,848             35,835          32,484
       Product sales operations                            3,026             425              6,607             563
                                                     -----------     -----------        -----------     -----------
         Operating income                                 33,041          27,756             66,639          50,981
       Interest and other income                               1             110                 89             181
       Interest expense                                   (8,903)         (7,653)           (17,518)        (12,930)
       Loss on debt extinguishment                           -            (1,957)               -            (2,112)
                                                     -----------     -----------        -----------     -----------

     Income before minority interest,
       income taxes and cumulative
       effect of change in accounting
       principle                                     $    24,139     $    18,256        $    49,210     $    36,120
                                                     ===========     ===========        ===========     ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                                          June 30,     December 31,
                                                                                            2003           2002
                                                                                       -------------   -------------
                                                                                              (in thousands)
<S>                                                                                    <C>             <C>
     Total assets:
        Pipeline operations                                                            $     351,789   $     352,657
        Terminaling operations                                                               861,598         844,321
        Product sales operations                                                              38,765          18,432
                                                                                       -------------   -------------
                                                                                       $   1,252,152   $   1,215,410
                                                                                       =============   =============
</TABLE>


<PAGE>


7.   ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

     The Partnership has adopted the provisions of FASB  Interpretation  No. 46,
     "Consolidation of Variable Interest Entities,  an interpretation of ARB No.
     51."  This   interpretation   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


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

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

     Operating Results:

     Pipeline Operations
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Six Months Ended
                                                              June 30,                           June 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    29,350     $    19,322        $    57,358     $    36,948
     Operating costs                                      12,841           7,615             24,082          14,091
     Depreciation and amortization                         3,511           1,374              7,008           2,747
     General and administrative                              778             850              2,071           2,176
                                                     -----------     -----------        -----------     -----------
         Operating income                            $    12,220     $     9,483        $    24,197     $    17,934
                                                     ===========     ===========        ===========     ===========
</TABLE>

     Pipeline revenues are based on volumes shipped and the distances over which
     such volumes are  transported.  For the three and six month  periods  ended
     June 30,  2003,  revenues  increased  by $10.0  million,  or 52%, and $20.4
     million,  or 55%,  respectively,  compared  to the same 2002  periods,  due
     primarily  to the November and December  2002  pipeline  acquisitions  (see
     "Liquidity and Capital Resources"). Because tariff rates are regulated, the
     pipelines compete primarily on the basis of quality of services,  including
     delivery of products at convenient  locations on a timely basis to meet the
     needs of its  customers.  Barrel miles on petroleum  pipelines  totaled 5.2
     billion and 4.6 billion for the three  months ended June 30, 2003 and 2002,
     respectively,  and 10.4  billion and 8.8  billion for the six months  ended
     June 30, 2003 and 2002, respectively.

     Operating  costs,  which  include  fuel  and  power  costs,  materials  and
     supplies,  maintenance  and  repair  costs,  salaries,  wages and  employee
     benefits, and property and other taxes, increased by $5.2 million and $10.0
     million  for  the  three  and  six  month  periods  ended  June  30,  2003,
     respectively,  when compared to 2002, due to the pipeline  acquisitions and
     increases in power and fuel costs.  For the three and six months ended June
     30, 2003,  depreciation and amortization increased by $2.1 million and $4.3
     million,  respectively,  when  compared  to  the  same  2002  periods,  due
     primarily to the pipeline  acquisitions.  General and administrative  costs
     include managerial,  accounting and administrative  personnel costs, office
     rent and  expense,  legal and  professional  costs and other  non-operating
     costs.



<PAGE>


     Terminaling Operations
<TABLE>
<CAPTION>

                                                         Three Months  Ended                 Six Months Ended
                                                              June 30,                           June 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    60,111     $    54,352        $   118,797     $    95,814
     Operating costs                                      28,058          24,070             55,335          42,388
     Depreciation and amortization                         9,856           8,412             19,100          14,085
     General and administrative                            4,402           4,022              8,527           6,857
                                                     -----------     -----------        -----------     -----------
         Operating income                            $    17,795     $    17,848        $    35,835     $    32,484
                                                     ===========     ===========        ===========     ===========
</TABLE>

     For the  three and six  month  periods  ended  June 30,  2003,  terminaling
     revenues  increased by $5.8  million,  or 11%, and $23.0  million,  or 24%,
     respectively,  when  compared  to the same  2002  periods,  due to the 2002
     terminal acquisitions (see "Liquidity and Capital Resources") and increases
     in the average price realized per barrel of tankage utilized. Approximately
     $21 million of the revenue  increase for the six months ended June 30, 2003
     was a result of the terminal acquisitions.  Average annual tankage utilized
     for the three and six month  periods  ended June 30, 2003 was 47.9  million
     and 47.7 million barrels,  respectively,  compared to 49.1 million and 44.0
     million  barrels,  respectively,  for the same prior year periods.  For the
     three  and six  month  periods  ended  June 30,  2003,  average  annualized
     revenues  per barrel of tankage  utilized  increased to $5.04 and $5.02 per
     barrel, respectively, compared to $4.44 and $4.39 per barrel, respectively,
     for the same prior year  periods,  due to changes in product mix  resulting
     from  the  terminal   acquisitions  and  more  favorable   domestic  market
     conditions.

     For the three and six month  periods ended June 30, 2003,  operating  costs
     increased by $4.0 million and $12.9 million, respectively, when compared to
     the same 2002 periods, a result of the terminal acquisitions. For the three
     and six months ended June 30, 2003,  depreciation and amortization increase
     by $1.4 million and $5.0 million,  respectively,  when compared to the same
     2002  periods,  due  also  to  the  terminal   acquisitions.   General  and
     administrative  costs for the three and six month  periods  ended  June 30,
     2003,  increased  by $0.4  million  and $1.7  million,  respectively,  when
     compared  to the  same  2002  period,  a  result  of the  acquisitions  and
     increases in personnel-related costs.



<PAGE>


     Product Sales Operations
<TABLE>
<CAPTION>
                                                         Three Months  Ended                 Six Months Ended
                                                              June 30,                           June 30,
                                                     ---------------------------        ---------------------------
                                                         2003           2002                2003           2002
                                                     -----------     -----------        -----------     -----------
                                                                             (in thousands)

<S>                                                  <C>             <C>                <C>             <C>
     Revenues                                        $    57,487     $    27,028        $   111,550     $    35,582
     Cost of products sold                                51,314          25,103             99,200          32,932
                                                     -----------     -----------        -----------     -----------
     Gross margin                                    $     6,173     $     1,925        $    12,350     $     2,650
                                                     ===========     ===========        ===========     ===========
     Operating income                                $     3,026     $       425        $     6,607     $       563
                                                     ===========     ===========        ===========     ===========
</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 June 30, 2003,  product
     sales  revenues,  gross  margin and  operating  income  increased  by $30.5
     million, $4.2 million and $2.6 million, respectively,  when compared to the
     same 2002 period,  due to  increases in both sales price and volumes  sold.
     For the six months  ended June 30,  2003,  product  sales  revenues,  gross
     margin and operating income increased $76.0 million,  $9.7 million and $6.0
     million,  respectively,  when compared to the same 2002 period. The results
     of operations  for the  comparable  periods ended June 30, 2002 include the
     operations of the product  sales  business  since the date of  acquisition,
     February 28, 2002. Product  inventories are maintained at minimum levels to
     meet customer's needs;  however,  market prices for petroleum  products can
     fluctuate significantly in short periods of time.

     Interest Expense

     For the  three  and six  months  ended  June  30,  2003,  interest  expense
     increased by $1.3 million and $4.6 million,  respectively,  compared to the
     same  2002  periods,  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 was
     $1.3  million and $1.1 million for the three months ended June 30, 2003 and
     2002,  respectively,  and $2.7 million and $1.6 million, for the six months
     ended June 30, 2003 and 2002, respectively.

     Liquidity and Capital Resources

     Cash provided by operations was $74.8 million and $43.2 million for the six
     months  ended June 30, 2003 and 2002,  respectively.  The  increase in cash
     provided by operations for the six months ended June 30, 2003,  compared to
     the same  2002  period,  was due  primarily  to the 2002  acquisitions  and
     changes in working  capital  components  resulting  from the timing of cash
     receipts and disbursements.

     Capital   expenditures,   including   routine   maintenance  and  expansion
     expenditures  but  excluding  acquisitions,  were $22.5 million for the six
     months ended June 30, 2003,  compared to $14.2 million during the same 2002
     period. The increase in capital  expenditures for the six months ended June
     30, 2003,  when compared to the same 2002 period,  is the result of planned
     maintenance and expansion capital  expenditures related to the pipeline and
     terminaling  operations  acquired  in 2002 and higher  maintenance  capital
     expenditures in the existing  pipeline and terminaling  businesses.  During
     all periods,  adequate  pipeline  capacity  existed to  accommodate  volume
     growth,  and  the  expenditures   required  for  environmental  and  safety
     improvements  were  not,  and  are  not  expected  in  the  future  to  be,
     significant.   The  Partnership   anticipates  that  capital   expenditures
     (including routine  maintenance and expansion  expenditures,  but excluding
     acquisitions)  will total  approximately  $40 million in 2003.  Such future
     expenditures, however, will depend on many factors beyond the Partnership's
     control,  including,  without  limitation,  demand  for  refined  petroleum
     products and terminaling services in the Partnership's market areas, local,
     state and federal government regulations, fuel conservation efforts and the
     availability  of financing on acceptable  terms.  No assurance can be given
     that required  capital  expenditures  will not exceed  anticipated  amounts
     during the year or thereafter or that the Partnership will have the ability
     to finance such expenditures through borrowings, or will choose to do so.

     The  Partnership  makes  quarterly  distributions  of 100% of its available
     cash,  as  defined  in the  Partnership  agreement,  to  holders of limited
     Partnership  units  and  the  general  partner.   Available  cash  consists
     generally of all the cash receipts of the  Partnership,  plus the beginning
     cash  balance,  less  all of  its  cash  disbursements  and  reserves.  The
     Partnership  expects to make  distributions of all available cash within 45
     days  after  the  end of each  quarter  to  unitholders  of  record  on the
     applicable record date. A cash distribution of $0.81 per unit for the first
     quarter of 2003 was paid on May 15, 2003. A cash  distribution of $0.81 per
     unit for the second  quarter of 2003 was  declared  to holders of record on
     July 31, 2003 and will be paid on August 14, 2003.

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

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

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

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

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

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

     On November 1, 2002, the Partnership  acquired an approximately  2,000-mile
     anhydrous  ammonia  pipeline  system from Koch Pipeline  Company,  L.P. for
     approximately  $139  million  in  cash.  This  fertilizer  pipeline  system
     originates  in southern  Louisiana,  proceeds  north  through  Arkansas and
     Missouri,  and then  branches  east into Illinois and Indiana and north and
     west into Iowa and Nebraska.  The acquisition was financed by bank debt. In
     November of 2002, the  Partnership  issued  2,095,000  limited  Partnership
     units in a public  offering  at $33.36 per unit,  generating  approximately
     $66.7  million in net proceeds.  The offering  proceeds were used to reduce
     bank borrowings for the fertilizer pipeline acquisition.

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

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

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

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

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

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


     Recent Accounting Pronouncement

     In April of 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
     on  Derivative  Instruments  and  Hedging  Activities",  which  amends  and
     clarifies financial accounting and reporting for derivative instruments and
     hedging activities.  The Partnership does not expect SFAS No. 149, which is
     effective for derivative contracts and hedging  relationships  entered into
     or  modified  after  June 20,  2003,  to have a  significant  impact on the
     Partnership's consolidated financial statements.




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


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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

The   Partnership's   investment   portfolio   consists  of  cash   equivalents;
accordingly,  the carrying amounts  approximate  fair value.  The  Partnership's
investments are not material to its financial position or performance.  Assuming
variable rate debt of $79.4 million at June 30, 2003, a one percent  increase in
interest rates would increase annual net interest expense by approximately  $0.8
million.

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


Item 4. Controls and Procedures.

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").  Management  believes  that  the
Partnership's existing disclosure controls and procedures have been effective to
accomplish these objectives.

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-15(e)
and 15d-15(e)) as of June 30, 2003,  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.

          10.1*Kaneb LLC 2002 Long Term Incentive Plan, effective July 18, 2002,
               as amended July 31, 2003, filed herewith.

          31.1 Certification of Chief Executive Officer, Pursuant to Section 302
               of the  Sarbanes-Oxley  Act of 2002, dated as of August 14, 2003,
               filed herewith.

          31.2 Certification of Chief Financial Officer, Pursuant to Section 302
               of the  Sarbanes-Oxley  Act of 2002, dated as of August 14, 2003,
               filed herewith.

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

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

          *    Denotes management contract.

     (b)  Reports on Form 8-K

          Current Report on Form 8-K, filed May 12, 2003

          Current Report on Form 8-K,filed May 20, 2003



<PAGE>


                                    Signature

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

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



Date:  August 14, 2003                       //s//
                                   ---------------------------------------------
                                   Howard C. Wadsworth
                                   Vice President, Treasurer and Secretary


<PAGE>
                                                                    Exhibit 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER


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

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

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

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

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

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

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

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

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

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

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

Date:   August 14, 2003

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


<PAGE>
                                                                    Exhibit 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER


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

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

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

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

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

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

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

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

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

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

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


Date:   August 14, 2003
                                                 //s//
                                         ---------------------------------------
                                         Howard C. Wadsworth
                                         Chief Financial Officer







<PAGE>
                                                                    Exhibit 32.1



                     CERTIFICATE OF CHIEF EXECUTIVE OFFICER

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

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

Date:   August 14, 2003

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




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




<PAGE>
                                                                    Exhibit 32.2



                     CERTIFICATE OF CHIEF FINANCIAL OFFICER

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

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

Date:   August 14, 2003
                                                 //s//
                                         ---------------------------------------
                                         Howard C. Wadsworth
                                         Vice President, Treasurer and Secretary
                                         (Chief Financial Officer)



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