Based in Aberdeen, Scotland, the joint venture "will be the UK North Sea's biggest independent producer", the energy sector heavyweights said in a statement.
The new company "will be set up to sustain domestic oil and gas production and security of energy supply in the UK", the statement said.
Equinor and Shell will each hold a 50 percent stake in the new company. Shell employs around 1,000 people in oil and gas positions in Britain compared to 300 for Equinor.
"Domestically produced oil and gas is expected to have a significant role to play in the future of the UK's energy system," said Zoe Yujnovich, Shell's integrated gas and upstream director.
"To achieve this in an already mature basin, we are combining forces with Equinor, a partner of many year," Yujnovich said.
The venture is expected to produce more than 140,000 barrels of oil equivalent per day in 2025.
"With the once-prolific basin now maturing and production naturally declining, the combination of portfolios and expertise will allow continued economic recovery of this vital UK resource," the statement said.
"The new company will invest to provide a long-term future for the individual oil and gas fields and platforms, helping extend the life of this crucial sector for the benefit of the UK."
The companies expect the merger to be completed by the end of 2025, pending approval by regulators.
- Legal case -
Under the deal, Equinor will retain ownership of three oil and gas cross-border assets between Norway and Britain, along with its offshore UK wind farms.
The Norwegian group will also keep its hydrogen, carbon capture and storage, power generation, battery storage and gas storage assets.
Shell will maintain ownership of its Fife liquefied natural gas plant and St Fergus gas terminal in Scotland as well as floating wind projects off Scotland.
"This transaction strengthens Equinor's near-term cash flow," said Philippe Mathieu, an executive vice president at the Norwegian company.
"By combining Equinor's and Shell's long-standing expertise and competitive assets, this new entity will play a crucial role in securing the UK's energy supply," he said.
Environmental group Greenpeace noted that the merger includes two oil and gas fields, Rosebank and Jackdaw, that it has challenged in court in Scotland.
"With two massive new Shell and Equinor fields already threatened by legal challenges from Greenpeace and others, this apparent show of strength belies an industry consolidating because it is in terminal decline," Greenpeace said in a statement.
"The government must hold fast on its commitment to banning new oil licenses," it said.
Shell shares fell more than one percent near midday deals in London while Equinor was down 0.5 percent in Oslo.
John Olaisen, an analyst at ABG Sundal Collier, an investment bank, said the new company could eventually have its own stock listing.
"Profitability is bad in the UK, and it is getting worse," Olaisen told the business news website e24.no.
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