If you're worried that your contacts will require access to the Internet to be used, rest assured. Not everyone even has a data plan. Of course your contacts are also on your phone.
If you just don't want them to have your contacts because of you're worried about your privacy, know that 1. I think you're worrying too much and 2. if you can't find any option for it, then it's probably not possible to disable it.
Unless you're blind. Don't worry, it happens to everyone, and very often to me, to be blind. In that case, if the option exists, and if Windows Phone 8 is anything like Windows 8 for PCs, it should be in the settings for the contacts app, in Accounts. You can either remove an account or uncheck "contacts" where there's a list of what to sync.
Then you could try "forgetting" to input a Microsoft account. They can't sync anything if you don't give them one, right?