UPDATE 2-Canada to apply existing laws to PetroChina bid

* Canada foreign ownership laws to apply to PetroChina bid

* PM says will not impose more investment restrictions (Recasts to adds detail and comment; changes dateline, previous TORONTO)

CALGARY, Alberta , Sept 1 (Reuters) - Canada will apply existing foreign ownership laws to PetroChina's PTR.N0857.HK bid to buy Canadian oil sands assets but will not introduce further barriers to investing in the country, Prime Minister Stephen Harper said on Tuesday.

PetroChina, the world’s most valuable oil company, is set to pay C$1.9 billion ($1.7 billion) for a 60 percent stake in two planned Canadian oil sands projects.

It’s the biggest Chinese investment yet in Canada’s oil sands, which have reserves second only to Saudi Arabia, and a test of the Canadian government’s bid to thaw once-frosty relations with Beijing.

Harper said he recognized that PetroChina’s plans were controversial, but committed to using existing Canadian laws to review the transaction and not introducing new legislation to block the deal.

“The government will apply the law that’s in place,” Harper said. “We’ve been very clear that in the middle of a global recession we will not be introducing further barriers to foreign investment.”

Current regulations call for an automatic review of any foreign purchase of Canadian assets worth more than C$312 million.

However, the laws also allow the government to block any investment that would adversely affect national security. Harper’s Conservative government has already blocked one deal, last year nixing the planned sale of a Canadian satellite company to a U.S. rocket maker.

PetroChina has signed an initial agreement to take majority control of the proposed MacKay River and Dover projects owned by Canada’s closely held Athabasca Oil Sands Corp. The properties could eventually produce as much as 500,000 barrels per day.

Harper’s government is moving to improve once-frosty relations with China to boost trade. Last month Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney went to meet with Chinese government officials and business leaders in advance of a visit by Harper planned for later this year. ($1=$1.10 Canadian) (Reporting by Scott Haggett; Editing by Jeffrey Hodgson)