The top prize, announced at a function at the New Zealand Portrait Gallery on Wednesday night, was won by Kapiti Coast artist Harriet Bright for her portrait of a naked friend.
Ms Demente and Rosalind Fair, of Auckland, were both named runners-up. Ms Demente said she was thrilled, particularly given that apart from one self-portrait, it was the first portrait she had done of a "real" person.
The painting of Ms Sullivan, the Fleur's Place restaurateur, was part of an idea she had to do a series of portraits of ship figureheads.
It recently formed part of "demente deCade", a major exhibition at the Forrester Gallery of Ms Demente's work over the past 10 years.
The award attracted 312 entries, which where whittled down to 93 portraits in the final selection.
The standard was "incredible", Ms Demente said.
It was judged by Andrew Sayers, director of the Australian National Portrait Gallery in Canberra.
Ms Demente spoke with him and was "so stoked" with his comments about her painting.
She planned to continue painting portraits, focusing on local characters.
