UPDATE 1-Suncor rekindles expansion of Ontario ethanol plant

* Puts C$120 mln plant expansion back on the table

* To double output to 400 mln litres

CALGARY, Alberta, Oct 2 (Reuters) - Suncor Energy Inc (SU.TO) said on Friday it has revived plans for a C$120 million ($111 million) expansion of its Sarnia, Ontario, ethanol plant in another sign the chill in energy investments is easing.

Suncor said the project would double output of the renewable fuel additive to 400 million litres (106 million gallons) a year by late 2010 or early 2011.

The company deferred the project at the start of the year as financial and energy markets skidded. It was initially to have been completed by the end of this year.

Construction will create 350 jobs in the Sarnia-Lambton area of southern Ontario.

When completed, the expanded plant will use 40 million bushels of corn annually, said the company, which last summer became Canada's largest energy producer when it took over Petro-Canada.

The initiative is the latest deferred plan to get put back on the table recently following the meltdown in credit and energy markets in the past year. In September, EnCana Corp (ECA.TO) restarted a plan that it had shelved in late 2008 to split itself into two separate companies.

Suncor, which is Canada's largest oil sands producer, said the expanded ethanol plant and its investment in four wind power projects are expected to offset nearly one million tonnes of carbon dioxide a year, equal to the annual emissions of about 200,000 cars.

Suncor shares were off 21 Canadian cents at C$35.53 on the Toronto Stock Exchange on Friday morning.

($1=$1.08 Canadian) (Reporting by Jeffrey Jones; editing by Peter Galloway)