<SUBMISSION>
<ACCESSION-NUMBER>0000898822-04-001022
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20041101
<ITEMS>7.01
<ITEMS>9.01
<FILING-DATE>20041101
<DATE-OF-FILING-DATE-CHANGE>20041101
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>VALERO L P
<CIK>0001110805
<ASSIGNED-SIC>4610
<IRS-NUMBER>742956831
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-16417
<FILM-NUMBER>041108410
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>P.O. BOX 696000
<CITY>SAN ANTONIO
<STATE>TX
<ZIP>78269-6000
<PHONE>2103452000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>P.O. BOX 696000
<CITY>SAN ANTONIO
<STATE>TX
<ZIP>78269-6000
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>SHAMROCK LOGISTICS LP
<DATE-CHANGED>20000331
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8kgo.txt
<TEXT>


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

                                    FORM 8-K

                                 CURRENT REPORT


     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


                Date of Report (Date of earliest event reported):
                                NOVEMBER 1, 2004


                                   VALERO L.P.
             (Exact name of registrant as specified in its charter)

    DELAWARE                         1-16417                          74-2956831
(State or other               (Commission File Number)             (IRS Employer
  jurisdiction                                               Identification No.)
of incorporation)

            ONE VALERO WAY
          SAN ANTONIO, TEXAS                                 78249
(Address of principal executive offices)                  (Zip Code)


       Registrant's telephone number, including area code: (210) 345-2000

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

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):


[x] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))


<PAGE>
ITEM 7.01         REGULATION FD DISCLOSURE

On November 1, 2004, Valero L.P., a Delaware limited partnership, announced that
it has entered into agreements to acquire Kaneb Pipe Line Partners, L.P., a
Delaware limited partnership, and Kaneb Services LLC, a Delaware limited
liability company.

A copy of the press release announcing the transaction is furnished with this
report as Exhibit 99.1, and a copy of the investor presentation relating to the
transaction is furnished with this report as Exhibit 99.2, and are incorporated
herein by reference.

The information in this report is being furnished, not filed, pursuant to Item
7.01 of Form 8-K. Accordingly, the information in this report, including the
press release and the investor presentation, will not be incorporated by
reference into any registration statement filed by the Company under the
Securities Act of 1933, as amended, unless specifically identified therein as
being incorporated therein by reference.




ITEM 9.01         FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits.

         99.1   Press Release Announcing the Transaction dated November 1, 2004.

         99.2   Investor Presentation Regarding the Transaction.


<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 hereunto duly authorized.

                                    VALERO L.P.

                                    By: Riverwalk Logistics, L.P.
                                        Valero L.P.'s general partner


                                        By: Valero GP, LLC
                                            Riverwalk Logistics, L.P.'s
                                            general partner


Date: November 1, 2004                      By: /s/Bradley C. Barron
                                                --------------------------------
                                                Name:  Bradley C. Barron
                                                Title: Corporate Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>prnov1.txt
<DESCRIPTION>EXHIBIT 99.1 - PRESS RELEASE
<TEXT>

                    VALERO L.P. TO ACQUIRE KANEB SERVICES LLC
                       AND KANEB PIPE LINE PARTNERS, L.P.

       NEW PARTNERSHIP TO BE LARGEST TERMINAL OPERATOR AND SECOND LARGEST
                 PETROLEUM LIQUIDS PIPELINE OPERATOR IN NATION

SAN ANTONIO,  November 1, 2004 -- Valero L.P.  (NYSE:  VLI),  Kaneb Services LLC
(NYSE: KSL) and Kaneb Pipe Line Partners,  L.P. (NYSE: KPP) today announced that
they have executed definitive agreements to merge Valero L.P. and Kaneb Partners
to become the largest  terminal  operator and second largest  petroleum  liquids
pipeline operator in the United States. As part of the transaction,  Valero L.P.
will also acquire all of Kaneb Services' equity securities for cash. The general
partner of the combined  partnership  will continue to be owned by affiliates of
Valero Energy  Corporation  (NYSE:  VLO). Kaneb Services and Kaneb Partners will
become wholly owned subsidiaries of Valero L.P.

The assets of the combined partnership,  which will retain the name Valero L.P.,
will include  approximately  9,700 miles of pipeline  comprised of approximately
6,900 miles of refined product pipelines, 800 miles of crude oil pipelines and a
2,000-mile  anhydrous ammonia pipeline.  The combined  partnership will also own
101 terminal  facilities located in 30 states,  Canada,  Mexico, the Netherlands
Antilles,  Australia,  New Zealand and the United Kingdom, as well as four crude
oil storage tank  facilities.  The combined  system will have  approximately  85
million barrels of storage capacity.

"We're excited to bring together two of the best pipeline and terminal operators
in the country to form one of the premier mid-stream  logistics  partnerships in
the world," said Curt Anastasio, President and Chief Executive Officer of Valero
L.P.  "The  combined  entity will be in a much better  strategic  position  with
stronger,  more  diversified  operations,  increased  earnings  stability  and a
terrific platform for future growth.  Our relationship with our general partner,
Valero Energy,  will continue to be of significant  benefit to Valero L.P. going
forward given that Valero Energy is the largest independent  refining company in
the United States and is committed to further expanding its operations.

"This is a great  transaction for our investors.  Upon closing of the merger, we
intend  to  recommend  to our  board of  directors  an  increase  in the  annual
distribution  from $3.20 per unit to $3.42 per unit,  which  would  represent  a
nearly 7 percent  increase.  In  addition,  we expect this  transaction  will be
significantly  accretive  to cash  flow and will  position  us well for  further
distribution  increases.  With  our  combined  operations,  we  see  outstanding
opportunities  to  increase  unitholder  value  through a wider  array of growth
opportunities than either  partnership had independently.  And, we are fortunate
to be adding key  members  from  Kaneb's  high-quality  management  team and its
workforce, who are among the best in the industry," said Anastasio.

                                     -More-
<PAGE>
The total value of the transaction is approximately $2.8 billion and is expected
to close in the first quarter of 2005.  The  completion of the merger is subject
to the approval of the  unitholders  of Valero L.P.  and Kaneb  Partners and the
shareholders  of  Kaneb  Services  as well  as  customary  regulatory  approvals
including those under the Hart-Scott-Rodino Antitrust Improvements Act.

Under the terms of the  agreement,  Valero L.P.  will  acquire all of the equity
securities of Kaneb Services in a fixed cash merger for $525 million,  or $43.31
per share. In addition,  each unitholder of Kaneb Partners will receive a number
of Valero L.P. common units based on an exchange ratio formula  providing Valero
L.P. common units worth $61.50 per Kaneb Partners common unit within a specified
"collar"  range of Valero L.P.  common unit  market  prices  (plus or minus five
percent of $57.25,  the Valero  L.P.  common  unit price as of October 7, 2004),
measured over a period prior to closing.  Should Valero L.P.'s  average per unit
price during the measurement period be below $54.39 per unit, the exchange ratio
will be fixed at 1.1307 Valero L.P.  common units for each Kaneb  Partners unit.
Should Valero L.P.'s average per unit price during the measurement period exceed
$60.11 per unit, the exchange  ratio will be fixed at 1.0231 Valero L.P.  common
units for each Kaneb Partners unit.

"This  transaction  will bring tremendous  advantages to Kaneb  investors," said
John  Barnes,  Chairman  and Chief  Executive  Officer of Kaneb  Services.  "The
combination  of the  transaction's  favorable  exchange ratio and the premium at
which Valero L.P. units are trading represents a substantial  increase in market
value for Kaneb Partners' unitholders.  Kaneb Services shareholders will receive
cash that also represents a substantial premium to current market value. We have
created  significant  value over the years in the Kaneb companies and we believe
this transaction provides an outstanding opportunity to our investors."

"Through the  additional  Valero L.P. units they will receive,  Kaneb  Partners'
unitholders will have the opportunity to receive larger cash  distributions  and
participate  in the  outstanding  growth  prospects  represented by the combined
partnership,"  said Ed Doherty,  President and Chief Executive  Officer of Kaneb
Pipe Line Company, Kaneb Partners' general partner.

Following  the merger,  Bill  Greehey  will remain  Chairman of the Board of the
general partner and Curt Anastasio will continue to serve as President and Chief
Executive Officer of Valero L.P. The combined  partnership will be headquartered
in San Antonio, Texas.



                                     -More-
<PAGE>
The board of directors of Valero L.P.,  Kaneb  Services and Kaneb  Partners have
all approved the terms of the proposed  transaction.  Credit Suisse First Boston
and Citigroup are serving as financial advisors to Valero L.P. Raymond James and
Associates is serving as financial advisor to the special committee of the Kaneb
Services board of directors and Houlihan,  Lokey, Howard and Zukin is serving as
financial  advisor to the special  committee of the board of the general partner
of Kaneb Partners.

Valero L.P.  and Kaneb will host a  conference  call at 10:00 a.m. ET (9:00 a.m.
CT) today,  November 1, 2004, to discuss this transaction.  Anyone interested in
listening to the presentation can call  800/901-5218,  passcode VALERO, or visit
the partnership's web site at www.valerolp.com. In addition, further information
about the  transaction  is provided in a management  presentation  posted to the
Valero L.P. website.

Valero L.P. owns and operates crude oil and refined product  pipelines,  refined
product terminals and refinery  feedstock storage assets primarily in Texas, New
Mexico,  Colorado,  Oklahoma and California.  The partnership transports refined
products from Valero  Energy's  refineries to established and growing markets in
the  Mid-Continent,  Southwest and the Texas-Mexico  border region of the United
States. In addition,  its pipelines,  terminals and storage facilities primarily
support  eight of  Valero  Energy's  key  refineries  with  crude  oil and other
feedstocks as well as provide  access to domestic and foreign crude oil sources.
For more information, visit Valero L.P.'s web site at www.valerolp.com.

Kaneb is a single business  represented by two separate publicly traded entities
on the New York Stock Exchange. Kaneb's business is focused on mid-stream energy
assets -- refined  petroleum  product  pipelines,  and  petroleum  and specialty
liquids  storage and  terminaling  facilities.  Kaneb is a major  transporter of
refined petroleum products in the Midwest and is the second largest  independent
liquids  terminaling  company  in  the  world.   Worldwide   operations  include
facilities  in 29 states,  Canada,  the  Netherlands  Antilles,  Australia,  New
Zealand and the United Kingdom.  Its publicly traded entities are Kaneb Services
LLC  (NYSE:KSL)  and Kaneb  Pipe Line  Partners,  L.P.,  (NYSE:  KPP).  For more
information, visit www.kaneb.com.


                                     -More-

<PAGE>
INVESTOR NOTICE

Valero L.P.,  Kaneb  Services  and Kaneb  Partners  will file a proxy  statement
and/or  a  joint  proxy   statement/prospectus  and  other  documents  with  the
Securities and Exchange Commission.  Investors and security holders are urged to
read  carefully  these  documents when they become  available  because they will
contain  important  information  regarding  Valero L.P.,  Kaneb Services,  Kaneb
Partners  and the  merger.  A  definitive  proxy  statement  and/or  joint proxy
statement/prospectus  will be sent to  security  holders of Valero  L.P.,  Kaneb
Services,  and  Kaneb  Partners  seeking  their  approval  of  the  transactions
comtemplated by the merger agreements. Investors and security holders may obtain
a free copy of the proxy statement and/or joint proxy statement/prospectus (when
available) and other documents  containing  information about Valero L.P., Kaneb
Services,  and  Kaneb  Partners,  without  charge,  at the  SEC's  web  site  at
www.sec.gov.  Copies  of the  proxy  statement  and/or  definitive  joint  proxy
statement/prospectus  and the SEC filings that will be incorporated by reference
in the joint proxy  statement/prospectus  may also be obtained free of charge by
directing a request to Kaneb Services or the respective partnerships.

Valero L.P., Kaneb Services,  Kaneb Partners,  and the officers and directors of
Kaneb Services and of the respective  general  partners of Valero L.P. and Kaneb
Partners may be deemed to be  participants  in the  solicitation of proxies from
their security  holders.  Information about these persons can be found in Valero
L.P.'s,  Kaneb Services',  and Kaneb Partners' respective Annual Reports on Form
10-K filed with the SEC, and  additional  information  about such persons may be
obtained from the proxy statement and/or joint proxy  statement/prospectus  when
available.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS - VALERO L.P.

THIS PRESS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
SECURITIES  LITIGATION REFORM ACT OF 1995 REGARDING FUTURE EVENTS AND THE FUTURE
FINANCIAL  PERFORMANCE OF VALERO L.P.. ALL FORWARD-LOOKING  STATEMENTS ARE BASED
ON THE  PARTNERSHIP'S  BELIEFS AS WELL AS  ASSUMPTIONS  MADE BY AND  INFORMATION
CURRENTLY   AVAILABLE  TO  THE  PARTNERSHIP.   THESE   STATEMENTS   REFLECT  THE
PARTNERSHIP'S  CURRENT  VIEWS WITH  RESPECT TO FUTURE  EVENTS AND ARE SUBJECT TO
VARIOUS RISKS,  UNCERTAINTIES  AND ASSUMPTIONS.  THESE RISKS,  UNCERTAINTIES AND
ASSUMPTIONS  ARE  DISCUSSED IN VALERO L.P.'S 2003 ANNUAL REPORT ON FORM 10-K AND
SUBSEQUENT FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                     -More-

<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS - KANEB

CERTAIN OF KANEB'S  STATEMENTS IN THIS PRESS RELEASE ARE NOT PURELY  HISTORICAL,
AND AS SUCH ARE  "FORWARD-LOOKING  STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES  LITIGATION  REFORM ACT OF 1995. THESE INCLUDE  STATEMENTS  REGARDING
MANAGEMENT'S  INTENTIONS,  PLANS,  BELIEFS,  EXPECTATIONS  OR PROJECTIONS OF THE
FUTURE.  FORWARD-LOOKING  STATEMENTS INVOLVE RISKS AND UNCERTAINTIES  ,INCLUDING
WITHOUT  LIMITATION,  THE VARIOUS RISKS INHERENT IN KANEB'S BUSINESS,  AND OTHER
RISKS AND  UNCERTAINTIES  DETAILED FROM TIME TO TIME IN KANEB'S PERIODIC REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.  ONE OR MORE OF THESE FACTORS
HAVE AFFECTED,  AND COULD IN THE FUTURE AFFECT,  KANEB'S  BUSINESS AND FINANCIAL
RESULTS IN FUTURE PERIODS,  AND COULD CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY
FROM PLANS AND PROJECTIONS.  THERE CAN BE NO ASSURANCE THAT THE  FORWARD-LOOKING
STATEMENTS MADE IN THIS DOCUMENT WILL PROVE TO BE ACCURATE, AND ISSUANCE OF SUCH
FORWARD-LOOKING  STATEMENTS SHOULD NOT BE REGARDED AS A REPRESENTATION BY KANEB,
OR ANY OTHER PERSON,  THAT THE  OBJECTIVES  AND PLANS OF KANEB WILL BE ACHIEVED.
ALL  FORWARD-LOOKING  STATEMENTS  MADE  IN  THIS  PRESS  RELEASE  ARE  BASED  ON
INFORMATION  PRESENTLY AVAILABLE TO MANAGEMENT,  AND KANEB ASSUMES NO OBLIGATION
TO UPDATE ANY FORWARD-LOOKING STATEMENTS.



                                      -30-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>investpres.txt
<DESCRIPTION>EXHIBIT 99.2 - INVESTOR PRESENTATION
<TEXT>







VALERO LP LOGO




                                 ACQUISITION OF

                              KANEB SERVICES, LLC &

                         KANEB PIPE LINE PARTNERS, L.P.



                                NOVEMBER 1, 2004





<PAGE>


VALERO L.P. FORWARD LOOKING STATEMENTS
--------------------------------------------------------------------------------

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

THIS PRESENTATION INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
SECURITIES LITIGATION REFORM ACT OF 1995 REGARDING FUTURE EVENTS AND THE FUTURE
FINANCIAL PERFORMANCE OF VALERO L.P. ALL FORWARD-LOOKING STATEMENTS ARE BASED ON
THE PARTNERSHIP'S BELIEFS AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION
CURRENTLY AVAILABLE TO THE PARTNERSHIP. THESE STATEMENTS REFLECT THE
PARTNERSHIP'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO
VARIOUS RISKS, UNCERTAINTIES AND ASSUMPTIONS. THESE RISKS, UNCERTAINTIES AND
ASSUMPTIONS ARE DISCUSSED IN THE PROSPECTUS AND PROSPECTUS SUPPLEMENT, VALERO
L.P.'S 2003 ANNUAL REPORT ON FORM 10-K AND SUBSEQUENT FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.



                                                          VALERO LP LOGO 2
--------------------------------------------------------------------------------
<PAGE>


KANEB FORWARD LOOKING STATEMENTS
--------------------------------------------------------------------------------

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN OF KANEB'S STATEMENTS IN THIS PRESENTATION ARE NOT PURELY HISTORICAL,
AND AS SUCH ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE INCLUDE STATEMENTS REGARDING
MANAGEMENT'S INTENTIONS, PLANS, BELIEFS, EXPECTATIONS OR PROJECTIONS OF THE
FUTURE. FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING
WITHOUT LIMITATION, THE VARIOUS RISKS INHERENT IN KANEB'S BUSINESS, AND OTHER
RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN KANEB'S PERIODIC REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ONE OR MORE OF THESE FACTORS
HAVE AFFECTED, AND COULD IN THE FUTURE AFFECT, KANEB'S BUSINESS AND FINANCIAL
RESULTS IN FUTURE PERIODS, AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM PLANS AND PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING
STATEMENTS MADE IN THIS DOCUMENT WILL PROVE TO BE ACCURATE, AND ISSUANCE OF SUCH
FORWARD-LOOKING STATEMENTS SHOULD NOT BE REGARDED AS A REPRESENTATION BY KANEB,
OR ANY OTHER PERSON, THAT THE OBJECTIVES AND PLANS OF KANEB WILL BE ACHIEVED.
ALL FORWARD-LOOKING STATEMENTS MADE IN THIS PRESENTATION ARE BASED ON
INFORMATION PRESENTLY AVAILABLE TO MANAGEMENT, AND KANEB ASSUMES NO OBLIGATION
TO UPDATE ANY FORWARD-LOOKING STATEMENTS.









                                                          VALERO LP LOGO 3
--------------------------------------------------------------------------------

<PAGE>


INVESTOR NOTICE
--------------------------------------------------------------------------------

Valero L.P. ("Valero LP"), Kaneb Services LLC ("Kaneb Services") and Kaneb Pipe
Line Partners, L.P. ("Kaneb Partners") will file a joint proxy
statement/prospectus and other documents with the Securities and Exchange
Commission. Investors and security holders are urged to read carefully the joint
proxy statement/prospectus when it becomes available because it will contain
important information regarding Valero LP, Kaneb Services, Kaneb Partners and
the merger. A definitive joint proxy statement/prospectus will be sent to
security holders of Valero LP, Kaneb Services, and Kaneb Partners seeking their
approval of the merger transactions. Investors and security holders may obtain a
free copy of the joint proxy statement/prospectus (when it is available) and
other documents containing information about Valero LP, Kaneb Services, and
Kaneb Partners, without charge, at the SEC's web site at www.sec.gov. Copies of
the definitive joint proxy statement/prospectus and the SEC filings that will be
incorporated by reference in the joint proxy statement/prospectus may also be
obtained for free by directing a request to Kaneb Services or the respective
partnerships.

Valero LP, Kaneb Services, Kaneb Partners, and the officers and directors of
Kaneb Services and of the respective general partners of Valero LP and Kaneb
Partners may be deemed to be participants in the solicitation of proxies from
their security holders. Information about these persons can be found in Valero
LP's, Kaneb Services', and Kaneb Partner's respective Annual Reports on Form
10-K filed with the SEC, and additional information about such persons may be
obtained from the proxy statement/prospectus when it becomes available.





                                                          VALERO LP LOGO 4
--------------------------------------------------------------------------------

<PAGE>


MANAGEMENT PRESENTATION
--------------------------------------------------------------------------------

CURT ANASTASIO - PRESIDENT AND CEO,
                 VALERO L.P.

ED DOHERTY     - CHAIRMAN AND CEO,
                 KANEB PIPE LINE PARTNERS, L.P.

STEVE BLANK    - CFO,
                 VALERO, L.P.



                                                          VALERO LP LOGO 5
--------------------------------------------------------------------------------

<PAGE>


TRANSACTION SUMMARY
--------------------------------------------------------------------------------

O     VALERO LP (NYSE: VLI) TO ACQUIRE KANEB SERVICES (NYSE: KSL)
      AND KANEB PIPE LINE PARTNERS (NYSE: KPP) FOR $2.8 BILLION

O     VLI WILL ACQUIRE KSL FOR $43.31 CASH PER SHARE

O     VLI WILL ACQUIRE KPP FOR $61.50 PER UNIT, SUBJECT TO A FIXED
      VALUE COLLAR OF +/- 5%

O     UPON CLOSING, VALERO ENERGY (NYSE: VLO) WILL CONTINUE TO OWN
      100% OF THE GP OF VLI AND 21% OF THE COMMON UNITS

O     UPON CLOSING, VLI INTENDS TO RECOMMEND AN INCREASE IN ITS
      COMMON UNIT DISTRIBUTION TO $3.42 PER UNIT

O     EXPECT TRANSACTION TO CLOSE IN THE 1ST QUARTER 2005



                                                          VALERO LP LOGO 6
--------------------------------------------------------------------------------

<PAGE>


STRATEGIC RATIONALE
--------------------------------------------------------------------------------

O     CREATES THE LARGEST TERMINAL OPERATOR AND 2ND LARGEST PETROLEUM LIQUIDS
      PIPELINE OPERATOR IN THE U.S.

O     TRANSACTION IS EXPECTED TO BE CASH FLOW ACCRETIVE TO BOTH
      VLI AND KPP UNITHOLDERS

O     EXPECT TO ACHIEVE AT LEAST $25 MILLION IN SYNERGIES

O     GREATLY EXPANDS GEOGRAPHIC PRESENCE AND ENHANCES GROWTH
      PROSPECTS

O     DIVERSIFIES VLI'S CUSTOMER BASE

O     RELATIONSHIP WITH VALERO ENERGY CREATES ADDITIONAL
      OPPORTUNITIES



                                                          VALERO LP LOGO 7
--------------------------------------------------------------------------------

<PAGE>


THE COMBINED ENTERPRISE
--------------------------------------------------------------------------------

O     CREATES ONE OF THE LARGEST MLPS WITH AN ENTERPRISE VALUE OF
      APPROXIMATELY $4.3 BILLION

O     COMBINED ENTITY WILL OPERATE AROUND 9,700 MILES OF REFINED
      PRODUCT AND CRUDE PIPELINES

O     101 TERMINALS WITH APPROX. 85 MILLION BARRELS OF STORAGE
      CAPACITY

O     COMBINED PARTNERSHIP EXPECTED TO BE RATED INVESTMENT GRADE
      BY MOODY'S AND S&P

O     BILL GREEHEY WILL REMAIN CHAIRMAN OF THE BOARD AND CURT
      ANASTASIO WILL REMAIN PRESIDENT AND CEO

O     HEADQUARTERED IN SAN ANTONIO



                                                          VALERO LP LOGO 8
--------------------------------------------------------------------------------

<PAGE>


KANEB OVERVIEW
--------------------------------------------------------------------------------

O     KANEB OPERATES AS A SINGLE BUSINESS REPRESENTED BY TWO NYSE
      COMPANIES

      O   KANEB SERVICES LLC ("KSL") - OWNS THE GENERAL PARTNER

      O   KANEB PIPE LINE PARTNERS ("KPP") - THE MASTER LIMITED
          PARTNERSHIP

O     KPP OWNS AND OPERATES MID-STREAM ENERGY ASSETS CONSISTING PRIMARILY OF
      REFINED PETROLEUM PRODUCTS AND AMMONIA PIPELINES, PETROLEUM AND SPECIALTY
      LIQUIDS STORAGE AND TERMINALING FACILITIES

      O   PIPELINE OPERATIONS

          O   FOUR PIPELINE SYSTEMS IN MID-WESTERN UNITED STATES

          O   OVER 5,000 MILES OF PIPELINE

          O   25 PIPELINE TERMINALS, APPROX. 7.7 MILLION BARRELS OF STORAGE

      O   TERMINAL OPERATIONS

          O   54 FACILITIES WITH APPROX. 60 MILLION BARRELS OF STORAGE

      O   PRODUCT SALES OPERATIONS

          O   DELIVER BUNKER FUEL TO SHIPS IN THE CARIBBEAN AND NOVA
              SCOTIA, CANADA



--------------------------------------------------------------------------------
                                                          VALERO LP LOGO 9

<PAGE>


KANEB SYSTEM OVERVIEW
--------------------------------------------------------------------------------


                                 [GRAPH]

--------------------------------------
           LEGEND
--------------------------------------

      Kaneb Terminals

      Kaneb North Pipeline System

      Kaneb East Pipeline System

      Kaneb West Pipeline System

      Kaneb Ammonia Pipeline System
--------------------------------------


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

KEY STATISTICS:
--------------

      3,080 MILES OF REFINED PRODUCT PIPELINES

      2,000 MILE AMMONIA PIPELINE

      54 TERMINAL FACILITIES WITH APPROX. 60 MILLION BARRELS OF
      STORAGE

      25 ASSOCIATED PIPELINE TERMINALS WITH APPROX. 7.7 MILLION
      BARRELS OF STORAGE
-------------------------------------------------------------------



                                                          VALERO LP LOGO 10
--------------------------------------------------------------------------------

<PAGE>


BENEFITS TO KANEB INVESTORS
--------------------------------------------------------------------------------

O     OFFER REPRESENTS A 38% PREMIUM TO KSL SHAREHOLDERS

O     OVER 20% PREMIUM TO KPP UNITHOLDERS

      O   KPP UNITHOLDERS ALSO EXPECTED TO REALIZE A 9% INCREASE IN
          THEIR TOTAL DISTRIBUTION

O    GOING FORWARD, KPP UNITHOLDERS TO BENEFIT FROM:

      O   BROADER GEOGRAPHIC PLATFORM AND BETTER DIVERSITY OF
          OPERATIONS

      O   LOWER GP SPLIT MEANS MORE CASH AVAILABLE TO LPS

      O   LOWER COST OF CAPITAL

      O   SIGNIFICANT SYNERGIES

      O   IMPROVED PLATFORM FOR GROWTH

          O   GROWTH OPPORTUNITIES WITH THE LEADING INDEPENDENT REFINING
              COMPANY IN NORTH AMERICA



                                                          VALERO LP LOGO 11
--------------------------------------------------------------------------------

<PAGE>


VALERO L.P. SYSTEM OVERVIEW
--------------------------------------------------------------------------------

                                 [GRAPH]

LEGEND:

      Refined Product Pipelines

      Crude Oil Pipelines

      Liquified Petroleum Gas Pipeline

      Hydrogen Pipeline

      Refined Product Terminals

      Nuevo Laredo Propane Terminal

      Crude Oil Storage Tanks

      Bulk Feedstock Storage Facilities

      Valero Energy Refineries


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

KEY STATISTICS:
--------------

      3,800 MILES OF REFINED PRODUCT PIPELINES

      800 MILES OF CRUDE OIL PIPELINES

      22 TERMINALS WITH 4.5 MILLION BARRELS OF REFINED PRODUCT
      STORAGE CAPACITY

      4 PRIMARY CRUDE OIL STORAGE TANK FACILITIES WITH 12.6
      MILLION BARRELS OF CRUDE OIL STORAGE CAPACITY
-----------------------------------------------------------------


                                                          VALERO LP LOGO 12
--------------------------------------------------------------------------------

<PAGE>


COMBINED OPERATIONS
--------------------------------------------------------------------------------

                                  [GRAPH]

---------------------------------------------------------------------
LEGEND
---------------------------------------------------------------------

      Valero Corp. Refineries

      Valero LP Pipelines

      Valero LP Refined Product Terminals

      Valero LP Crude Tanks

      Kaneb Terminals

      Kaneb North Pipeline System

      Kaneb East Pipeline System

      Kaneb West Pipeline System

      Kaneb Ammonia Pipeline System
---------------------------------------------------------------------


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

PRO FORMA KEY STATISTICS:
------------------------

      AROUND 9,700 MILES OF CRUDE AND REFINED PRODUCT PIPELINE

      101 TERMINAL FACILITIES AND 4 CRUDE OIL STORAGE TANKS WITH
      AROUND 85 MILLION BARRELS OF STORAGE
---------------------------------------------------------------------



                                                          VALERO LP LOGO 13
--------------------------------------------------------------------------------

<PAGE>


COMBINED PIPELINE OPERATIONS
--------------------------------------------------------------------------------

                                  [GRAPH]

----------------------------
KANEB NORTH PIPELINE SYSTEM
----------------------------


                                                -------------------------------
                                                KANEB EAST PIPELINE SYSTEM
                                                -------------------------------

----------------------------
KANEB WEST PIPELINE
----------------------------

                                                -------------------------------
                                                KANEB AMMONIA PIPELINE
                                                -------------------------------

----------------------------
VLI PIPELINE SYSTEM
----------------------------



---------------------------------------------------
LEGEND
---------------------------------------------------

      Valero Corp. Refineries

      Valero LP Pipelines

      Valero LP Refined Product Terminals

      Valero LP Crude Tanks

      Kaneb Terminals

      Kaneb North Pipeline System

      Kaneb East Pipeline System

      Kaneb West Pipeline System

      Kaneb Ammonia Pipeline System
---------------------------------------------------



                                                          VALERO LP LOGO 14
--------------------------------------------------------------------------------

<PAGE>


COMBINED TERMINAL OPERATIONS
--------------------------------------------------------------------------------


                                 [GRAPH]



---------------------------------------------
LEGEND

      Kaneb Terminals

      Valero LP Refined Product Terminals

      Valero Corp. Refineries
---------------------------------------------



                                                          VALERO LP LOGO 15
--------------------------------------------------------------------------------

<PAGE>


BETTER EARNINGS DIVERSITY
--------------------------------------------------------------------------------

              PERCENT OF OPERATING INCOME BY SEGMENT

             VLI                                COMBINED OPERATIONS1
          [PIE CHART]                                   [PIE CHART]


            KPP1
          [PIE CHART]



----------------------------------------------------------------
[ ] PIPELINE OPERATIONS            [ ] TERMINAL OPERATIONS
[ ] CRUDE OIL STORAGE TANKS        [ ] PRODUCT SALES OPERATIONS
----------------------------------------------------------------

1  EXCLUDES OPERATING INCOME OF MARTIN OIL, A MARKETING SUBSIDIARY OF KSL.
   NOTE:  PERCENTAGE OF TOTAL OPERATING INCOME IS FOR THE NINE
   MONTHS ENDED SEPTEMBER 30, 2004


                                                          VALERO LP LOGO 16
--------------------------------------------------------------------------------

<PAGE>


LESS DEPENDENCE ON ONE CUSTOMER
--------------------------------------------------------------------------------

         PRE-MERGER                             PRO FORMA POST-MERGER
        CUSTOMER BASE                              CUSTOMER BASE1

          [PIE CHART]                                   [PIE CHART]

         VALERO ENERGY 98%                               THIRD PARTIES
                                       VALERO ENERGY         74%
                                           26%


          THIRD PARTIES 2%


O    DEPENDENCE ON MCKEE SYSTEM REDUCED FROM 40% TO 15% OF EBITDA

1  EXCLUDES REVENUE OF MARTIN OIL, A MARKETING SUBSIDIARY OF KSL.
   NOTE:  PERCENTAGES BASED ON TOTAL REVENUES FOR THE NINE MONTHS
   ENDED SEPTEMBER 30, 2004



                                                          VALERO LP LOGO 17
--------------------------------------------------------------------------------

<PAGE>


FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

(Dollars in 000s, except per unit amounts)

<TABLE>
<CAPTION>

                                     VALERO L.P.     KANEB PARTNERS
                                     YTD 9/30/04       YTD 9/30/04
                                     ------------    ----------------
<S>                                     <C>                <C>
NET INCOME APPLICABLE TO LPS            $54,612            $59,883
EPU                                       $2.37              $2.11
EBITDA                                  $99,229           $144,035
DISTRIBUTABLE CASH FLOW                 $76,690            $91,804
DISTRIBUTABLE CASH FLOW APPLICABLE
   TO LIMITED PARTNERS                  $67,942            $83,768
DISTRIBUTION PAID TO LIMITED
PARTNERS                                $55,299            $72,219
COVERAGE RATIO APPLICABLE TO LPS          1.23X              1.16X
DEBT-TO-CAPITALIZATION                    47.4%              57.9%

</TABLE>



                                                          VALERO LP LOGO 18
--------------------------------------------------------------------------------

<PAGE>


FINANCING PLAN
--------------------------------------------------------------------------------

                                              (DOLLARS IN MILLIONS)

<TABLE>
SOURCES OF FUNDS:
----------------
<S>                                                    <C>
      Valero L.P. common unit exchange1                 $1,422
      New debt issuance                                    550
      Less:  cash assumed                                  (79)
      Debt assumed at book value                           686
      Debt assumed FV write-up                              44
      Other liabilities assumed                            180
      Valero Energy capital contribution to                 28
      maintain 2% GP                                       ---
           TOTAL SOURCES                                $2,831
                                                         =====
USES OF FUNDS:
-------------
      Current Assets                                      $112
      Property, Plant & Equipment                        1,681
      Other Assets                                          34
      Goodwill & other intangible assets                 1,004
                                                         -----
           TOTAL USES                                   $2,831
                                                         =====
</TABLE>


1  Assuming exchange at mid-point of fixed value collar



                                                          VALERO LP LOGO 19
--------------------------------------------------------------------------------

<PAGE>


PRO FORMA ASSUMPTIONS
--------------------------------------------------------------------------------

Closing Date:                 Assumed at December 31, 2004

Forecast:                     2004: Based on 9 mos. actuals and 4th
                              quarter forecasts for each entity
                              2005: Internal forecasts for each entity

Distribution:                 GP's incentive distribution limited to
                              25%.  Adopt Kaneb's distribution of $3.42
                              per unit.  Distributable cash flow
                              accretion calculated assuming distribution
                              of all distributable cash flow.

Synergies:                    $25 million per year

Units Outstanding:            47.9 million units outstanding pro forma

Fixed Value Collar:           Baseline value set at $61.50 and exchange
                              ratio of 1.074 VLI units for each KPP unit

Interest Rates:               Interest rate on new term debt at 6.5%
                              Interest rate on revolving credit debt at 4%

Debt Assumption/Refinancing:  VLI will assume KPP's public debt and
                              refinance bank debt

KSL Purchase:                 To be paid in cash and debt-financed by
                              VLI in either the public or bank market




                                                          VALERO LP LOGO 20
--------------------------------------------------------------------------------

<PAGE>


PRO FORMA STATISTICS
--------------------------------------------------------------------------------

O    EXPECTED SYNERGIES OF $25 MILLION TO COME FROM . . .

     O    TERMINAL OPERATIONS - $6 MILLION

     O    PIPELINE OPERATIONS - $5 MILLION

     O    CORPORATE EXPENSE REDUCTION & OTHER - $10 MILLION

     O    OPERATING COST REDUCTIONS - $4 MILLION

O    $365 MILLION OF 2005 PROJECTED PRO FORMA EBITDA

O    2005 PRO FORMA DISTRIBUTABLE CASH FLOW ACCRETION OF 37 CENTS
     PER UNIT

O    PRO FORMA DEBT-TO-CAPITALIZATION RATIO AT APPROXIMATELY 46%

O    EXPECTED TO BE INVESTMENT GRADE RATED



                                                          VALERO LP LOGO 21
--------------------------------------------------------------------------------

<PAGE>


GREAT COMBINATION FOR INVESTORS
--------------------------------------------------------------------------------

O    DISTRIBUTABLE CASH FLOW ACCRETIVE

     O    TO RECOMMEND AN INCREASE IN THE DISTRIBUTION FROM $3.20 TO
          $3.42 PER UNIT FOR VLI UNITHOLDERS

     O    KPP UNITHOLDERS TOTAL DISTRIBUTION INCREASES DUE TO
          ADDITIONAL UNITS

O    BETTER EARNINGS DIVERSIFICATION

O    BROADER SCOPE OF OPERATIONS CREATES PLATFORM FOR GROWTH

O    RELATIONSHIP TO VALERO ENERGY EXPANDS OPPORTUNITIES

     GOING FORWARD - WELL POSITIONED TO CONTINUE DELIVERING INDUSTRY
     LEADING DISTRIBUTION GROWTH



                                                          VALERO LP LOGO 22
--------------------------------------------------------------------------------

<PAGE>


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










                                    APPENDIX









                                                          VALERO LP LOGO 23
--------------------------------------------------------------------------------

<PAGE>


FIXED VALUE COLLAR
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                          FIXED VALUE COLLAR STRUCTURE

----------------------------------------------------------------------
                     VALERO L.P.         KANEB            RATIO                         KANEB
----------------------------------------------------------------------                  SHARE PRICE
----------------------------------------------------------------------
<S>   <C>               <C>           <C>                  <C>                          <C>
     -10%               $  51.53      $    58.26           1.131
      -9%                  52.10           58.91           1.131
      -8%                  52.67           59.56           1.131                         [GRAPH]
      -7%                  53.24           60.21           1.131
      -6%                  53.82           60.85           1.131
      -5%                  54.39           61.50           1.131
      -4%                  54.96           61.50           1.119
      -3%                  55.53           61.50           1.107
      -2%                  56.11           61.50           1.096
      -1%                  56.68           61.50           1.085
     BASELINE              57.25           61.50           1.074
      +1%                  57.82           61.50           1.064
      +2%                  58.40           61.50           1.053
      +3%                  58.97           61.50           1.043
      +4%                  59.54           61.50           1.033
      +5%                  60.11           61.50           1.023                        ACQUIROR SHARE PRICE
      +6%                  60.69           62.09           1.023
      +7%                  61.26           62.67           1.023
      +8%                  61.83           63.26           1.023
      +9%                  62.40           63.84           1.023
     +10%                  62.98           64.43           1.023

</TABLE>





                                                          VALERO LP LOGO 24
--------------------------------------------------------------------------------

<PAGE>


RECONCILIATION OF NET INCOME TO EBITDA AND DISTRIBUTABLE CASH FLOW
[-------------------------------------------------------------------------------

The following is a reconciliation of net income to EBITDA and distributable cash
flow (in thousands):

<TABLE>
<CAPTION>

                                   YTD       9/30/2004       2005
                             ----------   --------------    -------
                             Valero L.P.  Kaneb Partners Projected Pro Forma

<S>                           <C>           <C>           <C>
Net income                    $59,063       $67,123       $176,255
   Plus net interest           15,630        32,180         94,449
   expense & other
   Plus depreciation &         24,536        41,677         94,034
   amortization
   Plus income tax expense        N/A         3,055            N/A
                                -----        ------          -----
EDITDA                         99,229       144,035        364,738
   Less VLI's Skelly
   interest                       121           n/a            n/a
   Less interest expense      (15,630)      (31,389)       (92,455)
   Less income taxes                -        (3,403)        (4,188)
   Less reliability capital    (7,030)      (17,439)       (46,427)
                               ------       -------         -------
Distributable Cash Flow        76,690        91,804         221,668

</TABLE>







                                                          VALERO LP LOGO 25
--------------------------------------------------------------------------------

</TEXT>
</DOCUMENT>
</SUBMISSION>
