Someone on Gamefaqs had the theory that the boys aren’t processed and turned into magic liquid, rather they are actually turned into Trocos and the barrels are just a reward for delivering the humans.
It seems that the blue liquid might actually be mined. There is a place in the game full of this colored mist…
I personally don’t believe this. I lean more towards the humans are being processed and turned into that liquid to keep the technology running, powered, and cooled.