
                   VALERO L.P. REPORTS THIRD QUARTER EARNINGS
                      AND ANNOUNCES QUARTERLY DISTRIBUTION

SAN ANTONIO,  November 1, 2004 -- Valero L.P.  (NYSE:  VLI) today  announced net
income  applicable to limited partners of $17.9 million,  or $0.78 per unit, for
the third quarter of 2004, compared to $18.5 million, or $0.82 per unit, for the
third quarter of 2003. For the nine months ended  September 30, 2004, net income
applicable to limited partners was $54.6 million, or $2.37 per unit, compared to
$47.4 million,  or $2.23 per unit, for the nine months ended September 30, 2003.
Distributable  cash flow available to limited partners for the third quarter was
$22.7 million, compared to $21.3 million for the third quarter of 2003.

With respect to the quarterly distribution to unitholders payable for the third
quarter of 2004, Valero L.P. also announced that it has declared a distribution
of $0.80 per unit payable November 12, 2004 to holders of record as of November
8, 2004.

"Although  we had a solid  quarter  operationally,  our  financial  results were
impacted by a 16-day  outage on the primary  gasoline  producing  unit at Valero
Energy's McKee  refinery,"  said Curt  Anastasio,  Valero L.P.'s Chief Executive
Officer.  "Given  that  our  logistics  system  supporting  the  McKee  refinery
typically  contributes  approximately  40 percent of our operating  income,  the
outage affected this quarter's  earnings by  approximately  five cents per unit.
Even with this outage,  our  distribution  coverage to limited  partners remains
strong at 1.23 times our  current  quarterly  distribution  rate of 80 cents per
unit.

"Looking at the fourth quarter,  Valero Energy's  Benicia  refinery is currently
down for a planned  35-day  plant-wide  turnaround  that is nearing  completion.
Since we own the crude  storage  facilities  at that  plant,  we expect  this to
affect our fourth  quarter  earnings by about five cents per unit,  so we expect
fourth  quarter  earnings  to be about  the  same as we  achieved  in the  third
quarter," said Anastasio.

Valero L.P. also announced  this morning a proposed  merger with Kaneb Pipe Line
Partners, L.P. and the acquisition of its general partner, Kaneb Services, LLC.

"We are excited  about the  tremendous  opportunities  created by this  proposed
merger.  This is a significant  milestone for the partnership  that will greatly
expand our geographic and product diversification making us the largest terminal
operator and second largest  petroleum  liquids pipeline  operator in the United
States.  In addition,  we believe  that the  transaction  will be  significantly
accretive to cash flow. Upon completion of the merger, we intend to increase our
distribution  to $3.42 per unit annually,  which is a nearly 7 percent  increase
from our current rate of $3.20 per unit annually.  We anticipate  closing in the
first  quarter of 2005 and expect to quickly  integrate  these  assets  into our
system," said Anastasio.

                                     -More-
<PAGE>
A conference  call with management is scheduled for 10:00 a.m. ET (9:00 a.m. CT)
today,  November 1, 2004,  to discuss the  proposed  merger with Kaneb Pipe Line
Partners,  L.P. and the proposed purchase of Kaneb Services,  LLC and respond to
questions  regarding the financial and operational results for the third quarter
of  2004.   Anyone   interested  in  listening  to  the  presentation  may  call
800/901-5218,   passcode  VALERO,   or  visit  the  partnership's  web  site  at
www.valerolp.com.

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.

INVESTOR NOTICE

Valero  L.P.,  Kaneb  Services,  LLC  ("Kaneb  Services")  and  Kaneb  Pipe Line
Partners,  L.P.  ("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  contemplated 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.

<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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 WITH THE SECURITIES AND EXCHANGE COMMISSION.

FOR MORE INFORMATION, VISIT VALERO L.P.'S WEB SITE AT WWW.VALEROLP.COM.

                                      -30-



<PAGE>

                                   VALERO L.P.
                       CONSOLIDATED FINANCIAL INFORMATION
                           SEPTEMBER 30, 2004 AND 2003
          (UNAUDITED, IN THOUSANDS, EXCEPT UNIT DATA AND PER UNIT DATA)

                              THREE MONTHS ENDED          NINE MONTHS ENDED
                                 SEPTEMBER 30,               SEPTEMBER 30,
                              ------------------           -----------------
                             2004           2003           2004        2003
                             ----           ----           ----        ----
 STATEMENT OF INCOME
 DATA (NOTE 1):
  Revenues                  $ 58,075      $ 51,695       $ 166,106     $ 131,053
                            ---------     ---------       ---------     --------
  Costs and expenses:
      Operating expenses      21,626        19,445          59,746        47,441
      General and
          administrative
          expenses             3,588         1,588           8,233         5,102
      Depreciation and
          amortization         8,413         7,135          24,536        18,687
                            ---------     ---------       ---------     --------
   Total costs and expenses   33,627        28,168          92,515        71,230
                            ---------     ---------       ---------     --------
  OPERATING INCOME            24,448        23,527          73,591        59,823
      Equity income from
        Skelly-Belvieu
        Pipeline Company         372           657           1,102         1,988
      Interest and other
        expense, net          (5,433)      (4,504)         (15,630)     (11,617)
                            ---------     ---------       ---------     --------
  NET INCOME                  19,387        19,680          59,063        50,194
      Net income applicable
        to general partner
        including incentive
        distributions
        (Note 2)              (1,478)      (1,138)          (4,451)      (2,828)
                            ---------     ---------       ---------     --------
   Net income applicable
      to limited partners   $ 17,909       $ 18,542        $ 54,612     $ 47,366
                           =========      =========       =========    =========


  Net income per unit
     applicable to
     limited partners
     (Note 2)               $   0.78       $   0.82        $   2.37     $   2.23

  Weighted average
     number of limited
     partnership units
     outstanding (Note 3)  23,041,394     22,477,019      23,041,394  21,256,196

  Earnings before
     interest, taxes
     and depreciation
     and amortization
     (EBITDA,Note 4)        $ 33,233      $ 31,319         $ 99,229     $ 80,498

  Distributable cash
     flow (Note 4)          $ 25,684      $ 24,089         $ 76,690     $ 63,813



                                   SEPTEMBER 30,                     DECEMBER 31
                            ---------------------------
                               2004                2003                    2003
                               ----                ----                    ----
 BALANCE SHEET DATA:
  Long-term debt,
    including current
    portion (a)             $ 395,599     $ 358,095                     $ 54,192
  Partners' equity (b)        438,903       437,168                      438,163
  Debt-to-capitalization
  ratio (a) / ((a)+(b))         47.4%         45.0%                        44.7%

                          See accompanying notes below.
<PAGE>



                                   VALERO L.P.
                 CONSOLIDATED FINANCIAL INFORMATION - CONTINUED
                           SEPTEMBER 30, 2004 AND 2003
              (UNAUDITED, IN THOUSANDS, EXCEPT BARREL INFORMATION)


                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                 SEPTEMBER 30,               SEPTEMBER 30,
                              ------------------           -----------------
                              2004          2003           2004        2003
                              ----          ----           ----        ----
OPERATING DATA:
     CRUDE OIL PIPELINES:
       Throughput
        (barrels/day)        380,395      385,181          384,643       355,636
       Revenues            $  13,231     $ 14,166         $ 39,462      $ 38,707
       Operating
        expenses               4,225        4,173           11,825        11,827
       Depreciation and
        amortization           1,136        1,227            3,368         4,083
                            ---------     ---------       ---------     --------
SEGMENT OPERATING INCOME   $   7,870     $  8,766         $ 24,269      $ 22,797
                           =========      =========       =========    =========

     REFINED PRODUCT
        PIPELINES:
       Throughput
        (barrels/day)        433,695      432,885          440,853       375,945
       Revenues            $  22,324     $ 20,819         $ 63,764      $ 51,439
       Operating expenses     10,493        8,885           28,360        21,163
       Depreciation and
        amortization           3,690        3,405           10,978         8,815
                            ---------     ---------       ---------     --------

SEGMENT OPERATING INCOME   $   8,141     $  8,529         $ 24,426      $ 21,461
                            ---------     ---------       ---------     --------

     REFINED PRODUCT
        TERMINALS:
       Throughput
        (barrels/day)        260,440      236,440          256,291       215,925
       Revenues            $  11,150     $  8,438         $ 30,259      $ 22,614
       Operating expenses      4,677        4,553           13,930        11,020
       Depreciation and
        amortization           1,720          853            4,593         2,472
                            ---------     ---------       ---------     --------
SEGMENT OPERATING INCOME   $   4,753     $  3,032         $ 11,736      $  9,122
                            =========      =========       =========    ========

     CRUDE OIL STORAGE
        TANKS:
       Throughput
        (barrels/day)        517,135      433,921          490,190       330,192
       Revenues            $  11,370     $  8,272         $ 32,621      $ 18,293
       Operating expenses      2,231        1,834            5,631         3,431
       Depreciation and
        amortization           1,867        1,650            5,597         3,317
                            ---------     ---------       ---------     --------
SEGMENT OPERATING INCOME   $   7,272     $  4,788         $ 21,393      $ 11,545
                           =========      =========       =========    =========

     CONSOLIDATED
        INFORMATION:
       Throughput
        (barrels/day)      1,591,665    1,488,427        1,571,977     1,277,698
       Revenues            $  58,075    $  51,695        $ 166,106     $ 131,053
       Operating expenses     21,626       19,445           59,746        47,441
       Depreciation and
        amortization           8,413        7,135           24,536        18,687
                            ---------     ---------       ---------     --------
SEGMENT OPERATING INCOME      28,036       25,115           81,824        64,925
General and administrative
        expenses               3,588        1,588            8,233         5,102
                            ---------     ---------       ---------     --------
       CONSOLIDATED
        OPERATING INCOME   $  24,448     $ 23,527        $  73,591      $ 59,823
                           =========      =========       =========    =========


                          See accompanying notes below.

<PAGE>
                                   VALERO L.P.
                 CONSOLIDATED FINANCIAL INFORMATION - CONTINUED
                           SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)
NOTES:
   1.       The statement of income data for the nine months ended September 30,
            2004 includes $32 million of operating income related to the various
            acquisitions completed by Valero L.P. during 2003 and 2004. These
            acquisitions consist of the Paulsboro refined product terminal
            acquired on September 3, 2003, the Southlake refined product
            pipeline acquisition effective August 1, 2003, the Shell pipeline
            interest acquired on May 1, 2003, the crude oil storage tanks and
            the South Texas pipelines and terminals acquired on March 18, 2003
            and on February 20, 2004, the Royal Trading asphalt terminals. The
            statement of income for the nine months ended September 30, 2003
            includes $20 million of operating income related to the 2003
            acquisitions mentioned above.

   2.       Net income is allocated between limited partners and the general
            partner's interests based on provisions in the partnership
            agreement. The apportioned net income applicable to limited partners
            is divided by the weighted average number of limited partnership
            units outstanding in computing the net income per unit applicable to
            limited partners. Net income per unit applicable to the general
            partner includes incentive distributions, aggregating $1.1 million
            and $0.8 million for the three months ended September 30, 2004 and
            2003, respectively, and $3.3 million and $1.9 million for the nine
            months ended September 30, 2004 and 2003, respectively.

   3.       The increase in outstanding limited partnership units over
            comparable periods is due to the 2003 public offerings of common
            units by Valero L.P. in March, April and August, in which 7,567,250
            common units were sold. Partially offsetting the increase in new
            units sold was the redemption in March 2003 of 3,809,750 common
            units held by UDS Logistics, LLC, an affiliate of Valero Energy
            Corporation. As of September 30, 2004, Valero L.P. has 23,041,394
            common and subordinated units outstanding.

   4.       Valero L.P. utilizes two financial measures, EBITDA and
            distributable cash flow, which are not defined in United States
            generally accepted accounting principles. Management uses these
            financial measures because they are widely accepted financial
            indicators used by investors to compare partnership performance. In
            addition, management believes that these measures provide investors
            an enhanced perspective of the operating performance of the
            partnership's assets and the cash that the business is generating.
            Neither EBITDA nor distributable cash flow are intended to represent
            cash flows for the period, nor are they presented as an alternative
            to net income. They should not be considered in isolation or as
            substitutes for a measure of performance prepared in accordance with
            United States generally accepted accounting principles.

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

                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                 SEPTEMBER 30,               SEPTEMBER 30,
                              ------------------           -----------------
                              2004          2003           2004        2003
                              ----          ----           ----        ----

    Net income             $ 19,387      $ 19,680        $ 59,063      $  50,194
     Plus interest and
        other expense, net    5,433         4,504          15,630         11,617
     Plus depreciation
        and amortization      8,413         7,135          24,536         18,687
                            ---------     ---------       ---------     --------
    EBITDA                   33,233        31,319          99,229         80,498
     Less equity income
        from Skelly-Belvieu
        Pipeline Company       (372)         (657)         (1,102)       (1,988)
     Less interest and
        other expense, net   (5,433)       (4,504)        (15,630)      (11,617)
     Less reliability
        capital expenditures (1,992)       (2,664)         (7,030)       (5,302)
     Plus distributions
        from Skelly-Belvieu
        Pipeline Company        248           595           1,223          2,222
                            ---------     ---------       ---------     --------
    DISTRIBUTABLE
        CASH FLOW          $ 25,684       $ 24,089       $ 76,690      $  63,813

     General Partner
        interest in
        distributable
        cash flow            (2,946)       (2,815)         (8,748)       (6,782)
                            ---------     ---------       ---------     --------
     Limited Partners'
        interest in
        distributable
        cash flow          $ 22,738       $ 21,274        $ 67,942     $  57,031
                           =========      =========       =========    =========


