The barrel making is part of the NovtumberFest located in the south-eastern part of the crater. It is led by Lukas. Making barrels grants the player Smithing experience.
It requires no materials to make the barrels. There are two workbenches with two spots each to smith at. Interacting with one causes the player to gain experience seven times before tiring out if uninterrupted. Each time gives 87.9 experience at level 99, taking 3.6 seconds. It thus takes approximately 25.2 seconds for your arms to tire out and you have to click again.
There is a confirmation prompt about gaining experience before starting this activity that can be toggled off permanently.