verbal agreement to convert masters to PhD but reconsidering
I don't want to do this PhD project


If you don't want to do this project, DON'T DO IT. PhD is not everyday fun and it is sometime harsh to keep motivation through the ups and downs.

About your adviser, I will not be too worried for him/her burning bridge. How many PhD student actually drop during the PhD. As Nate Eldredge said, It is quite bad for an adviser/group to have an unmotivated student. Moreover you haven't yet start the PhD. It will be much worse for you adviser if you start and quit after 2 years because you cannot stand it anymore.

As often, you should just be frank with your adviser. Explain this is not the project you are ready to invest 4 years in your life and if he/she has a minimum understanding, it should be fine. If you are not at ease, do it in several discussions, where first you express your doubts on the current project. I think any adviser hearing that should actually advise you to not continue with a PhD.