The smectite‐illite transition in shales due to subsidence, temperature changes and diagenesis influences many processes in a sedimentary basin that can contribute to overpressure build up like reducing the shale permeability. The smectite‐rich layers can form sealing barriers to fluid flows that will influence pore pressure prognosis for drilling campaigns, contribute to sealing caprocks for possible CO2 storage and to sealing of plugging and abandonment wells. In this work, we have included the diagenetic smectite‐illite transition into a three‐dimensional pressure simulation model to simulate its effect on pressure build‐up due to reduced shale permeabilities over geological time scale. We have also tested effect of thermal history and potassium concentration on the process of smectite‐illite transition and the associated smectite‐illite correction on permeability. A new smectite‐illite correction has been introduced, to mimic how shale permeability will vary dependent on the smectite‐illite transition. Stochastic Monte Carlo simulations have been carried out to test the sensitivity of the new correction parameters. Finally, a 3D Monte Carlo pore pressure simulation with 1000 drawings has been carried out on a case study covering Skarv Field, and Dønna Terrace offshore Mid‐Norway. The simulated mean overpressures are in range with observed overpressures from exploration wells in the area for the Cretaceous sandy Lysing Formation and for the two Cretaceous Intra Lange Formation sandstones. The simulated smectite content versus depth is in line with published XRD dataset from wells. The corresponding modelled present‐day permeabilities for the shales including the smectite‐illite transition are two magnitudes higher than measured permeabilities on small samples in the laboratory using transient decay method. The measured permeabilities are in the range of 2.66·10−18 to 3.94·10−22 m2 (2695 to 0.39 nD) for the North Sea database and represent the end members for shales‐permeabilities with the lowest values, since the small samples are selected with no or minor natural fractures. This work shows that by upscaling shale permeabilities from mm‐scale to km scale, natural fractures and sedimentary heterogeneities will increase the shale permeabilities with a factor of two and that by including permeability correction controlled by the smectite fraction, pressure ramp can be simulated due to diagenesis effect in shales.